What Should you do if HMRC Contacts you About a Compliance Check?
If HMRC contacts you about a compliance check, it’s essential to take the matter seriously and respond promptly.
Our advice is to review the letter or email from HMRC thoroughly to understand the nature of the enquiry, what information they require, and any deadlines you need to meet.
Compliance checks are essential tools used by HMRC to maintain the integrity of the UK tax system and ensure that everyone pays their fair share. They are by no means indicative of a full investigation or cause for concern unless you feel they point to liabilities you cannot meet.
In that case, we suggest you contact our team at your earliest opportunity. Our licensed insolvency practitioners can offer expert advice on all forms of company debt.
If need help understanding your best course of action, use the live chat during working hours, or call us on 0800 074 6757. We’ve helped 1000’s of directors navigate difficult financial circumstances.
What is a Compliance Check by HMRC?
An HMRC compliance check is simply a routine inquiry to ensure that your business is paying the correct amount of tax and complying with UK tax laws. These checks aim to identify errors in tax reporting, underpayment of tax, or tax avoidance schemes.
Here are some common types of compliance checks:
Full enquiry – A comprehensive review of an individual’s or business’s tax affairs, covering all aspects of their tax returns and financial records.
Aspect enquiry – A targeted investigation focused on a specific area of concern, such as a particular transaction or a specific entry on a tax return.
Random check – A routine check selected at random to ensure that tax returns are being filed correctly and that taxpayers are complying with their obligations.
Why Has Your Company Received a Compliance Check Letter from HMRC?
If your business has received notification of a tax investigation, HMRC’s Local Compliance team will have taken various factors into account, such as risk, means, industry knowledge and even the results achieved by similar businesses in your area.
It’s also likely the inspector will have compiled information about your business from third parties. This can include banks , local authorities and even informants.
What Happens During a Compliance Check?
The compliance check may involve either someone from HMRC visiting you, or a request for you to visit them. You’re allowed to have a tax advisor or your accountant with you during the visit, which you may find reassuring.
Essentially , the compliance check is an information gathering process. HMRC want to confirm your accurate position so that compliance can be restored. This will either happen via updating certain details, or it could be via paying a penalty.
Usually, you are sent the results of the compliance check within a period of time. You will have 30 days to pay a tax penalty, and you can always appeal the decision if you disagree with it.
The normal time period for the tax to be assessed under a compliance check is 5 years and 10 months after the end of the tax year in question. However, it is usual for compliance checks to be carried out within 12 months of the tax year they relate to.
It is not uncommon for HMRC to ask for information concerning other years when conducting a compliance check. In cases where HMRC believes there is fraudulent or negligent conduct on behalf of the taxpayer, the time limit can be extended by up to 20 years.
