HMRC compliance checks for small businesses can be disruptive, but good records and prompt responses make them far easier to manage. A recent government announcement said HMRC plans more than 30,000 high-street compliance interventions during 2026–27 as part of a wider effort to tackle tax fraud and organised crime.
The campaign is aimed at harmful and non-compliant activity, not at treating every small business as suspicious. However, it is a useful reminder for legitimate businesses to review whether their sales, banking, VAT and payroll records tell a complete and consistent story.
What has HMRC announced?
In June 2026, the government said HMRC would carry out more than 30,000 interventions on high streets across the UK during the 2026–27 financial year. The announcement followed a joint operation at six souvenir shops in central London and confirmed that a new team of 350 criminal investigators had been recruited.
An “intervention” is a broad term. According to the announcement, it may include a visit, investigation, seizure or warning letter. The action is focused on tax fraud and related criminal activity, including electronic sales suppression—technology used to hide or alter recorded sales. You can read the official GOV.UK announcement.
What should a legitimate small business review?
1. Sales and till records
Your till, point-of-sale system, invoices and online platforms should provide a reliable record of every sale. Preserve the underlying digital data, not just summary figures. Check that refunds, voids, discounts and cash transactions are authorised and traceable. If your systems have changed, make sure historic records remain accessible for the required retention period.
2. Cash, card and bank reconciliation
Reconcile recorded sales to cash deposits, card-settlement reports and bank receipts. Differences should be investigated and documented rather than carried forward without explanation. Regular reconciliation is especially important for businesses with a high volume of cash transactions.
3. VAT evidence and digital records
Check that VAT returns agree with your accounting records and that you hold suitable evidence for input tax claims. Review zero-rated, exempt and reduced-rate sales to make sure the correct treatment has been applied. If you are within Making Tax Digital, confirm that your digital links and software records are complete. Our bookkeeping and VAT team can help you review these processes.
4. Payroll and minimum-wage records
Payroll should reflect the people who actually work for the business, their hours, pay and employment status. Check that PAYE information is submitted on time and that deductions, benefits, overtime and holiday pay are treated correctly. Employers should also retain the records needed to demonstrate compliance with National Minimum Wage rules. See our payroll and CIS support.
5. Company and director information
Your statutory accounts, tax returns, bank records and Companies House filings should be consistent. Review director’s loan accounts, dividends and personal expenses carefully. Transactions between connected businesses or family members should have a clear commercial explanation and supporting evidence.
6. CIS and subcontractor records
Construction businesses should verify subcontractors, apply the correct deductions and retain supporting statements and payment records. Do not assume that describing someone as self-employed settles their employment status; consider how the working relationship operates in practice.
If HMRC contacts your business
- Read the letter carefully and identify the tax, period, records and response deadline involved.
- Confirm that the contact is genuine using official HMRC contact details.
- Preserve all relevant paper and digital records. Do not alter or recreate documents.
- Ask for clarification if the scope of the request is unclear or appears disproportionate.
- Tell your accountant promptly, particularly before providing explanations or large volumes of data.
- Respond accurately and on time. If more time is genuinely needed, request it before the deadline.
A compliance check does not automatically mean that HMRC believes fraud has occurred. It may begin with a risk indicator, a discrepancy or information from another source. The most helpful response is organised, factual and supported by contemporaneous records.
Turn record-keeping into a routine
The best time to prepare for an HMRC enquiry is before one begins. Reconcile accounts regularly, investigate differences while they are fresh and keep clear evidence for unusual transactions. A reliable monthly process is usually more effective than trying to rebuild the story at year end.
If you would like an independent review of your bookkeeping, VAT, payroll or year-end records, speak to our accounting solutions team or contact London Accountants.
This article provides general information and is not a substitute for advice based on your circumstances. If HMRC has opened a formal investigation or alleged deliberate wrongdoing, seek appropriate professional advice promptly.
