What happens if HMRC reviews my accounts for consistency?

What HMRC means by a “consistency review”

When people hear that HMRC is “reviewing accounts for consistency”, it can sound like something mysterious or ominous. In practice, it usually means HMRC is checking whether the figures you’ve submitted across your tax returns, accounts, VAT returns, payroll records, and other filings line up in a way that makes sense. HMRC uses a mix of automated risk checks and human-led reviews to spot patterns that look unusual when compared with prior years, your sector norms, or other information HMRC already holds.

Consistency doesn’t mean your business has to look the same every year. Businesses grow, shrink, pivot, and have one-off events. Consistency means that the story your numbers tell is coherent. If turnover rises sharply, does your VAT output tax show a similar movement? If wages are significant, does PAYE data match what you claim in accounts? If you claim big expenses, do you have a plausible business rationale and records to back them up? If you report low profits, is that consistent with your lifestyle indicators and cash movements? A consistency review is essentially HMRC asking: “Do these pieces fit together?”

This kind of review can be relatively light-touch, such as a request for clarification or a handful of documents, or it can escalate into a full enquiry if HMRC believes there may be inaccuracies, omissions, or deliberate misstatements. How it unfolds depends on why you were flagged and how you respond.

Common triggers that cause HMRC to look more closely

HMRC does not typically announce the exact trigger for a review, but there are well-known risk indicators that often lead to questions. Some are straightforward and genuinely innocent; others can suggest problems.

One common trigger is mismatches between different returns. For example, your accounts show turnover of £200,000 but VAT returns suggest a materially different figure (after allowing for zero-rated sales, VAT schemes, timing differences, and exempt supplies). Or your company accounts show salaries of £60,000, but HMRC’s PAYE records show far less paid through payroll. Or your Self Assessment includes a claim for substantial business mileage or home office costs that is out of line with your declared turnover.

Another trigger is significant year-on-year movements. A sudden drop in profits, a dramatic increase in expenses, or a big swing in gross margin can prompt HMRC to ask what changed. It may be completely legitimate—new equipment, a one-off contract loss, a tough year, investment in marketing—but HMRC may want the explanation and evidence.

Industry comparisons also matter. HMRC has extensive data by sector and business type. If your business reports gross margins far outside what’s typical for your trade, or if your cash sales business reports unusually low takings, HMRC may view that as higher risk.

There are also behavioural triggers. Late filings, repeated amendments, inconsistent answers, and poor record-keeping can increase perceived risk. If HMRC sees frequent corrections or late submissions, it may infer that the underlying process is unreliable.

Finally, “connected information” can lead to checks. That can include information from third parties (banks, payment processors, property transactions, platforms), data matching with other government records, or links between related businesses. Even a well-meaning error—like using the wrong VAT rate or incorrectly reporting dividend income—can create a mismatch that triggers a consistency question.

The different levels of HMRC attention

It helps to know that not every HMRC contact is a full-blown enquiry. HMRC interactions can range from simple to extensive.

At the lighter end, HMRC may send a letter asking for clarification on one item. This might be a “check” or “aspect enquiry” focused on a specific point, such as a particular expense claim or a discrepancy in turnover.

A step up is a wider “compliance check”, where HMRC asks for more information and documents to understand whether the return is accurate. This can involve multiple areas, such as income, expenses, VAT, and payroll.

At the more serious end is a formal tax enquiry or investigation. In this scenario HMRC may scrutinise records in depth, ask detailed questions, and potentially extend the review to multiple years. If HMRC suspects deliberate behaviour, it may use stronger powers and may explore penalties and, in rare cases, criminal investigation routes.

Most consistency reviews sit somewhere in the middle: HMRC sees something that doesn’t add up and wants you to explain it. Your response and the quality of your records often determine whether things close quickly or expand.

What happens first: the initial HMRC contact

If HMRC decides to review your accounts for consistency, the process usually begins with a letter or message through your online tax account (or through your agent if you have one). The initial contact typically explains what HMRC is checking, the period involved, what information HMRC wants, and the deadline for response.

The request may be narrow—such as asking for a breakdown of expenses, copies of invoices for a particular claim, bank statements for a short period, or an explanation of a variance. Or it may be broader—asking for your bookkeeping records, sales invoices, purchase invoices, bank statements, VAT workings, payroll summaries, and other supporting documents.

It’s common for HMRC to ask for a narrative explanation. They may want you to explain in plain language how your business works, how you record sales, how you handle cash, what systems you use, and what changed compared with prior periods. This is where consistency matters: a clear explanation that matches the records can make a big difference.

Deadlines are important. If you can’t meet the deadline, it’s usually better to contact HMRC (or have your agent contact them) early to request an extension rather than missing it without explanation. A cooperative approach can keep the review on a manageable track.

