Random compliance check

danm

I received a letter from HMRC today advising me that are starting a compliance check.

Are these generally random or do they indicate something is wrong.

Almost all my income is PAYE apart from last year about 500 in dividend income offset by about 100 of charity donations....

When all in said and done, I had to pay them about £7...

In prior years I have had rebates between £20 and £80.... Like I said pretty straightforward....

If I read tax advisor sites they seem to suggest these are rarely at random and they recommend seeking assistance (no surprise!).

Wondered if there was any experience - I am going to give them a call tomorrow... I think I may have ticked a box somewhere which has triggered it as they want to know about my directorships and dividends taken... I am a 'director' of a number of subsidiary companies which I carry out under the terms of my employment but do not receive any dividends etc resulting from this which are not included in my income and on p60.

Darksparkle

They do both random and risk based checks.

They normally tell you what information they are looking for which gives an idea of what they are looking at.

antrobus

danm wrote: »

...Are these generally random or do they indicate something is wrong....

They can be random, but they are generally targeted.

Doesn't the letter set out what info HMRC require?

Compliance checks factsheets: general information
https://www.gov.uk/government/collections/hm-revenue-and-customs-leaflets-factsheets-and-booklets#compliance-checks-factsheets:-general-information

chrismac1

I don't get many enquiries in my client base. But none of them have ever been random, and I think you'll find very few accountants who believe the guff that HMRC do random ones. So that's the bad news.

The good news is that you are quite likely to be dealing with a clueless wally who does not really know much about UK tax laws. So in the enquiries I have had HMRC has sought over £250,000 in extra tax and achieved £67.

In the most blatant example of a clueless wally, it was a VAT enquiry into a dancing school. I found myself reading out the section of the VAT Act 1994 to the so-called Inspector over the phone. Not once, but THREE times because her answers showed she had completely failed to understand what the section meant the first 2 times.

Back in the old days when HMRC were reasonably competent, there is no way they would let someone loose on a VAT enquiry who had not bothered to read up on the relevant VAT legislation.

If they are asking for information from a specific area, then that is because they think there is more to tax for you to pay arising from that area. So somewhere along the line in one of those companies they think you've had salary or dividends or benefits in kind that you don't think you've had.

EdSwippet

danm wrote: »

If I read tax advisor sites they seem to suggest these are rarely at random and they recommend seeking assistance (no surprise!).

From what you wrote I'd say you can easily get through this without expensive assistance. Make sure of your ground, and be co-operative but at the same time do not offer anything beyond what satisfies HMRC's request for explanation or corroboration. They will deal with you through email if you ask, including receiving PDF files of documents -- that makes things run more smoothly than if you had to post everything in dead tree format.

I handled my own 'compliance check' recently with circumstances far more complex than your own, and emerged a month ago with 'no amendments required'. It was time-consuming and annoying, not least because it was apparently triggered by an error somewhere in HMRC's online self-assessment software (they claimed a box on my return was not completed but it certainly was; it is fully visible in the PDF return printout I get from online self-assessment). But no worse than that.

Wenlock

I can confirm that HMRC definitely do some entirely random enquiries - although these are a minority of the total number undertaken each year. They will not tell you if it is random or not.

As Darksparkle said, you normally can get a clue from the questions asked. If they are simply asking for documents like the P60 to confirm the entries on your Return it may well be random. If however they believe you have other income (like rental income or bank interest) they will either ask you outright for clarification or they may request copies of all bank statements etc so that they can check the position for themselves.

Be aware that HMRC do have various sources of information. If you have omitted anything from your Return you can minimise the penalties they charge by giving a full and early disclosure and by co-operating throughout the enquiry.