HMRC Compliance Checks

• What is an HMRC compliance check? 
• What triggers an HMRC compliance check? 
• What HMRC can check 
• How long does an HMRC compliance check take? 
• What happens after the check? 
• Your rights and responsibilities during a compliance check 
• How accurate workforce records reduce your compliance risk 
• If you disagree with an HMRC decision 
• Getting help with an HMRC compliance check 

An HMRC compliance check is a review of a person’s or business’s tax position. It aims to confirm that the right amount of tax is being paid at the right time and that any allowances or reliefs claimed are correct. For employers, a compliance check could cover PAYE, National Insurance, VAT, Corporation Tax, employee expenses or benefits, depending on the business.

Who can be subject to a compliance check?

Any UK business or employer may face tax compliance checks, regardless of size or sector. This includes sole traders, partnerships, limited companies and employers operating PAYE, from SMEs and retailers to manufacturers, care providers and office-based businesses.

Good record-keeping is therefore important for every employer, particularly where payroll and employee information may need to be provided.

Are HMRC compliance checks random?

Some checks may be random, while others are risk-based. HMRC enquiries and compliance checks can be prompted by inconsistencies or unusual figures, risks associated with a particular sector or information HMRC already holds.

Being selected does not necessarily mean an error has occurred, but employers should be prepared to provide accurate records and respond to HMRC's questions.

There are several reasons HMRC enquiries or tax compliance checks may be opened.

Some of the most common triggers include:

• Late, missing or inconsistent tax filings
• PAYE or payroll discrepancies
• Inconsistencies in VAT returns
• Large or unusual claims
• Differences between current and previous submissions
• Industry risk profiling
• Information received from third parties
• Tip-offs or whistleblowing
• Random selection

For employers, this could mean discrepancies between PAYE submissions and payroll records, overtime payments that do not match recorded hours or inconsistencies involving shift records and employee expenses. Keeping these records accurate and aligned can make HMRC enquiries compliance easier to respond to.

During HMRC tax compliance checks, HMRC may request documents relevant to the area under review. For employers, these can include PAYE and payroll records, RTI submissions, National Insurance records, expenses, benefits in kind, employment contracts and accounting records. Workforce information such as time and attendance records, overtime, absences and shift data may also be relevant.

Payroll and PAYE records

HMRC may review payslips, PAYE calculations, RTI submissions, deductions, National Insurance, tax codes and starter or leaver information. Accurate workforce data helps ensure the information feeding into payroll is reliable. Payroll integrations can also reduce the need to transfer data manually between workforce and payroll systems.

Working time and attendance records

Clock-in and clock-out data, shift schedules, overtime approvals and absence logs can help evidence how payroll figures were calculated. For example, an approved overtime record provides a clear link between additional hours worked and the resulting payment, helping HR and payroll teams respond to questions with supporting evidence.

HMRC will usually contact the business by letter or phone and explain what it wants to check. The employer may then be asked to provide specific records or information. HMRC reviews this material, may raise follow-up questions and will ultimately issue an outcome.

What should employers do first after receiving an HMRC compliance check letter?

After receiving a letter about a HMRC compliance check letter, employers should:

• Read the letter carefully and identify the tax area being reviewed
• Note any deadlines
• Gather the documents requested
• Involve HR, payroll and finance teams where relevant
• Seek advice from a tax professional if the request is complex
• Check that information is complete and accurate before submitting it

Taking a coordinated approach can make it easier to find the right information and respond within the required timeframe.

Can HMRC visit your business?

Depending on the nature of an HMRC compliance check, HMRC may request a visit or meeting. Employers should check the official guidance relating to their particular case.

If workforce or payroll information is being reviewed, HR teams should ensure relevant payroll, attendance, shift, overtime and employee records are organised and accessible ahead of the visit.

Can HMRC visit your business?

Depending on the nature of an HMRC compliance check, HMRC may request a visit or meeting. Employers should check the official guidance relating to their particular case.

If workforce or payroll information is being reviewed, HR teams should ensure relevant payroll, attendance, shift, overtime and employee records are organised and accessible ahead of the visit.

There is no fixed timeframe for an HMRC compliance check. Compliance checks can vary depending on the complexity of the case, how quickly records are provided, whether HMRC has follow-up questions, whether errors are identified and whether professional advisers are involved.

A straightforward check may be resolved relatively quickly, while a more complex case can take several months. Employers should therefore pay close attention to individual response deadlines rather than relying on time limits.

How far back can HMRC check?

HMRC compliance checks vary depending on the tax involved, the circumstances and whether any error is considered careless or deliberate. Employers should check current GOV.UK guidance or seek professional advice for their specific circumstances.

For HMRC tax compliance checks, employers should also retain PAYE records in line with HMRC requirements and ensure relevant workforce records remain accurate and accessible.

Once an HMRC compliance check is complete, HMRC will explain the outcome. Depending on its findings, there may be no changes required, or the employer may need to pay additional tax, interest or penalties. In some cases, the business may instead be due a repayment or adjustment in its favour.

If the employer disagrees with the outcome of an HMRC tax compliance check, there may be options for further discussion or appeal. Any deadlines included in HMRC's decision should be checked carefully.

During a compliance check, employers should cooperate fully with HMRC, provide accurate information and ensure requested records are accessible. However, they can also ask questions, seek professional advice, request reasonable time to provide information and challenge a decision where appropriate.

HMRC provides official guidance and support for businesses undergoing compliance checks on GOV.UK. Employers should refer to this guidance for information relevant to their circumstances and any deadlines or requirements they need to follow.

Accurate workforce records cannot prevent a tax compliance check, but they can make it much easier to respond with clear, consistent information. Reliable data on hours worked, overtime, absences and shift patterns can support payroll accuracy and provide an evidence trail when records are requested.

Protime's workforce management platform helps HR teams manage time tracking, workforce planning and employee data in one place, making relevant information easier to access when needed.

Compliance-ready records checklist:

• Keep time and attendance records accurate and up to date
• Record and approve overtime consistently
• Maintain clear absence and shift records
• Check workforce and payroll data for discrepancies
• Keep relevant records accessible

Time registration and audit trails

Automated time registration creates a clearer record of hours worked, attendance, overtime and shift patterns. If HMRC queries payroll figures, for example, approved time records can help demonstrate how an employee's pay was calculated.

Reducing manual errors in payroll data

Manual timesheets, spreadsheets and disconnected systems can increase the risk of errors. Integrating workforce management software with payroll can reduce discrepancies between hours worked, overtime approved and the pay ultimately processed.

Employers may be able to challenge a decision through an internal review, appeal or Alternative Dispute Resolution (ADR). GOV.UK provides information on these routes as part of HMRC compliance check support.

Seek professional tax advice before submitting an appeal, particularly where HMRC compliance issues are complex.

Sources of HMRC compliance check support include:

• HMRC official guidance and the contact details in your compliance check letter
• Your accountant, payroll provider or tax adviser
• Internal HR and finance teams
• Workforce management reporting tools

Using the right compliance checks support can help employers manage HMRC enquiries and compliance checks more effectively.

HMRC compliance checks are a normal part of the tax system, but they require careful handling. Keeping accurate, accessible records helps employers provide the information requested and respond with confidence.