Opening letters, records, information requests, visits, findings and closure
HMRC Compliance Check Support and Representation
An HMRC compliance check is a formal or informal review of whether a return, claim, payment or wider tax position is correct. The response should identify the exact issue, reconcile the submitted figures to the supporting records and address HMRC's questions without making unsupported assumptions or sending unexplained data. We represent individuals, landlords, directors, companies and employers across Exeter and the surrounding Devon districts.
Direct answer
What an HMRC Compliance Check Means
HMRC is checking whether the taxpayer has paid the correct amount, claimed the correct relief or complied with the relevant tax obligation. The check can concern one figure, one tax period or a wider set of business and personal records.
A compliance check is not automatically an accusation of fraud. Checks may be risk-based or selected randomly. The taxpayer should cooperate accurately and promptly while still asking HMRC to identify the issue, keep requests proportionate and use the correct statutory powers.
The opening letter defines the initial compliance-check question
The tax, periods, return entries and records requested should be mapped before preparing the response.
Explanations should agree with the accounting and source records
A narrative is reliable only when the ledgers, bank records, invoices, contracts and filed figures reconcile.
A compliance check can close with no tax adjustment
HMRC may also identify a repayment or propose tax, interest and a separately considered penalty.
A controlled response from opening to closure
The HMRC Compliance-Check Lifecycle
The work should progress in defined stages. Answering the first letter without reviewing the complete records can lead to repeated corrections, inconsistent explanations and unnecessary expansion of the check.
Confirm the route and deadline
Identify the tax, periods, return or claim, HMRC officer, information requested and formal appeal rights.
Secure the relevant records
Retain original digital and paper records, earlier versions, correspondence and evidence held by third parties.
Test the filed position
Reconcile the return or claim to accounts, bank movements, invoices, contracts and tax computations.
Answer the question with indexed evidence
Explain the treatment, identify assumptions and provide only the documents needed for the agreed scope.
Manage follow-up, meetings and visits
Maintain one chronology and document register so later answers remain consistent with earlier submissions.
Review findings and secure closure
Agree or challenge tax adjustments, address interest and penalties, and protect review or appeal deadlines.
Issue-specific checks rather than one generic enquiry
HMRC Compliance Checks for Different Taxes and Claims
Each tax has different records, return mechanics and common areas of error. The response should explain the transaction or calculation HMRC is checking rather than relying on a generic statement that the figures are correct.
Business Profit, Expenses and Personal Return Entries
Turnover, cash receipts, expenses, private use, losses, pension relief, property income and capital gains can be checked against the underlying records.
Accounts, CT600 and Company Tax Adjustments
HMRC may review deductions, capital allowances, losses, director loans, dividends, associated companies, R&D or connected-party transactions.
Sales, Rates, Input Tax and Registration
The check can test taxable turnover, VAT rates, exemptions, invoices, input recovery, partial exemption, reverse charges, property or cross-border supplies.
Payroll, Benefits, Expenses and Worker Status
Salary, bonuses, directors, benefits, reimbursed costs, employment status, statutory pay and RTI records may be reconciled.
Contractor Returns and Subcontractor Treatment
Verification, deductions, gross-payment status, employment status, materials, monthly returns and payments can form one connected check.
Rental Profit, Repairs and Property Disposals
Ownership, rent, finance costs, repairs, improvements, private use, losses and Capital Gains Tax records may be requested.
Residence, Overseas Income and Foreign Tax
Travel, residence, foreign accounts, property, pensions, investments, gains and tax-credit claims can be checked against overseas evidence.
Evidence Before HMRC Releases a Repayment
Employment expenses, CIS deductions, losses, pension claims, R&D or VAT repayments may be held while entitlement and source records are verified.
MTD, Software and Digital Links
HMRC may review whether records were kept digitally, transactions were complete and return figures were transferred through the required digital process.
Turnover Completeness and Capital Introduced
Business and relevant personal accounts can be reconciled to explain deposits, transfers, drawings, loans and non-business sources.
Salary, Dividends, Benefits and Director Loans
Company records, payroll, dividend documents and the director's personal return should present one consistent treatment.
Income, Gains, Distributions and Inheritance Tax
Ownership, valuations, administration-period income, beneficiary payments, reliefs and tax paid may require records from several parties.
