Guide
What triggers a tax investigation? The boring truth
Updated
The honest answer is less dramatic than the folklore: most enquiries start with data that doesn't match, figures outside the pattern for your trade, or nothing at all, a percentage are simply random. Knowing this helps you read your own letter calmly.
The common triggers
- Data that doesn't match: HMRC receives information from banks, employers, letting platforms, online marketplaces and overseas tax authorities, and its systems compare it with returns. A gap between reported and received data is the single most common start.
- Figures outside the pattern: margins or expenses well outside the norm for a trade's size and sector invite a question. Sometimes there is an excellent reason; the enquiry is how HMRC asks.
- Repeated lateness or amendments: a compliance history draws attention to the returns behind it.
- Random selection: a proportion of enquiries are random. An enquiry letter is not, by itself, evidence anyone thinks something is wrong.
What a letter does and doesn't mean
Most compliance checks are routine and end with no change or a modest adjustment. The letter tells you its own weight: an aspect enquiry names the specific entries in question; a full enquiry asks for records behind a whole return; and Code of Practice 8 or Code of Practice 9 letters are their own category, see the COP9 guide. HMRC's compliance checks overview (gov.uk) describes the process; matching your letter against it is ten well-spent minutes.
Sensible first moves
- Read the letter twice and note what is actually asked for and by when; the ask is usually narrower than the first read suggests.
- Check your cover: if your accountant's package includes fee protection insurance, representation may already be paid for, see the insurance guide.
- Decide the level of help honestly: a simple aspect enquiry about one figure can reasonably be handled yourself; full enquiries and anything COP-numbered justify a specialist's fee.
Avoiding attention is mostly unglamorous hygiene: file on time, keep records that reconcile, and explain unusual figures in the return's white space before anyone asks. Nothing here is tax advice.