HMRC compliance checks
An HMRC investigation letter is alarming out of proportion to what it usually is. Most compliance checks are about one figure on one return, and the thing that most affects how they end is whether you got there first.
Updated 13 September 2026
What an HMRC compliance check actually is #
HMRC checking that a return, a claim or a set of records is right. Compliance check is the current name; enquiry and investigation mean the same thing and are still used interchangeably, including by HMRC.
Checks are opened for all sorts of reasons: a figure out of line with the sector, a large change from last year, a third-party data match, a claim in a targeted area such as R&D, or simple random selection. A letter does not imply HMRC has concluded anything.
Reading the HMRC investigation letter #
A compliance check letter should tell you four things. If it does not, that is worth asking about before you answer anything:
- Which tax and which period is being checked
- What information HMRC wants
- By when, usually 30 days
- Whether it is a formal information notice, which carries penalties for non-compliance, or an informal request, which does not
If you cannot meet the deadline, ask for more time in writing before it passes. HMRC routinely agrees extensions and almost never agrees them retrospectively.
How far back HMRC can go #
The time limit is set by behaviour, which is why the question HMRC keeps returning to is not what happened but why.
| Behaviour | How far back |
|---|---|
| Reasonable care taken | 4 years |
| Careless | 6 years |
| Deliberate | 20 years |
Separately, HMRC normally has 12 months from the date a return was filed to open an enquiry into it. After that it needs a discovery assessment, which is harder: HMRC must show the lost tax arose from carelessness or deliberate behaviour, or that it could not reasonably have been discovered in time.
Filing on time therefore does more than avoid a late filing penalty: it starts the 12 month clock. The dates are in Self Assessment deadlines and Corporation Tax deadlines.
Penalties, and the disclosure that removes them #
Penalties are a percentage of the extra tax, set by two things: how the error arose, and whether you told HMRC before they asked.
| Behaviour and disclosure | Minimum | Maximum |
|---|---|---|
| Reasonable care taken No penalty, though the tax and interest are still due |
0% | 0% |
| Careless, unprompted disclosure Telling HMRC before they ask is what gets the minimum to nil |
0% | 30% |
| Careless, prompted Prompted means after HMRC made contact |
15% | 30% |
| Deliberate, unprompted | 20% | 70% |
| Deliberate, prompted | 35% | 70% |
| Deliberate and concealed, prompted Up to 100% of the tax, on top of the tax itself |
50% | 100% |
Penalties are also reduced for the quality of your cooperation: telling, helping and giving access to records. Being slow and grudging keeps the penalty at the top of its range even where the underlying error was innocent.
What "careless" actually means #
Careless is a failure to take reasonable care, judged against what a reasonable person in your position would do. It is a lower bar than most people assume.
- Reasonable care looks like keeping proper records, asking when unsure, and telling your accountant the whole picture
- Careless looks like guessing a figure, not keeping receipts, or not checking a return prepared for you
- Deliberate means knowing the return was wrong when you filed it
Taking advice you reasonably believed to be right is usually reasonable care, even if the advice turns out to be wrong. That is worth documenting at the time rather than recalling later.
Compliance checks in particular areas #
Some claims attract more attention than others simply because they have been widely over-claimed:
- R&D tax credits, where an HMRC R&D compliance check is now common and contemporaneous evidence of the technical uncertainty matters
- Expense claims, particularly use of home, vehicles and anything with a private element
- Employment status and IR35, where the question is the reality of the working relationship rather than the paperwork
- Minimum wage, enforced by HMRC directly, with arrears recalculated at today's rates
When it stops being routine #
An HMRC criminal investigation is a different thing entirely, reserved for serious fraud. It is rare, and HMRC tells you explicitly when one is under way, usually through a Code of Practice 9 letter or a caution.
At that point stop corresponding and instruct a specialist solicitor. Anything you say in a civil check can be used in a criminal one, and the two processes should not be handled the same way.
If you disagree with the outcome #
You can ask for a statutory review by an HMRC officer not involved in the decision, or appeal to the independent tax tribunal. Both have a 30 day window from the decision.
A review costs nothing and a meaningful share of decisions are varied. Appealing does not pause the tax in every case, so check whether you need to apply to postpone payment separately.
Common questions #
What is an HMRC compliance check?
HMRC examining whether a return or a set of records is right. It is the ordinary name for what used to be called an enquiry or an investigation. Most are routine, aimed at one figure, and end with no change or a small adjustment.
I have had an HMRC investigation letter. What does it mean?
Usually that HMRC wants to check something specific. The letter should say which return or tax it concerns, what information is wanted, and by when. It is not an accusation, and receiving one does not mean HMRC believes you have done something wrong.
How far back can HMRC go?
It depends on behaviour. 4 years where reasonable care was taken, 6 years for carelessness, and 20 years where the error was deliberate. The time limit is set by how the error arose, not by how large it was.
How long does HMRC have to open an enquiry?
Normally 12 months from the date the return was filed. Outside that window HMRC needs a discovery assessment, which requires the loss of tax to have been brought about carelessly or deliberately, or to have been reasonably undiscoverable.
What are HMRC penalties for an inaccurate return?
A percentage of the tax, set by behaviour and by whether you disclosed before HMRC asked. Careless and unprompted can be reduced to nil. Deliberate and concealed, prompted, reaches 100% of the tax on top of the tax itself.
Should I tell HMRC before they find it?
Almost always. Unprompted disclosure, meaning you came forward before HMRC made contact, carries a minimum penalty of nil for a careless error. The same error found by HMRC starts at 15%. Disclosure is the single biggest lever you have.
What is an HMRC criminal investigation?
A separate and rare route reserved for serious fraud. The vast majority of compliance work is civil: HMRC wants the tax, interest and a penalty. A criminal investigation is signalled explicitly, and is the point to instruct a solicitor rather than reply yourself.
Do I need an accountant for a compliance check?
For a single-question check about one figure, often not. For anything covering multiple years, business records or a discovery assessment, yes. The cost is usually far less than the difference between a well-handled and a badly-handled check.