HMRC powers and taxpayer safeguards
Information Must Be Relevant, Reasonable and Proportionate
Most compliance checks begin with informal cooperation. HMRC can use Schedule 36 information and inspection powers where records are not provided or progress is unreasonably delayed, but the information must be reasonably required for checking the tax position and the use of powers must remain proportionate.
HMRC normally begins with an informal request
The request should identify the information, documents, period and connection to the tax issue being checked.
Schedule 36 creates a legal requirement
The notice can require taxpayer, third-party or financial-institution information subject to statutory safeguards.
The burden must be balanced against the tax risk
Information that could not affect the tax position should not be demanded merely because it may be convenient.
HMRC action must respect legal and privacy safeguards
Requests and inspections must be appropriate, proportionate and limited to the purpose of checking the tax position.
A response should explain the figures, not merely attach them
How Records Are Prepared for an HMRC Compliance Check
Records are reviewed in the same way HMRC is likely to test them: completeness, consistency, source, business purpose, tax treatment and agreement with the return.
Return, accounts and tax computation
Identify the exact figure or claim and the working papers that produced it.
Ledger, cashbook and control accounts
Reconcile sales, purchases, payroll, VAT, debtors, creditors, assets and year-end journals.
Bank, invoice, contract and third-party statements
Show that the recorded transaction occurred and was classified in the correct tax period.
Commercial purpose and factual chronology
Explain how the business operates and why the transaction received the stated accounting and tax treatment.
Private use, estimates and missing documents
Identify limitations openly and use supportable replacement evidence or estimation methods.
Indexed response and copy of every document supplied
Retain the response, attachments and transmission evidence so later questions can be answered consistently.
Completeness, tax point, cash receipts, refunds, platform income and bank reconciliation.
Turnover bridge from source system to accounts and return, supported by indexed samples.
Business purpose, private use, capital treatment, VAT evidence and accounting period.
Expense schedule by category with explanation of disputed or unusual items.
Accounts within scope, business transfers, loans, capital introduced and personal transactions.
Reconciled statements with a separate explanation of non-trading deposits.
Parties, obligations, payment terms, ownership, tax point and actual working practice.
Relevant agreement plus concise chronology and explanation of the tax treatment.
Why unavailable, retention duties, third-party alternatives and reliability of any estimate.
Transparent reconstruction schedule with assumptions and corroborating evidence.
Visits are common in VAT and employer checks
HMRC Business Visits, Record Inspections and Meetings
A business visit allows HMRC to understand operations and compare the records with the premises, assets, goods and people involved. The purpose, scope and documents should be agreed or understood before the visit.
Date, officers and records should be confirmed in writing
The business can prepare the records, relevant staff and a suitable location. The tax adviser should receive a copy where authorised.
HMRC normally gives at least seven days' notice
A formal inspection notice may be used where an agreed visit cannot be arranged. The notice and factsheet should identify the inspection powers and rights.
HMRC can inspect but cannot conduct a search
Officers may examine statutory records and inspect business premises and assets. They cannot rummage, search or wander unaccompanied without consent.
Only areas used for the business fall within the inspection power
Parts of a home used solely as a dwelling cannot be inspected under the business-premises power. Privacy and other occupants must be respected.
The tax result and penalty result are separate
Errors, Reasonable Care and Penalty Considerations
Where HMRC identifies an underpayment or excessive claim, it should then consider why the return was wrong. A tax adjustment does not automatically prove that the taxpayer was careless or deliberate.
No inaccuracy penalty where reasonable care was taken
The evidence can include record systems, professional advice, review procedures, the complexity of the issue and steps taken to check the filing.
HMRC must identify the failure to take reasonable care
The standard is considered in the taxpayer's actual circumstances. A mistake is not careless merely because HMRC later reaches a different conclusion.
Knowledge and intention require separate evidence
Deliberate behaviour concerns knowingly creating or maintaining an inaccurate position. It should not be inferred solely from the value of the tax adjustment.
Telling, helping and giving access can reduce a penalty
Cooperation affects the reduction within the relevant statutory range, but it does not replace the need to establish the correct behaviour category.
A check should end with a documented conclusion
Possible Outcomes of an HMRC Compliance Check
The result should identify what HMRC checked, the conclusion reached, any tax amendment and whether interest or penalties are being considered. Outstanding uncertainty should not be left in informal correspondence.
The filed return or tax position is accepted
HMRC writes to confirm that the check is complete and no change is required.
The check identifies that too much tax was paid
The return or assessment is corrected and HMRC may repay tax with applicable repayment interest.
