Five Common Mistakes That Trigger an HMRC Compliance Check

Genuine costs tend to fluctuate — supplier prices change, usage varies, one-off items get bought and then don't need replacing for years. A motor expense claim of exactly £3,000 for three consecutive years, or an identical 'sundries' figure appearing on every return, looks manufactured rather than calculated, even when the underlying spending was entirely genuine.

If your figures genuinely are consistent year on year — a fixed subscription cost, for example — it's worth keeping a short note explaining why, so you're not caught out trying to reconstruct the reasoning from memory later.

HMRC's systems compare each return not just against sector averages but against the taxpayer's own historical pattern, so a business that has run at a consistent gross margin for years and suddenly reports a significantly lower one — without an obvious explanation such as a new discounting strategy or a one-off stock write-off — is a natural candidate for a closer look, particularly where the change conveniently reduces the tax bill.

A genuine, well-explained reason for the change is usually enough to resolve the query quickly, but only if you can point to it clearly and immediately rather than working it out for the first time once HMRC has already asked.

This is an increasingly common trigger given how much data-sharing has expanded in recent years — from employers' PAYE submissions and banks' interest reporting, to letting platforms, ride-hailing and delivery apps, and online marketplaces now required to report seller income directly.

Where HMRC's systems show income from a specific source that simply isn't reflected anywhere on the submitted return, that gap is one of the most reliable enquiry triggers there is, and one of the easiest for HMRC to identify automatically without any manual review at all.

A small sole trader claiming subsistence and travel costs at a level associated with a much larger operation, or a business claiming costs that don't obviously relate to its stated trade, invites questions — not necessarily because anything is wrong, but because the figures don't fit the expected shape of that kind of business.

Since VAT returns are submitted quarterly and accounts annually, there's an obvious opportunity for the two to drift apart if turnover figures aren't reconciled carefully — and HMRC's systems are well placed to spot exactly this kind of mismatch, since both sets of figures ultimately sit on HMRC's own records.

Consider a small café that's run a stable gross margin for three years running. In year four, the margin drops sharply with nothing on file to explain why. At the same time, HMRC's data shows a payment from a delivery platform that doesn't appear anywhere on the submitted return. Individually, either point might prompt a query; together, they significantly increase the likelihood of a compliance check letter landing on the doormat.

Neither point proves anything is wrong. A genuine explanation — higher wastage during a supplier issue, and a reconciliation gap that's simply an accounting oversight rather than deliberate omission — can resolve both quickly and completely. But without a contemporaneous note explaining the margin change, and without matching platform income to the return in the first place, the business is left reconstructing an explanation under pressure rather than having one ready to hand.

None of these five patterns automatically means something is wrong. Genuine businesses regularly have unusual years, disproportionate one-off costs, or a timing difference between VAT and annual accounts that has a perfectly ordinary explanation. What matters is being able to explain the pattern clearly and quickly if HMRC does ask.