A compliance check is the most common way HMRC look into a tax return or a specific issue. It's a standard process. It doesn't mean HMRC think you have done anything wrong, and many checks close with little or no change.
A compliance check letter means a named HMRC officer wants to check something: a return, a claim or a particular figure. Reply by the date given, provide what is reasonably asked for, keep your answers factual, and don't volunteer guesses. If the letter hints at bigger concerns or asks about years outside the normal window, get advice first.
HMRC enclose one or more compliance check factsheets with their letters. They set out your rights and obligations, what HMRC can ask for and how penalties work. The factsheet number tells you a lot. For example, some explain the general check process, others cover penalties for inaccuracies or the information powers HMRC may use. Reading them before you reply is time well spent.
An aspect enquiry looks at one area, such as a large expense claim, rental income or a capital gain. A full enquiry looks at the whole return, often including your business records and sometimes your private bank accounts. The letter usually makes clear which one it is. If it doesn't, you can ask.
For a self assessment return filed on time, HMRC normally have 12 months from the date it was filed to open an enquiry into it. Outside that window they generally need a discovery assessment, which has its own rules and time limits of 4, 6 or 20 years depending on your behaviour. If a check reaches back further than you expected, that is a reason to take advice.
Answer the questions actually asked, in writing, clearly and politely. Send copies, never originals, and keep a record of everything you send. If something is wrong, say so. Telling HMRC promptly reduces penalties. Don't speculate. 'I will check and confirm' is a perfectly good answer. If a request seems excessive or irrelevant, you can ask HMRC to explain why they need it.
At the end HMRC issue a closure notice. It either confirms no change, or sets out adjustments with any tax, interest and penalty. If you disagree with the conclusion you can ask for a statutory review or appeal to the tax tribunal, usually within 30 days. If you agree but can't pay in one go, a Time to Pay arrangement is often possible.
It is a formal enquiry, but it is the routine end of HMRC's work. Most are resolved by correspondence, and many end with no change or a small adjustment.
Simple aspect checks can close in a few months. Full enquiries or complex issues can take a year or more, largely depending on how quickly information is exchanged.
HMRC can ask for information reasonably required to check your tax position, and can issue a formal Schedule 36 notice if you refuse. Private statements are often requested in full enquiries. Ask why they are needed if it isn't clear.
Only if an inaccuracy is found and it was careless or deliberate. Genuine mistakes where you took reasonable care do not attract a penalty, and co-operation reduces any penalty that does apply.