The taxpayer accepts a supported correction
Tax, interest and any penalty are documented through the appropriate amendment, assessment or settlement route.
The factual or technical issue remains unresolved
The taxpayer responds to the pre-decision position and preserves appeal, review, ADR or tribunal rights.
A discrete return matter can sometimes be concluded first
For qualifying Self Assessment, partnership and company enquiries, a partial closure notice can settle a discrete matter while other issues remain open.
The facts indicate a different specialist route is required
Material offshore, avoidance or suspected deliberate conduct may require separate disclosure or specialist investigation advice.
Disagreement should be identified precisely
Appeals, Reviews and Alternative Dispute Resolution
A check can involve several issues. The appeal or ADR request should identify whether the dispute concerns the facts, tax treatment, assessment period, information powers, penalty behaviour or amount charged.
New evidence can be supplied before or after a formal decision
The officer should be asked to address the evidence and legal analysis rather than repeat the original conclusion without explaining the remaining disagreement.
Most direct-tax decisions use a 30-day appeal period
The appeal states the decision challenged, grounds, evidence and outcome sought. Late appeals require a reasonable explanation and can be refused.
A different HMRC officer reviews the appealed decision
The review considers the evidence and representations within the statutory process. Tribunal rights can remain after the review conclusion.
Mediation and litigation serve different purposes
ADR can assist with factual and communication barriers. The First-tier Tribunal independently determines appeals that cannot be resolved.
Agreed Exeter guide fees
HMRC Compliance-Check Representation Fees
These are the previously agreed fees. The scope is established from the opening letter, tax periods, information already supplied, record quality and stage of the check. No tax, penalty or closure outcome can be guaranteed.
HMRC compliance-check representation
A defined compliance check covering opening review, record analysis, tax calculations, correspondence and resolution work within the agreed scope.
Compliance-check consultation
A scheduled review of the HMRC letter, known facts, deadline, immediate risks and recommended response plan.
Formal information-notice review or business-visit preparation
The notice, records, premises, proposed attendees and legal safeguards are reviewed before the work is quoted.
Appeal, statutory review or ADR
The formal decision, tax at stake, evidence, disputed issues and procedural stage are reviewed before quotation.
Additional returns, disclosures or specialist investigation work
Historic calculations, amended filings, offshore matters, COP8, COP9 or tribunal work are separately scoped where required.
Documents collected securely after engagement
Information Needed to Review a Compliance Check
The first enquiry needs only a summary. Once the work is scoped, the records are requested in a structured order so the tax position and response history can be reconstructed.
HMRC material
- Opening letter and factsheets
- Information requests or notices
- Earlier replies and attachments
- Meeting notes, findings and decisions
Filed tax position
- Relevant returns and amendments
- Accounts and tax computations
- Claims, elections and supporting schedules
- Payment and repayment history
Accounting records
- Trial balance and nominal ledger
- Sales and purchase records
- Bank and control-account reconciliations
- Payroll, VAT and asset schedules
Source documents
- Invoices, receipts and statements
- Contracts and correspondence
- Property and investment documents
- Foreign tax and income records
Decision history
- Advice relied upon
- Who prepared and reviewed the filing
- Contemporaneous explanations
- Steps taken to check uncertain treatment
Missing-record explanation
- Records unavailable and the reason
- Third-party replacement evidence
- Reconstruction and estimation method
- Known limitations and assumptions
Compliance-check representation process
From HMRC Letter to a Recorded Closing Position
The representation process protects the deadline first, then builds the factual and technical response from reconciled evidence.
Opening material and deadlines reviewed
We identify the tax, periods, question, powers, information requested and any immediate procedural action.
Return and records reconciled
The filed position, source documents, chronology and possible correction are reviewed before detailed reply.
Responses, meetings and follow-up managed
Submissions remain indexed and consistent while HMRC's questions and findings develop.
Outcome, payment and rights recorded
No adjustment, repayment, tax, interest, penalty and any appeal or review action are documented.
Exeter and surrounding Devon
Compliance-Check Work Reflecting the Regional Economy
The wider Exeter area combines professional, healthcare, university and technology activity with property, tourism, construction, manufacturing, rural businesses and private wealth. Each sector produces different records and recurring tax questions.
Professional, healthcare, academic and technology activity
Employment expenses, overseas duties, consultancy, company extraction, R&D, VAT treatment and repayment claims.
