An HMRC compliance check does not automatically mean you have done something wrong. Many checks are routine or data-driven, and the majority are resolved quickly with the right response. Here is what a compliance check involves, what HMRC can ask for, and how to handle it effectively in 2026/27.
What HMRC Is Looking For
A compliance check typically arises because HMRC’s systems have flagged a potential discrepancy. HMRC operates a sophisticated data analytics platform called Connect which cross-references over 100 data sources — including PAYE records, bank interest, online platforms, Land Registry, Companies House, and foreign tax authorities.
If your Self Assessment return does not match what HMRC expects from these sources, a compliance check may follow.
Types of Compliance Check
| Type | Scope | What HMRC focuses on |
|---|---|---|
| Aspect enquiry | Single issue on your return | One specific figure or deduction |
| Full enquiry | Entire tax return | All income, expenses, and reliefs claimed |
| Employer compliance | PAYE/NIC records | Payroll, benefits in kind, expenses |
| VAT visit | VAT returns | Output tax, input tax, records |
| COP8 | Complex avoidance schemes | Specific marketed tax avoidance |
| COP9 | Suspected fraud | Full financial investigation |
The Compliance Check Letter
HMRC will always open a formal compliance check in writing. The letter will:
- Identify the tax year(s) under review
- Specify whether it is an aspect or full enquiry
- List the documents or information HMRC wants
- Give a response deadline (typically 30 days, though extensions are available)
Do not ignore the letter. Failure to respond allows HMRC to raise an assessment based on their best estimate — which will almost always be higher than your actual liability.
What HMRC Can Request
HMRC can ask for:
- Business accounts and bookkeeping records
- Bank statements (business and personal if relevant)
- Invoices, receipts, and contracts
- Records explaining how income or expenses were calculated
- Evidence of private-use adjustments on expenses
- Details of any assets purchased or disposed of
HMRC must have a legitimate basis for each request. They cannot go on a fishing expedition through your entire financial history without cause.
Record retention requirements:
- Self-employed / sole trader: 5 years after the 31 January following the relevant tax year
- Limited companies: 6 years
- Employees with simple income: 22 months after the end of the tax year
How to Respond Effectively
Do:
- Respond within the deadline — or request a written extension
- Provide exactly what is asked for — no more, no less
- Check figures carefully before submitting
- Keep copies of everything you send to HMRC
- Seek professional help if the check covers more than a simple factual query
Do not:
- Ignore or delay — this escalates the check
- Volunteer additional information about issues not raised by HMRC
- Guess or estimate figures you are not sure about — say you need time to check
- Agree to HMRC’s conclusions without verifying they are correct
Worked Example: A Compliance Check on Business Mileage
Rebecca is a self-employed consultant who claimed 12,000 business miles at 45p/mile (£5,400) on her 2024/25 return. HMRC opens an aspect enquiry asking for evidence.
Rebecca provides:
- A mileage log showing dates, start/end locations, business purpose, and miles for each journey
- Her client invoices, matching the dates she claims to have attended meetings
- Confirmation that her home is her base of work
HMRC is satisfied. The enquiry closes with a closure notice within 6 weeks. No additional tax is owed.
If Rebecca had estimated the mileage without records, HMRC might have disallowed the claim entirely — a £5,400 expense deduction wiped out means an extra £1,080 in tax for a basic rate taxpayer.
Penalties for Errors Found During a Compliance Check
| Behaviour | Penalty (% of unpaid tax) | Reduction for cooperation |
|---|---|---|
| Innocent mistake | 0% | — |
| Careless (lack of reasonable care) | 15–30% | Yes — reduced to 0–15% |
| Deliberate under-statement | 35–70% | Yes — reduced to 20–35% |
| Deliberate and concealed | 50–100% | Yes — reduced to 30–50% |
Unprompted disclosure (you come forward before HMRC asks) attracts the lowest penalties — sometimes 0% even for careless errors. If you realise you have made an error before HMRC contacts you, it is always better to disclose voluntarily.
If You Disagree with HMRC
If HMRC concludes the check by raising an assessment you believe is wrong:
- Request a statutory review — a separate HMRC officer reviews the decision. Free, takes around 45 days.
- Appeal to the First-tier Tax Tribunal — independent of HMRC, free to use. Must appeal within 30 days of HMRC’s review decision.
- Consider Alternative Dispute Resolution (ADR) — a mediated negotiation, often faster than tribunal. Available for both individuals and businesses.
HMRC’s Connect System
HMRC’s Connect platform is worth understanding. It uses artificial intelligence to detect mismatches between what taxpayers declare and what third parties report. Data sources include:
- Letting platforms (Airbnb, Zoopla, Rightmove listings)
- Online marketplaces (eBay, Amazon, Etsy — platforms now report seller income to HMRC)
- PAYE and P11D data from employers
- Bank interest reported by financial institutions
- Social media (to assess lifestyle against declared income in serious cases)
If you earn income that is not on your return but is visible to these sources, HMRC is increasingly likely to detect it automatically.
See our what happens if HMRC investigates me guide, HMRC nudge letter — what to do, and Self Assessment guide.