What HMRC may ask for during a consistency review

The information HMRC requests will depend on the nature of the inconsistency. However, there are categories of documents and records that commonly come up.

For income, HMRC may ask for sales invoices, till reports, job sheets, contracts, platform statements, and evidence of payments received. If you operate online or use payment processors, HMRC may ask for summaries from those systems. If you have cash sales, HMRC may focus on how you record daily takings and whether the records are complete.

For expenses, HMRC may ask for purchase invoices, receipts, supplier statements, and explanations of unusual costs. They may ask for details of travel and subsistence claims, motor expenses and mileage logs, home office cost calculations, and any apportionments between business and personal use.

For bank and cash movements, HMRC often requests bank statements and sometimes cash books. They may look at transfers between accounts, unexplained cash deposits, personal spending patterns, and whether drawings or director’s loan movements align with the declared profits.

For VAT, HMRC may ask for VAT return workings, VAT account reconciliations, and evidence supporting zero-rated or exempt treatment. They may compare VAT returns against accounts turnover and examine timing differences. If you use a VAT scheme (such as Flat Rate Scheme or Cash Accounting), HMRC may want to confirm it’s applied correctly.

For payroll, they may request PAYE submissions summaries, payslips, RTI records, and evidence of payments. They may also look at benefits and expenses, or at whether payments treated as dividends were genuinely dividends and properly authorised.

For companies, HMRC may want accounts, Corporation Tax computations, CT600 filings, dividend vouchers, board minutes authorising dividends, and director loan account records. They may also look at whether expenses claimed by the company are wholly and exclusively for business purposes.

How HMRC checks “consistency” in practice

Consistency checks often take the form of reconciliations. HMRC may compare your declared turnover to money coming into your bank accounts, allowing for loans, transfers, VAT, and non-trading income. They may reconcile wages in your accounts to what’s been reported under RTI. They may reconcile VAT outputs to sales and VAT inputs to purchase costs. They may compare expense categories year on year and ask why one has changed.

HMRC may also test gross profit margins. In many trades, a typical margin range is expected. If your margin is unusually low, HMRC may ask whether sales have been understated, purchases overstated, stock movements misrecorded, or personal costs run through the business.

Another practical method is sampling. HMRC may request a sample of invoices and receipts and check that they exist, are valid, relate to the business, and are recorded correctly. They may compare invoice dates to bank payments and check whether there are gaps in numbering that could suggest missing sales.

They may also look at “reasonableness” indicators: if you declare very low profits but show high personal expenditure, significant mortgage payments, or lifestyle costs, HMRC may ask how you financed them. This does not automatically mean wrongdoing—it might be savings, a partner’s income, inheritance, loans, or one-off events—but HMRC may want the explanation.

Your rights and HMRC’s powers

During a review, it’s useful to know that HMRC has formal powers to request information and documents that are reasonably required to check your tax position. If HMRC makes a formal information notice, there are rules around what can be requested and how. In many cases, HMRC starts informally and only escalates if it doesn’t get cooperation or if the situation looks more serious.

You also have rights. You can ask HMRC to explain what they are checking and why they need particular documents. You can ask for reasonable time to provide records. You can have an accountant or tax adviser represent you. You can challenge certain requests if they go beyond what is reasonably required, and you can dispute penalties if you believe they are unfair or not properly applied.

However, relying on rights as a strategy is rarely helpful if the underlying issue is simply that HMRC wants to understand your numbers. In many cases, the fastest route to closure is providing clear, organised evidence and a coherent narrative.

What it feels like from your side: the typical timeline

A consistency review often follows a pattern. First, HMRC identifies a risk and opens contact. Then you supply information and explanations. HMRC reviews what you provide and may come back with follow-up questions. If the answers resolve the concern, HMRC closes the check. If not, HMRC may widen the scope or propose adjustments.

Timelines vary widely. A narrow issue can be resolved in a few weeks if records are strong and the explanation is straightforward. A broader review can take months, particularly if records are incomplete, if HMRC needs time to analyse data, or if the review extends to multiple years.

Delays often come from disorganisation. If you submit partial information, send inconsistent explanations, or take a long time to respond, HMRC may escalate. Conversely, when you provide a well-structured pack—reconciliations, supporting documents, and clear explanations—reviews tend to move more smoothly.

Possible outcomes: no change, amendments, or escalation

There are several outcomes after HMRC reviews your accounts for consistency.

The best outcome is that HMRC accepts your explanations and closes the check with no change. This can happen when the inconsistency was only apparent, not real—such as timing differences between accounts and VAT returns, unusual one-off expenses, or classification differences.

A common outcome is a small adjustment. Perhaps an expense was claimed incorrectly, VAT was treated wrongly on a few items, or a personal element wasn’t removed from a cost. In that case, you may need to amend a return or accept an HMRC assessment. If the error is innocent and promptly corrected, penalties may be reduced or not applied, depending on the circumstances and the behaviour category HMRC considers relevant.