Property, tourism, hospitality and private clients
Rental income, former holiday letting, property disposals, seasonal turnover, VAT, pensions and foreign assets.
Manufacturing, construction, trades and rural businesses
Stock, plant, capital allowances, CIS, payroll, cash records, land, fuel and family-company transactions.
Hospitality, property and owner-managed enterprises
Accommodation, food and events, tips, VAT, subcontractors, directors' accounts and mixed private use.
Common practical questions
HMRC Compliance Check FAQs
What is an HMRC compliance check?
A compliance check is HMRC's process for checking whether a tax return, claim, payment or wider tax position is correct. It can be narrow, such as checking one expense or repayment claim, or wider, such as reviewing business records, VAT, payroll or several entries on a return. A compliance check does not by itself mean that HMRC alleges fraud.
Why has HMRC selected my return or business?
HMRC may identify a risk from the information it holds, inconsistencies between filings, unusual claims, sector patterns or third-party data. Some checks are also selected randomly at a national level. The opening letter may identify the issue, but HMRC does not always disclose every part of its risk assessment.
How quickly should an HMRC compliance-check letter be answered?
Use the deadline stated in the letter or notice. The first task is to record the date received and determine whether the request is informal or formal. Where more time is genuinely needed, an extension should be requested before the deadline with an explanation of the records involved and a realistic proposed date.
Can HMRC ask for personal bank statements during a business check?
HMRC can ask for information that is reasonably required to check the tax position. Personal bank statements may be relevant where business receipts passed through a personal account, capital introduced is unexplained, drawings appear inconsistent or HMRC is testing whether receipts were omitted. The relevance, period and scope should be considered rather than assuming every personal transaction is automatically within the check.
What is the difference between an informal request and a Schedule 36 information notice?
An informal request asks the taxpayer to cooperate without imposing the statutory notice regime. A Schedule 36 notice legally requires specified information or documents reasonably required to check the tax position. Formal notices can carry appeal rights, restrictions and penalties for non-compliance. There is generally no appeal against a requirement to provide statutory records.
What penalties can apply for not complying with an information notice?
A failure to comply can result in an initial penalty of £300. Daily penalties of up to £60 can follow while the failure continues, and tax-related penalties are available in serious cases. A reasonable excuse can prevent a penalty, but the notice should not be ignored while an extension, appeal or clarification is being considered.
Can HMRC visit the business during a compliance check?
Yes. HMRC may arrange a visit to understand the business, examine records and inspect business premises, goods or assets. Agreed visits are normally confirmed in writing. A formal announced inspection normally gives at least seven days' notice. HMRC cannot search premises or wander unaccompanied, and areas of a home used solely as a dwelling are outside the business-inspection power.
Can an accountant deal with HMRC on my behalf?
Yes, once the appropriate authority is in place. An adviser can correspond with the compliance officer, organise records, prepare reconciliations, attend meetings and make technical and penalty representations. The taxpayer remains responsible for providing complete facts and approving the accuracy of information supplied.
Will cooperation automatically prevent a tax penalty?
No. Cooperation can affect the quality-of-disclosure reduction and how efficiently the check is resolved, but the underlying behaviour must still be established. An error made despite reasonable care normally carries no inaccuracy penalty, while careless or deliberate conduct can produce a penalty even where the taxpayer later cooperates fully.
What happens when HMRC finds nothing wrong?
HMRC should write to confirm that the check is complete and that no adjustment is required. Where too much tax was paid or a claim was understated, the check can also result in a repayment and, in some cases, repayment interest. The closing letter should be retained with the return and evidence reviewed.
What happens when HMRC proposes additional tax?
HMRC should explain the proposed adjustment and give the taxpayer an opportunity to respond. The final position may be completed by an amendment, assessment, closure notice or contract settlement depending on the tax and procedure. Additional tax normally carries interest from the original due date, and HMRC may separately consider a penalty.
Can the outcome of a compliance check be appealed?
A formal tax or penalty decision will normally explain the appeal rights. Most direct-tax appeals must be made within 30 days. The taxpayer may provide further information, request or accept an independent statutory review, notify an appeal to the First-tier Tribunal and consider Alternative Dispute Resolution where suitable.
Start with the opening letter and response deadline
Tell Us What HMRC Is Checking and What Has Already Been Supplied
A short summary is enough for the initial review. We will confirm the immediate action, secure records required, proposed scope and agreed fee before substantive representation begins.