What happens if HMRC opens a tax check on you
A letter from HMRC can be genuinely frightening. Here's what a compliance check actually involves, what it doesn't mean, and what to do if one lands on your mat.
A letter from HMRC lands, and the stomach drops. We understand why - but for the vast majority of drivers who go through this, it’s a far more ordinary process than it feels like in the moment. Here’s what actually happens.
The correct term is “compliance check”
HMRC calls this a compliance check (sometimes informally a “tax enquiry”). It’s not what most people picture when they hear “tax audit” - that’s not a term HMRC actually uses for this process.
What actually triggers one
There’s no single reason a compliance check gets opened. It might be figures that look unusual compared to others in the same trade, a discrepancy between your declared income and what’s visible elsewhere, a tip-off, or simply random selection. Since January 2024, one additional factor is worth knowing about: platforms like Uber and Bolt now report driver earnings to HMRC annually, so a mismatch between what’s reported and what you’ve declared is one more way a question might get raised - though it’s one of several possible triggers, not something that happens to every driver who uses an app.
What the process actually looks like
HMRC opens a compliance check by letter or phone, explaining what they’re looking at and why. If you have an accountant properly authorised as your agent, we’re copied in and can deal with the correspondence directly. You might be asked for specific records - bank statements, mileage logs, invoices, receipts - and occasionally for a meeting, though that’s never compulsory. Throughout, you keep filing returns and paying tax exactly as normal; a check doesn’t pause your ongoing obligations.
The more serious versions, for context
There are two separate, more serious processes - COP8 and COP9 - but they’re not what most compliance checks are. COP8 applies where HMRC suspects a significant tax loss without necessarily alleging fraud. COP9 is specifically for suspected deliberate fraud, and comes with the option of the Contractual Disclosure Facility - a 60-day window to admit any deliberate wrongdoing in exchange for HMRC not pursuing a criminal investigation. These are rare, and a world away from an ordinary compliance check. If you’ve received a standard compliance check letter, this almost certainly isn’t that.
What it can actually cost you, if something is wrong
If a check does find an error, what you pay depends on why the error happened, and whether you told HMRC about it yourself or they found it first:
- Careless mistake: 0–30% of the extra tax (lower if you disclose it yourself)
- Deliberate error: 20–70%
- Deliberate and concealed: 30–100%
On top of any penalty, interest is charged on unpaid tax from the date it was originally due. And if the check finds nothing wrong, it simply closes - no penalty, no fuss.
What to actually do if a letter arrives
Don’t ignore it, and don’t try to handle it entirely on your own if you’re unsure of anything in it. Start gathering the records HMRC has asked for straight away. An accountant can be formally authorised to deal with HMRC on your behalf - either through the standard authorisation form or a quicker version specific to an open compliance check - which takes the direct correspondence off your plate, though the responsibility for your own affairs always stays with you.
We’ve helped clients appeal more than £100,000 in HMRC penalties over the years, and dealing with HMRC on a client’s behalf, from the first letter to final resolution, is part of our Gold plan as standard. If you’ve received a letter, don’t sit with it - ring Michael on 07799 414972 and we’ll talk you through it.