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Income Tax Compliance Check

HMRC can conduct tax compliance checks on an individual taxpayer or on those who run a business. This guide explains how the checks get conducted and what you might need to do.

HMRC COMPLIANCE CHECK: The reason tax affairs get checked is to ensure you pay the right amount.

The details and information HMRC can check include:

You get a compliance check letter or a phone call from HM Revenue and Customs if they want to check your tax affairs. HMRC will contact your accountant instead if you use one to manage your taxes on your behalf.

Note: You can appoint a tax agent or authorise someone else to handle your taxation. If so, you must inform HMRC who you want to use and which tax they will manage for you.

HMRC Tax Compliance Check Procedure

As a rule, HM Revenue and Customs inspectors will ask to make a visit to your home or the business premises. In some cases they will conduct the check at your adviser’s office or they might even ask you to visit them instead.

Note: The HMRC tax compliance check process allows you to have a legal adviser or an accountant with you during the visit.

HMRC will send a notice for inspection or for information. Failing to send the information to them or refusing to attend a visit can result in a penalty.

HMRC Income Tax Compliance Checks in the United KingdomBut, anyone with a ‘reasonable excuse‘ will not need to pay the penalty. Reasonable excuses would include things like:

  • Having a serious illness.
  • A close relative passed away.

Write to HM Revenue and Customs if you feel they should postpone the check. Send the HMRC compliance check letter to the same office that sent you the notice and explain your reasons for the request.

At any time in the process you have the right to apply for Alternative Dispute Resolution.

ADR applies to times when you disagree with a decision made either by HMRC or what they are checking.

After a Tax Compliance Check

After HMRC have conducted the tax check they will write to inform you of the results. The outcome is usually one of two situations:

  1. HM Revenue and Customs will repay you in cases where you paid too much tax. They may also pay interest on the amount they owe you.
  2. HMRC will ask you to pay extra tax in cases where you owe more than you thought. You will get 30 days to pay but they can charge interest from the date when the tax was first due.

HMRC income tax compliance checks can result in a financial penalty. The tax inspectors base fines and penalties on:

  1. Reasons behind a tax underpayment or why you claimed too much tax.
  2. Whether you delayed declaring or informing HM Revenue and Customs about the issue.
  3. How cooperative and helpful (or not) you were during the tax compliance check.

Note: Inform the tax officer dealing with the inspection if you have any problems with a payment. You can also make a tax appeal if you disagree with the final decision.

HMRC Income Tax Compliance Checks in the United Kingdom