What Triggers an HMRC Compliance Check — and What to Do
An HMRC compliance check can be triggered by unusual expenses, income gaps, late returns, or random selection. Here is what commonly triggers a check and the best steps to take when one arrives.
In this article we cover What Triggers an HMRC Compliance Check — and What to Do — practical, plain-English guidance from our Glasgow team.
Founder & CEO · Countify · Glasgow
An HMRC compliance check is a formal review of a tax return, payroll record, or VAT return. HMRC uses risk-profiling software to select cases, receives information from third parties, and conducts random checks. Common triggers include expenses that appear unusually high, income inconsistent with apparent lifestyle, late or amended returns, and information passed to HMRC by employers, banks, or other businesses.
Common triggers for an HMRC compliance check
- Expense ratios significantly above the industry average.
- A sudden or unexplained drop in profit without a credible business reason.
- Declared income that appears inconsistent with property ownership or lifestyle.
- Regular losses that appear to be a hobby rather than a genuine trade.
- Inconsistencies between PAYE records filed by an employer and the tax return.
- Third-party information — for example from the Land Registry, Companies House, or overseas tax authorities.
- Random selection by HMRC's Connect risk profiling system.
Types of compliance check
An aspect enquiry focuses on a single item on a return — for example, one category of expenses or a specific income source. A full enquiry covers the whole return and supporting records. HMRC can also conduct PAYE compliance reviews (checking employer deductions and RTI accuracy) and VAT inspections separately from income tax compliance activity.
What HMRC can request
HMRC can ask for bank statements, invoices, receipts, payroll records, contracts, bookkeeping exports, and explanations for specific transactions. There are statutory time limits for how far back HMRC can go: generally four years for innocent errors, six years for careless errors, and twenty years where fraud is suspected. HMRC must have a reason to go back more than four years.
What to do when a compliance check letter arrives
- Read the letter carefully to understand which tax, period, and return is being reviewed.
- Note the deadline for response and do not ignore the correspondence.
- Send the letter to your accountant before making any response to HMRC.
- Gather the original records that support the return being reviewed.
- Do not send more information than HMRC has asked for.
Professional representation
An accountant or tax adviser can manage correspondence with HMRC, prepare organised responses, challenge requests that go beyond the statutory scope, and negotiate where there is a genuine dispute. Early professional involvement typically reduces the time, cost, and stress of a compliance check significantly.
If you have received an HMRC compliance check letter, contact Countify's HMRC enquiry support team in Glasgow as soon as possible for a free initial consultation.