Another outcome is that HMRC widens the review. If HMRC discovers multiple issues or believes the records are unreliable, it may extend the scope to additional areas or years. This is why the first response matters: the tone and quality of your engagement can influence whether HMRC stays focused or expands its enquiries.

In more serious cases, HMRC may allege deliberate understatement of income or inflation of expenses. That can lead to larger assessments, penalties, and potentially investigations into related matters. Most people never go near that end of the spectrum, but it’s important to understand that consistency reviews are one way HMRC identifies patterns that might warrant deeper scrutiny.

Penalties: what affects the size and likelihood

People often worry that any HMRC review automatically means penalties. Penalties are not inevitable, and they are heavily influenced by behaviour and cooperation.

If an inaccuracy occurred despite taking reasonable care, HMRC may treat it more leniently. If the issue is due to carelessness, penalties can apply but may be reduced based on the quality of disclosure and cooperation. If HMRC believes the inaccuracy is deliberate or deliberately concealed, penalties increase significantly.

What reduces penalties? Prompt disclosure, full cooperation, providing records quickly, and taking steps to correct issues going forward. What increases risk? Ignoring deadlines, giving evasive answers, withholding information, or providing inconsistent stories that undermine credibility.

Even when there is an error, HMRC often looks for evidence that you have a reasonable process. If you can show that you keep records properly, reconcile accounts, and seek advice when needed, it supports the argument that any mistake was not careless or deliberate.

How far back can HMRC look?

A key anxiety is whether HMRC will go back many years. How far HMRC can look depends on the nature of the issue and the relevant rules for assessment time limits. In general terms, if HMRC believes errors are innocent or due to reasonable care, the window tends to be shorter; if HMRC believes there was carelessness or deliberate behaviour, it can look further back.

In practical terms, many consistency checks focus on a specific return or year that triggered the concern. But if HMRC finds a pattern—say, repeated under-declaration of sales—it may extend the review to earlier years to quantify the total tax difference.

This is another reason record-keeping matters. If you can produce records and demonstrate that the apparent inconsistency is explained, HMRC has less reason to expand the scope.

What you should do immediately if you receive a review letter

The first step is to read the letter carefully and identify exactly what HMRC is asking for and what period is in scope. Note the response deadline and whether the request is informal or a formal notice. If you have an accountant or tax adviser, forwarding the letter and discussing it early is often wise, because the initial response sets the tone.

Next, gather the relevant records in a structured way. If HMRC is asking about turnover, prepare a reconciliation showing how you get from sales records to bank receipts and to the figure in the accounts and tax return. If the issue is VAT, show how VATable sales in VAT returns reconcile to accounts turnover, and explain timing differences and scheme effects. If the issue is expenses, prepare a breakdown, identify any unusual items, and pull supporting invoices and receipts.

It’s also helpful to prepare a narrative explanation. HMRC officers are not inside your business. A clear explanation—how you invoice, how you take payment, your busiest months, your systems, any major changes—helps them interpret the data.

Finally, avoid rushing to respond with incomplete information. A fast but sloppy response can cause more questions than it answers. If you need extra time to compile the information properly, communicate that early. The goal is to provide a coherent pack that answers the question and reduces the need for follow-up.

How to respond so HMRC is satisfied

HMRC reviews often hinge on clarity. Aim for a response that is organised, polite, and evidence-led.

Structure helps. Start with a brief summary of what you understand HMRC is checking. Then address each point in turn. For each figure, state where it comes from, how it’s calculated, and how it ties back to the return. Attach supporting schedules and label them clearly. If you refer to a bank statement entry, point to the date and amount. If you refer to an invoice, include the invoice number and date.

If there is a genuine mistake, it’s usually better to acknowledge it and propose a correction than to defend something you can’t support. HMRC tends to respond better to straightforward disclosure than to prolonged argument over indefensible points.

If the inconsistency has a legitimate explanation, be explicit. For example, if accounts turnover includes VAT but your VAT return figure is net, explain it. If VAT returns include deposits but accounts recognise income on completion, explain timing. If you had a one-off bad debt, explain how it affected sales and profits. If you changed accounting software or your bookkeeping method, explain that too.

Examples of “inconsistencies” that are often harmless

Not every mismatch is a sign of a problem. Many consistency issues are caused by timing, method, or classification differences.

One example is timing between VAT and accounts. VAT returns are based on the VAT tax point and reporting periods, while accounts might recognise revenue differently depending on the accounting basis used. If you invoice near a quarter-end, VAT may appear in one period and income in another.

Another example is differences due to VAT schemes. Under certain schemes, the way VAT is calculated can make simple comparisons between VAT returns and accounts misleading without proper adjustment. Similarly, cash accounting can shift the timing of VAT recognition compared with accrual accounting in your accounts.

