HMRC Compliance Checks for Corporation Tax

If HMRC decides to look into your company's tax affairs, they'll open what's called a compliance check. This is their way of making sure your business has paid the correct amount of Corporation Tax and claimed allowances properly. Understanding what to expect during a check —...

What is a compliance check?

A compliance check is HMRC's examination of your tax position. They carry out these checks to confirm that you've:

Paid the right amount of tax at the right time
Claimed the correct allowances and tax reliefs

HMRC also uses compliance checks to ensure the tax system operates fairly and effectively across all businesses.

What HMRC can look at

HMRC will write or phone to tell you what they want to check. For companies, this could include:

Your Company Tax Return
Accounts and tax calculations
Any other taxes your business pays
PAYE records and returns, if you employ people

If you use an accountant, HMRC will contact them directly instead of you. If you want to authorise someone other than a tax agent to deal with HMRC on your behalf, you'll need to write to HMRC explaining who you want to use and for which tax.

How the check works

During a compliance check, HMRC will:

Send you a letter requesting information or documents
Discuss matters with you to understand your tax position
Establish the correct tax position and then close the check

HMRC may ask to visit your business premises, your home, or your adviser's office. Alternatively, they might ask you to visit one of their offices. You're entitled to have an accountant or legal adviser with you during any visit.

Your responsibilities during a check

If HMRC sends you an inspection notice or information notice, you must comply with their requests. This means:

Providing the information or documents they've asked for
Allowing visits if requested

You could face a penalty if you don't send the information HMRC has requested or if you refuse a visit.

However, you won't have to pay a penalty if you have a 'reasonable excuse'. Examples of reasonable excuses include:

You're seriously ill
Someone close to you has died

If you disagree with the check

If you believe HMRC should stop the check, you can write to the office that sent you the letter, explaining your reasons.

You can also apply for alternative dispute resolution (ADR) at any time during the process if you don't agree with HMRC's decision or what they're checking. ADR offers a way to resolve disagreements without going through the formal appeals process.

Getting support

HMRC provides an online tool that gives you access to guidance and videos to support you throughout your compliance check. This tool can help you understand what's happening at each stage and what you need to do.

You can also get professional help from an accountant or tax adviser who can represent you and handle communications with HMRC on your behalf.

What happens after the check

Once HMRC completes their compliance check, they'll write to you with the results. The outcome will be one of the following:

If you've overpaid tax: HMRC will repay you. You may also receive interest on the amount you're owed.

If you owe tax: You'll be asked to pay the additional tax within 30 days. You'll normally have to pay interest from the date the tax was originally due.

Penalties

You may also have to pay a penalty on top of any tax owed. HMRC will consider:

The reasons why you underpaid or overclaimed the tax
Whether you told HMRC as soon as you could
How helpful you've been during the check

If you're facing difficulties paying what you owe, tell the officer dealing with your check. HMRC may be able to arrange a payment plan.

Your right to appeal

If you disagree with HMRC's decision following a compliance check, you have the right to appeal the tax decision. This is a formal process that allows you to challenge HMRC's findings.

Key points to remember

Respond promptly to any letters or requests from HMRC
Keep accurate records and make them available when requested
Be cooperative throughout the process — this can affect whether you face penalties
Use professional help if you're unsure about anything
Know that you have rights, including the right to have representation and to appeal decisions

A compliance check doesn't necessarily mean HMRC suspects wrongdoing. Many checks are routine, and some result in refunds to the business. The key is to respond professionally and provide the information requested in a timely manner.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.