HMRC Compliance Check

Have HMRC Sent You a Letter and Opened a Compliance Check into Your Tax Return?

If you have received a letter from HMRC informing you of a compliance check into your tax return, Michael Filiou can help manage the process seamlessly and ensure its closure as quickly as possible.

Understanding Compliance Checks

HMRC compliance checks are typically conducted by their local compliance division to verify the accuracy of your tax return. Most compliance checks stem from suspected errors in your tax return, while a small percentage are randomly initiated. HMRC conducts compliance visits only when they identify a potential tax risk, indicating a likelihood of additional tax being due. The most effective way to assess this is through an investigation into the business or individual.

A compliance check involves a thorough review of your previously filed tax return. Tax investigations typically begin within 12 months of filing your tax return with HMRC.

HMRC usually notifies individuals or businesses of an impending investigation through an official letter. This correspondence clearly states that HMRC is initiating a tax investigation or a review of your tax return.

Types of HMRC Compliance Checks

Business or individual tax investigations are generally categorised into two types:

Full Check: This involves a comprehensive review of all company records for a full year, along with all associated entries on the tax return.

Aspect Check: HMRC conducts a compliance check by focusing on one or two specific elements of the tax return, such as the calculation of capital gains tax or the method used to claim relief for pension returns.

Full Tax Investigation

Based on the findings of an aspect compliance check, HMRC may decide to proceed with a full investigation. They will inform you clearly and in writing if they decide to do so. A full investigation indicates that HMRC believes there are significant issues with the tax affairs of a business or individual.

In the face of a potential compliance check, Michael Filiou can provide expert guidance on the processes, procedures, and what to expect. Our team has extensive experience assisting clients who have received notification of an investigation.

HMRC Visits and Meetings During a Compliance Check

HMRC may request a meeting with the business owner or individual as part of their investigation. Michael Filiou can accompany you to these meetings to make the process less daunting and ensure your interests are protected.

While attending a meeting with HMRC is not mandatory, it is advisable to do so if they strongly believe there are discrepancies in your tax return. However, it is crucial to seek representation from a tax investigation specialist like Michael Filiou before attending such meetings.

Thorough preparation is essential for these meetings. HMRC will take detailed notes of the information you provide. There have been instances where individuals’ statements without careful consideration have caused further complications during the investigation.

Information Held by HMRC Prior to a Compliance Check

HMRC will closely scrutinise all records supporting your tax returns during their investigation. This may include credit card statements and private bank account statements.

If you discover any inaccuracies in your submitted tax returns, prompt disclosure to a specialised tax advisor is highly recommended. Early disclosure can significantly reduce penalties and simplify the process.

HMRC’s Lookback Period Following a Compliance Check

In cases where errors are identified during a tax investigation, HMRC may assume similar errors exist in previous years’ returns and seek adjustments. HMRC can go back up to 20 years in instances of deliberate or fraudulent behaviour. This could result in additional penalties and interest.

It is important to note that not every compliance check uncovers errors. If no irregularities are detected, the investigation will be closed. Therefore, entrusting the management of your compliance check to a team of experienced tax investigators is crucial.

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