VAT compliance guide

What Happens at an HMRC VAT Compliance Check, and How to Prepare

Last reviewed 2 October 2026. Based on HMRC’s compliance check factsheets, VAT Notice 700/21 and the Finance Act 2008.

A VAT compliance check is HMRC looking more closely at your VAT returns and records to make sure you have paid the right amount. Most start with a letter or phone call, many are dealt with by post or online, and some involve a visit. A check does not mean HMRC thinks you have done anything wrong. How you respond, especially how quickly and openly, has a real effect on the outcome and on any penalty.

Key facts

How it starts

A letter or phone call saying what HMRC wants to check and why

Visits

Usually at least 7 days’ notice. Unannounced inspections need senior authorisation

How far back

4 years for VAT, or 20 years for deliberate errors or failing to register

Records

You must keep VAT records for at least 6 years

Careless error penalty

0% to 30% of the extra VAT if you tell HMRC first; 15% to 30% if HMRC finds it

Disagreeing

Ask for a review or appeal to the tribunal within 30 days of the decision

Your rights

You can have an adviser, friend or relative deal with HMRC for you

Why HMRC checks VAT returns

HMRC chooses businesses for checks mainly by risk. Its own guidance gives examples such as claiming a large VAT refund when turnover is low, or declaring very little VAT when turnover is high. How often you can expect a look depends on how big and complex the business is and whether earlier returns were late or wrong.

Other common starting points are:

• Repayment returns. Returns are run through automatic credibility checks before HMRC pays out. A refund that looks out of line can be held while an officer asks questions.
• New registrations. HMRC checks some new VAT registrations to confirm the business genuinely intends to trade.
• Data matching. HMRC compares returns with bank, marketplace, payment and other data it holds, and increasingly uses AI and analytics to spot risks.
• Sector projects. Some checks are part of wider campaigns focused on particular trades or risks.

• 306,000compliance checks across all taxes
• £50.2bncompliance yield, a record
• 350criminal investigators recruited

In 2025/26 HMRC carried out 306,000 compliance checks across all taxes and brought in a record £50.2 billion of compliance yield. It has also recruited 350 criminal investigators focused on evasion by small businesses and carried out unannounced visits to high street premises with other agencies.

Types of VAT check

What to do when you hear from HMRC

1. Make sure it is genuine. A real HMRC caller already knows your name and business name and will not ask for bank details. Emails only come from addresses ending in hmrc.gov.uk. If in doubt, ring HMRC yourself on the VAT helpline and quote the reference.
2. Note the deadline. If you need more time to gather records, tell the officer before the deadline. HMRC’s factsheets say to let them know if you need extra time.
3. Bring in your adviser. If you have an accountant, tell them straight away and make sure they are authorised to act for you on VAT. If you do not have one, consider getting one for anything beyond a simple question.
4. Gather the records asked for. Send exactly what is requested, organised and labelled. Keep copies of everything you send and a note of every call.
5. Check your own figures. Look at the period being checked before HMRC does. If you find a mistake, tell HMRC about it fully and early.
6. Keep in touch. Reply on time, answer what is asked, and tell the officer straight away if you will struggle to pay any amount that comes out of the check.

Records HMRC usually asks for

HMRC normally tells you which records it wants to see before a visit. Expect some or all of these for the periods being checked:

• your VAT account, which links your records to the figures on each return;
• sales and purchase invoices, including credit notes. Our guide to valid VAT invoices explains what each must show;
• bank statements, cash books and till records;
• delivery notes, contracts and import documents where relevant;
• your digital records and the software used for Making Tax Digital.

VAT visits

Information notices

HMRC usually asks informally first. If you do not provide what it needs, it can issue a formal information notice under Schedule 36 of the Finance Act 2008. It cannot demand documents you cannot get, privileged legal advice or material prepared for an appeal. You can appeal most notices, but not ones that only ask for statutory records or that a tribunal has approved.

• £300for not complying with a formal notice
• up to £60a day after that
• up to £3,000for each inaccurate document or piece of information

Not complying with a formal notice can cost £300, then up to £60 a day, and up to £3,000 for each inaccurate document or piece of information you give. In serious cases a tribunal can add a further penalty linked to the tax at stake.

How far back HMRC can go

Unlike income tax, there is no six year limit for careless VAT errors: it stays at four years. Where records are missing or unreliable, HMRC can make an assessment “to the best of its judgement”, so good records are your best protection.

Penalties

If a check finds an inaccuracy, the penalty depends on why it happened and on whether you told HMRC before it found out. If you took reasonable care, there is no penalty, even if the figure was wrong.

The percentage is of the extra VAT due. Within each range, HMRC reduces the penalty for the quality of your help: up to 30% of the reduction for telling HMRC about the problem, up to 40% for helping work out the figures, and up to 30% for giving access to records. Careless penalties can be suspended for up to two years if you agree conditions to improve your records and then meet them. The government has said it plans to replace suspension with a warning for a first careless error, but no date has been set.

On top of any penalty, late payment interest runs on the extra VAT from when it should have been paid, currently 7.75% a year. Our late payment calculator shows how that builds up.

If HMRC is holding your VAT refund

HMRC can hold a repayment while it checks a return. Since 2023, the old 5% repayment supplement has been replaced by repayment interest, currently 2.75% a year, which runs from the later of the return’s due date and the date you submitted it until HMRC pays. Answer questions quickly; the refund is usually released once the officer is satisfied.

How a check ends

If HMRC finds nothing wrong, it closes the check and tells you. Otherwise it sends a decision or assessment showing the extra VAT, any penalty and interest, or in some cases agrees a settlement with you. It may also write setting out how your record keeping should improve.

If you disagree

• Talk to the officer and send any new information first; many points are settled this way.
• Ask for a review by an HMRC officer not involved in the decision, usually within 30 days of the decision letter. Reviews usually take about 45 days.
• Appeal to the tax tribunal, within 30 days of the decision or of the review result. You usually have to pay the disputed VAT first unless HMRC accepts hardship.
• Try alternative dispute resolution, where a trained HMRC mediator not involved in your case helps both sides. It does not affect your right to a review or appeal.

Your rights during a check

• You can have a professional adviser, friend or relative deal with HMRC for you.
• You can ask HMRC to write rather than phone.
• You can ask for reasonable adjustments if you need extra support.
• Where a penalty is being considered, you do not have to answer questions, though you must still provide records you are legally required to keep. Cooperating usually reduces the penalty.
• The HMRC Charter commits HMRC to getting things right, treating you fairly and respecting your representative.

Are you ready for a VAT check?

Frequently asked questions

Sources: HMRC, About compliance checks (CC/FS1a); HMRC, Record keeping (VAT Notice 700/21); Finance Act 2008, Schedule 36; The HMRC Charter. This page is general information, not tax advice.