HMRC investigation triggers can include figures that appear incorrect, a large VAT repayment claim compared with turnover, or a small tax liability despite substantial turnover. Most compliance checks are based on identified risks, but HMRC also selects some cases at random. Being checked does not, by itself, mean your business has committed fraud or owes additional tax.
For UK business owners, the useful question is whether the records explain the figures. A change in profit, an expense claim or a difference between returns may have a legitimate explanation. This guide separates published HMRC examples from practical areas to review, so you can prepare evidence without treating every unusual figure as wrongdoing.
HMRC’s compliance-check guidance identifies three examples: figures that seem wrong, a large VAT refund when turnover is low, and little tax declared when turnover is high. These are examples, not a complete selection formula. A concern gives HMRC a reason to ask questions; the records determine whether an adjustment is needed.
Review the relationship between your accounts, tax computations and supporting transactions. A low tax bill may reflect a valid relief or loss, while a VAT repayment may follow investment in equipment. Keep the calculation and evidence together, rather than assuming the result is self-explanatory.
The table below is a practical review checklist. It is not an official HMRC scoring system or a prediction that an investigation will follow.
Growth, the loss of a major customer, a premises move or one-off costs can change your results. Compare the current period with the previous one and explain material movements using records. Avoid claiming that high profits, low margins or a particular percentage automatically trigger a check: this guide does not provide such a threshold.
These figures are not always meant to match exactly. Reporting periods, accounting adjustments and different tax treatments can create legitimate differences. The practical task is to reconcile them and explain the reason. Copying one return’s figure into another simply to make them agree can create a new error.
Check both the supporting documents and the tax treatment. An invoice proves a transaction took place, but does not settle every question about deductibility. Mixed personal and business use needs careful treatment. Ask your accountant to review unclear claims rather than assuming that a large expense is either automatically allowable or automatically suspicious.
Yes. HMRC’s Compliance Handbook distinguishes checks based on identified risks from nationally selected random checks. This means a business with accurate returns and organised records can still be selected. Random selection is already a compliance check; it does not require an error to be found first.
Good administration helps you answer questions and demonstrate how returns were prepared. It cannot guarantee that HMRC will never contact you. Keep records accessible even when you have no reason to expect a check.
HMRC has powers to obtain certain third-party information, including information from financial institutions. A Treasury answer to Parliament explains these powers and their use in checking a tax position. A difference between payment information and a return needs investigation, rather than an immediate assumption of concealed income.
For example, a payment may relate to another accounting period, include an amount collected for someone else, or have been classified incorrectly. Establish the facts and retain the documents that support your explanation.
A business handling cash needs a reliable trail from sales records to cash counts, banking and the accounts. Keep explanations for refunds, voided sales and money introduced by an owner. Operating a restaurant or shop does not establish wrongdoing; assess the records and transactions rather than relying on a sector label.
Address missed deadlines and outstanding liabilities promptly. Late filing and late payment can have their own consequences, but neither proves a return is inaccurate. Avoid treating them as a universal automatic investigation trigger. Check what has been submitted, what remains overdue and whether your records support the filed figures.
These examples are hypothetical, not reports of HMRC cases.
The aim is an accurate explanation supported by evidence. Do not invent a commercial reason after the event or alter original documents to fit an expected answer.
Read our guide to responding to an HMRC investigation letter for the detailed first steps. If you need representation, visit Apex Accountants’ HMRC tax investigation service. Continue meeting ongoing filing and payment obligations while the check is open.
No. An unusual figure may have a legitimate explanation. A check establishes the facts; it does not prove an error or fraud at the outset.
Yes. HMRC can select cases at random as well as on the basis of identified risks. Accurate records help you demonstrate your position.
HMRC lists a large VAT refund with low turnover as an example that may prompt a check. It is not a guarantee of selection or evidence that the claim is wrong.
Not necessarily. Periods and tax treatments can differ. Prepare a reconciliation that explains the differences and ask your accountant to check unresolved items.
No. An accountant can help improve records, assess claims and prepare responses, but cannot guarantee that your business will never be selected.
Your accountant can help assess the request. Specialist investigation support may be useful for significant discrepancies, several taxes or years, or disputed issues. Book a consultation with Apex Accountants to discuss your letter and the support you need.
General guidance checked against the linked official sources on 6 October 2026. Your own correspondence and circumstances should guide the response.
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