HMRC Compliance Checks

HMRC compliance checks. Written by John A Waller, Consultant. Reviewed June 2nd, 2024.

How Does An “HMRC Compliance Checks” Visit Therefore, Affect Your Business?

An HMRC Compliance Check remains a formal investigation of your tax affairs, supported by the books and records you use to manage them.

If HMRC decides to investigate your tax, it will send you an information request.

How does HMRC determine who to investigate?

The HMRC compliance check is mainly based on HMRC concerns about how the company has accounted for tax. The number of registered companies does not allow HMRC to conduct routine visits. Therefore, it visits those it believes have underpaid tax through fraud or mismanagement.

HMRC Compliance Check:

  • Local Compliance;
  • Specialist Investigations;
  • Local Compliance Fraud.

Upon receiving your notice of a compliance visit (compliance check letter), you may determine the reason for the visit by the name of the department or inspector on the letter you have received. The Compliance team conducts usual tax examinations of many tax aspects, evidenced by your company’s tax return.

Once HMRC considers further action resulting from any HMRC Compliance Checks, you need to ensure you seek help from a Licensed Insolvency Practitioner (IP) urgently.

Comprehending the Three Types of Tax Investigation by HMRC. Three levels of audit HMRC can perform include:

  • Carry out a full enquiry.

During a full enquiry, HMRC reviews your business records, typically when they suspect a potential error in your tax declarations. This investigation can extend to examining the directors and the company’s tax affairs.

  • Aspect enquiry.

When HMRC examines a particular aspect of your accounts during an aspect enquiry. They pay attention to anomalies in a recent tax return,

  • Random check

Random checks occur unexpectedly, without regard for your accounts’ state or whether you’ve triggered an alert. This unpredictability underscores the importance of maintaining accurate and up-to-date records at all times.

Which taxes can come under scrutiny?

Many believe HMRC tax investigations apply only to income tax. However, they may examine various things relating to tax, including:

  • Corporation Tax,
  • Capital Gains Tax,
  • Construction Industry Scheme (CIS),
  • VAT (Value Added Tax),
  • IR35.

Why is HMRC Compliance Visiting You?

Having received notification of an HMRC compliance check. Your local HMRC’s Compliance team considered your company a risk. They run a business data comparison compared to your competitors and various other sources. By doing so, they have a good measure of whether you are paying the right amount of tax. Therefore, co-operate at all times, telling the truth.

HMRC carry out compliance checks to:

  • Accurate company tax return.
  • Be sure you’re paying the right amount of tax at the right time.
  • Make sure you get the right allowances and tax reliefs.
  • Prevent tax evasion.
  • Be sure the tax system is operating fairly.
  • Keep your tax agent informed.

Helping HMRC with the checks

During the checks, HMRC may ask you to:

  • Send any needed information or documents;
  • You can meet with HMRC to discuss your tax affairs and records.

HMRC may ask to visit your business premises to inspect them and your assets and records. If you think the request is unreasonable, inform the officer who requested the information.

If both sides disagree with sending the information or documents, HMRC may use legal powers by sending an information notice. Upon receiving a notice from HMRC, you must give HMRC what they have asked for or risk penalties.

Ultimately, you are responsible for giving accurate information, even when you have employed a tax agent to manage your affairs. Any error by your agent is your responsibility.

Helping HMRC enables them through your help with compliance checks to:

  • Complete it quickly to reduce the inconvenience;
  • Reduce your penalty if we find there’s something wrong.

HMRC Compliance Check – VAT and PAYE Compliance Visits

This type of visit is usual, and most companies either have had or received one. Note though, due to limited resources, they usually need suspicion before firming a visit.

Corporation Tax Compliance Visits

Compliance Check visits fall into two sectors. The first is a Full Tax Visit, which is like an in-depth audit of the company on behalf of HMRC. It covers all the companies’ records of account. Therefore, it is considered one of the most severe types of visits.

The second, an Aspect Tax Corporate tax visit, is an Aspect tax investigation normally carried out by Local HMRC Compliance. They check specific parts of the tax return as submitted and include items such as travel and subsidence expenses.

A full tax investigation, however, is much more serious. It involves thoroughly examining the company, usually by reviewing the books and accounting records for one year. If HMRC launches a full tax investigation, it believes something is wrong with the tax affairs of your business.

Receiving Help From HMRC

If you need help during the checks

HMRC will help you if you need additional support in dealing with compliance checks.

Contact the case officer if you have health conditions or personal circumstances that may make the compliance check difficult. They will work with you to make any necessary reasonable adjustments.

If you need more time, please tell us. HMRC may, however, agree to allow additional time if there is a good reason, for example, if you are seriously ill or someone close to you has died.

Time limits for HMRC Compliance Checks Visits.

The HMRC time limit officially remains five years and ten months from the end of any tax year, after that no compliance visits are allowed. In cases of fraud or serious negligence, however, this can be 20 years.

So after the compliance visit:-

HMRC will write to tell you the results of the check.

If you have overpaid tax, the HMRC will repay you within 30 days, along with interest.

However, if HMRC finds you owe further tax, they will then send a demand to pay the additional tax within 30 days. You may also however, have to pay the interest and pay a penalty.

So, contact the team at HBG Advisory for help with HMRC issues.

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