What Triggers an HMRC Investigation?

HMRC has a legal obligation to ensure taxes are reported accurately and honestly across the UK. Each year, its compliance teams carry out a significant volume of checks and investigations against both businesses and individuals. In 2024/25 alone, HMRC secured £48 billion in compliance yield, money that would otherwise have gone unpaid, and it is actively expanding its compliance workforce to increase that figure further in the years ahead.

An investigation can be opened against any registered business or anyone completing a Self Assessment tax return. Understanding what triggers one, and how to reduce your risk, is an important part of managing your tax responsibilities correctly.

What Is an HMRC Investigation?

An HMRC investigation is a formal review of a taxpayer’s financial records and submissions. Compliance checks can range from a straightforward query about a specific figure to a full-scale examination of several years of accounts. Some are triggered by specific concerns, while others are selected at random. Either way, the process is designed to verify that tax has been reported and paid correctly.

What Are the Most Common Triggers for an HMRC Investigation?

Errors or inconsistencies in tax returns

Incorrect or inconsistent figures are one of the most common reasons HMRC opens an enquiry. Submissions are cross-referenced against previous years, and repeated amendments or resubmissions can attract additional scrutiny. Missing documentation or incomplete company details will also prompt HMRC to request further information. This is one of the key reasons we always recommend working with a qualified accountant rather than relying on AI for tax advice. Submissions must be accurate first time.

Unusually high or low income

Significant fluctuations in income compared to previous years can raise concerns that not all income has been declared. Where genuine reasons exist for a large change in turnover or profit, such as a difficult trading period or a particularly strong year, it is advisable to include a supporting explanation with your submission to give HMRC the full picture.

High levels of expenses or tax reliefs

Businesses and sole traders are entitled to claim allowable expenses and reliefs, but claims that appear disproportionately high relative to taxable income can attract scrutiny. HMRC will expect to see supporting evidence for every claim, and costs that appear non-essential or undocumented are likely to prompt further questions.

Late or missing submissions

Failing to meet HMRC’s filing deadlines, or missing submissions altogether, reflects poorly and can be an indicator of wider disorganisation in financial record-keeping. Late payments carry the same risk. Staying on top of key tax deadlines throughout the year is essential.

Third-party tip-offs

HMRC accepts information from employees, customers, suppliers, and members of the public. Where information passed on conflicts with what has been submitted, an investigation may be opened. A tip-off does not automatically lead to an enquiry, but it can prompt questions.

Random checks

Each year HMRC selects a proportion of taxpayers for investigation entirely at random, regardless of the accuracy of their submissions. These checks are a routine part of HMRC’s compliance programme and, where records are properly maintained, are straightforward to navigate.

How Can You Reduce the Risk of an HMRC Investigation?

No taxpayer can eliminate the risk of a random check entirely, but the following steps significantly reduce the likelihood of a compliance enquiry being opened:

• Keep thorough, organised records of all income and expenses throughout the year
• Align your record-keeping with Making Tax Digital requirements
• Submit all returns on or before the relevant deadlines
• Address any errors promptly and transparently
• Respond to any HMRC correspondence quickly and completely

Working with a specialist in tax compliance is the most reliable way to ensure your submissions are accurate, well-evidenced, and consistent year on year. Should an investigation be opened, having an experienced accountant in your corner makes a significant difference to how efficiently and smoothly the process is resolved.

How Hysons Can Help

At Hysons, we support both businesses and individuals with all aspects of tax compliance, from Self Assessment and income tax through to company tax returns and bookkeeping. If you are concerned about your current tax position or would like support preparing for an investigation, get in touch with our team today.