If you've received a HMRC compliance check letter, you're likely to have many questions:

• What exactly does this check entail?

• Why am I under enquiry?

• How long will the check last?

Here, we answer the above questions and share how we can help you overcome a compliance check.

Get specialist tax investigation help today: +44 (0)20 7710 3389

What's a compliance check?

A ‘compliance check’, also commonly known as ‘an enquiry’, is a review of the accuracy of a submitted Self-Assessment tax return by HMRC. These checks can be carried out on a formal or informal basis. An informal check may just involve questions about the return, whereas a formal compliance check will contain a notice of enquiry and will often request documents and information. HMRC must also be within strict time limits for the enquiry notice to be valid. HMRC compliance check letters come in many and various forms; always seek suitable professional advice before responding to any HMRC query in relation to a filed return.

What triggers an HMRC compliance check?

Compliance checks can either target a particular aspect of your tax return (known as an aspect enquiry), such as a claim for relief or a specific item of income, or they can be a full enquiry into all areas.

HMRC rarely selects cases at random. More than 90% of investigations will be initiated because HMRC holds information suggesting something is wrong, although they may not admit this from the outset.

HMRC also uses data from third parties, including cryptocurrency exchanges, which can lead to enquiries. Read more about cryptocurrency checks here.

What are HMRC's powers?

HMRC will often request information and documents to establish whether you’ve underpaid tax and to understand the behaviour that led to your underpayment. Such requests can be onerous, and if you don’t have the knowledge or confidence to challenge HMRC’s requests, you could find yourself subject to what can only be described as a ‘fishing expedition’, where HMRC take advantage of your willingness to cooperate. Where a business is involved, HMRC can also ask to inspect the business premises.

These enquiries can be extremely disruptive and stressful for individuals and businesses. Appointing the right advisor to deal with HMRC on your behalf will allow you to continue to focus on developing your business and lead to a quicker resolution of your case.

How long will the compliance check last?

There’s no set limit for how long a compliance check can last as everyone’s circumstances will vary. Some cases can be dealt with swiftly if managed correctly, while others can spiral out of control and last many years if they haven’t been pro-actively managed. Under their own charter, HMRC have a duty of care to taxpayers for their enquiries not to become protracted. If you’ve any concerns about the duration of an ongoing enquiry, seek specialist advice.

HMRC compliance check penalties

Once an enquiry has been resolved, HMRC may impose penalties. The level of penalty will depend on the behaviour that led to the inaccuracy in the return and the level of cooperation that you’ve shown throughout the enquiry. Further information relating to penalties following the conclusion of an enquiry can be found here.

How we can help

When considering appointing specialist representation, advisers and taxpayers should ask themselves these questions:

• Do you feel comfortable dealing with HMRC?

• Are you able to manage and control HMRC or have you now lost control?

• Do you have up-to-date knowledge of HMRC’s powers?

• Are there any errors in your tax affairs that you should disclose?

• Are you concerned about being publicised as a tax evader?

• Can you restrict the extent of information you provide to HMRC, without adversely affecting the extent of your penalty mitigation?

If you choose to get specialist advice from Buzzacott, we’ll:

• Carry out a comprehensive review of your position to ensure we’ve a full understanding of the issues and risks you’re facing.

• We’ll work with your existing adviser, if you have one, and prepare a strategy going forward to minimise your potential exposure to unnecessary tax, interest and penalties.

• Should a disclosure be necessary, we’ll present this to HMRC to ensure that you’re treated fairly and proportionately.

• Aim to fast track your enquiry to resolution and closure of all issues at minimum cost and disruption to you.