Quick answer: An HMRC compliance check (also called a tax enquiry) is a formal review of your tax return, accounts, or records to confirm you’ve paid the right tax. It can be opened at random or triggered by specific risk indicators. It isn’t an accusation but ignoring it, or mishandling your response, is what turns a routine check into a costly one.
FA Accountants work with individuals and businesses through this process every week, and the goal here is to give you the same clear, practical guidance we give our own clients.
1. What a Compliance Check Actually Means
HMRC uses “compliance check” and “tax enquiry” more or less interchangeably. It’s a review of your tax return, business records, or accounts to confirm the figures you’ve reported are accurate. It can apply to Income Tax, Corporation Tax, VAT, PAYE, or a combination, depending on your circumstances.
HMRC opens these checks to confirm three things:
- You’ve paid the right amount of tax, at the right time
- You’ve only claimed the reliefs and allowances you’re actually entitled to
- The tax system is operating fairly across the board
Crucially, a compliance check is not an accusation. HMRC’s own position is that checks can end with you owing more tax, being owed a refund, or with no change whatsoever. A large proportion end in that third category especially where the taxpayer engages promptly and provides clear records.
Extra Reading: VAT on Service Charge
Why HMRC Opens a Compliance Check
HMRC doesn’t need a specific reason to check a return it has a general right to check the accuracy of any submission.
That said, certain patterns make a check far more likely:
- Figures that look inconsistent with previous years’ returns
- A large VAT refund claim sitting alongside low reported turnover
- Income that looks low relative to the size, sector, or location of the business
- Repeated late filing or a visible pattern of poor record-keeping
- Third-party data that doesn’t match your return banks, letting agents, online marketplaces, or overseas tax authorities all now feed information directly to HMRC
- Random selection as part of routine, unrelated monitoring
HMRC’s systems also run automated data-matching and risk analytics that flag returns looking unusual compared to similar taxpayers in the same sector. None of these triggers mean you’ve done anything wrong they simply mean your return has been flagged for a closer look.. They simply flag a return for a closer look, which is the starting point of an HMRC tax investigation style review.
HMRC’s Legal Powers: Schedule 36 Explained
This is the part most guides skip and it matters, because it’s the legal basis for almost everything HMRC asks you to do during a check.
HMRC’s power to demand information and documents comes from Schedule 36 of the Finance Act 2008. Under this legislation, an officer can issue a written notice requiring you to provide information or produce documents that are “reasonably required” to check your tax position.
There are three main types of notice you might encounter:
- Taxpayer notice: sent directly to you, the person whose tax affairs are under review
- Third-party notice: sent to someone else who holds relevant information, such as your bank or a business counterparty
- Financial institution notice: allows HMRC to obtain specified information directly from a bank or financial institution, subject to statutory conditions
The key word in the legislation is “reasonably.” HMRC cannot demand documents that have no realistic bearing on the tax position under review. If a request looks excessive, unrelated to the period being checked, or simply too broad, you (or your accountant) are entitled to push back and ask HMRC to narrow it this is a legitimate part of the process, not obstruction.. Asking questions early avoids confusion later and shows HMRC that you are engaging properly with the check.
The Compliance Check Letter: What to Expect
If HMRC opens a case, you’ll receive a formal notice by phone or post. If you use an agent, HMRC will usually write to them as well.
Your letter should tell you:
- The specific tax and time period under review
- What records or information HMRC wants first
- A named contact and phone number for the officer handling your case
- Often, a reference to a factsheet (such as CC/FS1a — “General information about compliance checks”) that explains the process in more detail
Read it fully before doing anything else. If anything is unclear, call the officer directly asking questions early avoids confusion later and shows HMRC you’re engaging properly, which genuinely does influence how the check is handled.
HMRC’s New Interactive Compliance Check Tool
Good tax records and documentation make a compliance check faster and far less stressful. HMRC may In 2025, HMRC launched an online interactive tool designed to help taxpayers who’ve received a compliance check letter understand the process. It’s a useful first stop, but it has real limits you should know about before relying on it.
What it can do:
- Point you to the right HMRC guidance pages based on what you select
- Provide short explainer videos on how checks work, what to expect, and what to do if you disagree with a decision
- Link you to information on appointing an agent, getting extra support, and making a complaint
What it can’t do:
- Interact with your specific circumstances it’s generic guidance, not personalised advice
- Tell you whether a specific information request from HMRC is reasonable under Schedule 36, or whether you’re entitled to push back on part of it
- Explain the underlying error that led to a penalty, or whether the penalty percentage HMRC has applied is actually correct
- Help you if your case involves multiple tax years, cross-border transactions, or a possible dispute over what HMRC is entitled to see
If your situation is anything beyond straightforward, the tool is a starting point not a substitute for professional advice.
Once a case is open, most checks follow a broadly similar pattern, though the depth and duration vary considerably.
Step 1: Information gathering
HMRC requests records, receipts, bank statements, or other documents connected to the period under review.
Step 2: Review and questions
The officer examines what you’ve sent and may raise follow-up questions or request a meeting. You are not obliged to meet HMRC in person — you can respond in writing if you prefer.
Step 3: Findings
HMRC either confirms your figures are correct, or identifies a discrepancy that needs resolving.
Step 4: Resolution
The check closes with a written outcome: a repayment, additional tax owed, or no change.
Throughout the process, keep filing and paying tax as normal a check doesn’t pause your other tax obligations, and falling behind elsewhere can complicate matters further.
What Documents HMRC Can Ask For
Good record-keeping is genuinely the single biggest factor in how smoothly a check goes. HMRC may request:
- Sales invoices and purchase receipts
- Bank and credit card statements
- Payroll records
- VAT records and returns
- Business mileage logs
- Contracts or agreements relevant to the income or expense being questioned
If you can’t locate something, say so — HMRC would rather know about a genuine gap than assume you’re withholding information.
How to Submit Documents to HMRC (Including the New Online Portal)
HMRC has recently introduced a dedicated online form for sending documents and information during a compliance check, replacing some of the older post/email routes for many cases. Here’s what you need to know:
- Who can use it: Only if you’ve received a letter from HMRC’s compliance team requesting additional information. An authorised agent can submit on your behalf.
- What you’ll need: The case reference number shown on your letter using the wrong one can delay your submission.
- File formats accepted: PDF, JPEG, XLSX, ODS, DOCX, ODT, PPTX, ODP
- File limits: Each file must be 15MB or under, and you can upload up to 10 documents per submission. If you have more than 10, split them into separate batches.
- What happens next: You’ll receive a confirmation email with a submission reference number. HMRC will contact you if they need anything further.
You’ll need to sign in to use the service, and you can save your progress and return later useful if you’re gathering documents from multiple sources (a bookkeeper, a bank, a previous accountant).
Getting It Right the First Time
A compliance check can feel intimidating, but it doesn’t have to derail your business or your peace of mind. The key is responding early, staying organised, being straightforward about what you can and can’t provide, and knowing exactly where your rights sit under Schedule 36.
If you’ve received a letter and aren’t sure where to start, don’t wait until the deadline is close. We can review your case, help you prepare the right documents, deal with HMRC directly on your behalf, and make sure nothing gets missed from the first letter through to a full resolution. Our tax investigation support service explains exactly what that looks like from start to finish.
Contact us today and let us take the stress out of the process.
