HMRC Compliance Checks – A Brief Overview

HMRC Compliance Checks

What are HMRC Compliance Checks?

HMRC compliance checks are used by HMRC when looking into a someones tax affairs. Just because a person Is the subject of a compliance check it doesn’t necessarily mean that they have done anything wrong. It might be that HMRC are simply checking for errors. However, this shouldn’t eliminate the concern of being the subject of  HMRC compliance checks.

HMRC’s has considerable resources and focuses in achieving the highest return on their investment. The taxpayer should be mindful that they have fallen under a ‘higher risk’ category.

New Software Used For HMRC Compliance Checks

Due to technological advances in recent years, HMRC now possesses a highly sophisticated electronic selection software. This software is geared towards identifying taxpayers whom have tax irregularities.  The old system relies on a HMRC tax inspector to gather data – this has gone. HMRC now has a dedicated section for this purpose. This is knows as the Risk and Intelligence Service.

Why has HMRC Chosen Me?

HMRC’s powers of ‘Catching’ taxpayers are well documented. What is less well known is the general approach that HMRC uses in its selection parameters. HMRC is keen to conceal specific details regarding what they look for in order to avoid people adapting to their systems. Despite this, we do know that there is degree of ‘risk profiling’ involved in HMRC compliance checks.

‘Behavioural risk’ is one factor to consider. For example, if a person continuously discloses the use of tax avoidance schemes they will be put into a higher risk category. This applies even if the scheme is ‘DOTAS’ registered. A simpler example is a taxpayer who is regular in submitting their tax returns late. this a simple mistake which can lead to a person becoming subject to a HMRC compliance check.

One thing is certain. HMRC now takes into account a much wider range of information from a much wider variety of sources. This helps to strengthen its decision to perform a HMRC compliance check.

Have you the subject of a HMRC compliance check? Do you have concerns regarding one? It’s important to seek advice from a professional advisor as soon as possible. An advisor will be able to provide help in dealing with a check should one arise, and even how to help avoid one in the first place.