HMRC Urges Companies And Agents To Review Tax Returns

HMRC initiates compliance letters

HM Revenue & Customs has begun issuing letters to companies and their agents where corporation tax liabilities reported in the most recent returns are considered unusually low in relation to comparable businesses. Both company and agent receive formal notification.

Agents are provided with a list of client companies affected. These letters serve as an early indication that HMRC may commence a compliance check within the following 12 months if unresolved issues persist.

This approach is designed to prompt businesses to re-examine their filings and make any necessary corrections proactively.

Criteria for correspondence

HMRC's decision to send these letters is based on comparisons between a company's declared corporation tax and typical figures within its sector or peer group. This targeted strategy is part of the department's wider commitment to closing the tax gap and identifying possible errors or omissions before formal compliance interventions are instigated.

The letters are sent to the company's address and any registered agent. Notably, agents receive an itemised list so they are fully informed of which of their clients are subject to HMRC's review.

Steps required from companies and agents

Recipients are asked to carefully review their submitted corporation tax returns for the year in question. If errors are identified, companies or their agents must either amend the returns (if within the allowable amendment period) or make a voluntary disclosure if the deadline has passed.

Procedures for making amendments or disclosures are detailed in the letter. If, following a review, no errors are detected, HMRC advises companies or agents to confirm this using the contact information provided with the correspondence.

No action from HMRC will commence before a specified date, to allow reasonable time for self-correction.

Payment flexibility and late payment interest

Where companies determine that additional tax is due but face difficulties meeting the liability in full, HMRC directs recipients to guidance on paying in instalments. Interest is charged on all late payments, consistent with government policy.

The provision for instalments is intended to support business viability whilst ensuring outstanding tax is collected efficiently. HMRC's communications offer clear routes to arrange staged payments where required.

Penalties and disclosure implications

HMRC's letters include explanations regarding penalties that may apply if errors are identified. Penalty levels depend on the timing and manner of disclosure specifically, whether disclosures are made unprompted or after receipt of the letter.

Any disclosure made following receipt will be considered 'prompted' for penalty calculation purposes. This distinction influences the minimum and maximum penalty rates as set out in HMRC's published penalty guidance for inaccuracies in returns or documents. The authority also considers how cooperatively the company assists with resolving identified issues.

Broader context and expert perspectives

The compliance letter campaign forms part of HMRC's broader strategy to improve tax integrity and reduce inaccuracies. Recent public statements from the tax authority underscore the importance of early engagement and voluntary correction as effective measures in minimising the need for more formal investigations.

Professional bodies and advisers have widely reported a rise in data-driven compliance activity by HMRC across corporation tax and other business tax areas. According to sector analysts, increased transparency and timely disclosure are viewed as essential to mitigating future penalties and compliance costs.