Tax compliance checks on your company
Your business’s tax affairs may be checked by HM Revenue and Customs (HMRC) to make sure you’re paying the right amount of tax.
What HMRC can check
HMRC will write and tell you what they want to check. This could be:
- your Company Tax Return, including your accounts and tax calculations
- any taxes that you pay
- your PAYE records and returns
VAT and Corporation Tax
There’s a separate process for VAT checks on records and returns.
For Corporation Tax, HMRC can investigate any claims for tax relief or elections that you make, and any changes to these.
If HMRC want to ask about your personal tax position as a director, shareholder, member or trustee, they’ll need to make aseparate enquiry.
When HMRC can make a check
HMRC will normally make a check within 12 months of receiving your return (9 months for Stamp Duty Land Tax returns). This may change if you:
- file your return late
- amend your return
- make a claim separately from your return
- gave HMRC misleading information
What happens during a check
HMRC will write and tell you what information they need. If you don’t send it, they’ll send you an ‘information notice’ to ask again. If you still don’t send it, you may have to pay a penalty of £300, or up to £60 for each day outstanding.
If you know or suspect that there’s something wrong, you must tell HMRC as soon as possible.
HMRC may want to meet you at one of their offices or your company premises. You can have an accountant or legal adviser with you if you want.
Making a payment on account
If HMRC think that your limited company or organisation owes extra tax, they may ask for a payment on account before the check is finished. You don’t have to pay, but you’ll reduce any interest you may end up owing later.
After the check is finished
If you’ve paid too much tax, HMRC will amend your tax return to show the correct figures and you’ll get a repayment. You may get interest on the amount you overpaid.
If you owe more tax, HMRC will amend your return and ask you to pay any tax due within 30 days. You’ll normally have to pay interest.
You may also have to pay a penalty. When deciding if you must pay a penalty, HMRC will consider:
- the reasons for the error
- whether you told HMRC about the error as soon as you could
- how helpful you’ve been during the check
If HMRC need to follow up a previous check to make sure that you’re doing what was agreed, they may carry out an extra check before you submit your next tax return. This is known as a ‘pre-return’ check.
If you disagree with the result of the compliance check (like a penalty or a change to your tax bill), you can appeal.