A further example is reimbursements and pass-through costs. If you pay for something on behalf of a client and recharge it, the gross turnover might include recharged costs while your margin remains small. Without an explanation, HMRC might wonder why turnover is high but profit is low.

Seasonality can also look odd. A business with big peaks and troughs might show unusual VAT patterns or profits in one year compared to another. A clear narrative and supporting data can resolve this quickly.

Examples of inconsistencies HMRC may treat as higher risk

Some patterns tend to attract more concern. One is a persistent gap between banked income and declared turnover without a clear explanation. Another is a cash-heavy business with unusually low takings compared to similar businesses. Another is high expense claims in categories that commonly include personal use—such as motor costs, travel, subsistence, and “general” expenses—without evidence and apportionment.

In companies, HMRC often looks at director’s loan accounts and the relationship between salary, dividends, and personal spending. If a director withdraws significant funds but declares minimal income, HMRC may ask how withdrawals were funded and whether dividends were properly declared and supported by profits and paperwork.

VAT can also be a hot spot. Repeated large repayment claims, high input VAT relative to outputs, or inconsistent application of rates can lead to deeper checks. If HMRC sees patterns suggesting systematic errors rather than one-off mistakes, it may want to test the underlying process.

What if you can’t find the records HMRC wants?

Missing records are a common issue, especially for older periods or businesses that have changed systems. If you can’t find something, don’t ignore the request. Explain what’s missing, why it’s missing, and what alternative evidence you can provide.

Bank statements can often be obtained from the bank if they’re missing. Supplier invoices might be obtainable from suppliers. Payment processor statements can be downloaded again. If receipts are missing, sometimes you can provide other evidence like card statements and explain the business purpose.

If you genuinely cannot reconstruct the records, you may need to estimate, but estimation is risky in a compliance check. Where estimates are necessary, they should be reasonable, documented, and supported by whatever evidence exists. HMRC may accept a well-founded estimate in some circumstances, but it will be less persuasive than complete records.

Repeated missing records can also affect penalties. HMRC expects taxpayers to keep adequate records. If missing records suggest a lack of reasonable care, HMRC may be less sympathetic. This is where professional support can help, especially if the check is widening.

How an accountant or tax adviser can help

You are allowed to deal with HMRC yourself, but many people find that having an accountant or tax adviser reduces stress and improves outcomes. A good adviser can interpret HMRC’s questions, identify what HMRC is really concerned about, and prepare reconciliations that address the risk points.

Advisers can also help you avoid accidental misstatements in your responses. It’s surprisingly easy to give an explanation that creates a new inconsistency. For example, saying “all income is banked” when you occasionally accept cash can undermine credibility. Or saying “that’s all the records” when later you find additional invoices. An adviser can help you communicate accurately and consistently.

If there are errors, advisers can guide disclosure and correction in a way that reduces penalties and closes the matter. If HMRC proposes adjustments you disagree with, advisers can help you respond, negotiate, and, where appropriate, challenge decisions.

How to reduce the chance of future consistency reviews

While you can’t control every HMRC risk check, you can reduce your exposure by making your records and reporting internally consistent.

Regular reconciliations are a strong start. Reconcile bank accounts monthly. Reconcile VAT control accounts to VAT returns. Reconcile payroll costs in accounts to RTI submissions. If you operate with multiple income streams, reconcile each stream—cash, card, platform, invoiced—to the total turnover figure.

Keep a clear audit trail. Store invoices and receipts in an organised way, ideally digitally, with consistent naming and links to bookkeeping entries. If you claim mileage, keep a mileage log that shows date, journey purpose, and distance. If you apportion home office costs, keep the calculation and update it when circumstances change.

Be careful with classification. Large “miscellaneous” or “sundry” expense categories can look suspicious, even when legitimate. Clear categorisation and notes can prevent misunderstandings.

Finally, review your returns before submission with an eye for “does this make sense together?” If profit drops sharply, add internal notes explaining why. If you have one-off events—grants, insurance claims, major repairs, a bad debt—make sure your records and accounts reflect them properly.

Mental and practical preparation: keeping calm and staying organised

Receiving a review letter can be stressful, but anxiety often comes from uncertainty. A structured approach helps: understand the scope, gather the records, prepare reconciliations, and respond clearly.

It’s also helpful to separate “HMRC is asking questions” from “HMRC thinks I’ve done something wrong.” Often HMRC is simply trying to resolve a discrepancy. If you treat the interaction as a professional process—like responding to a customer query with supporting documentation—it can feel more manageable.

That said, don’t minimise it. HMRC letters should be treated seriously, and deadlines matter. If you feel overwhelmed, professional support is not a sign of guilt; it’s a pragmatic way to ensure you respond appropriately.

When to be especially cautious

There are situations where you should be particularly careful about how you respond. If HMRC’s questions suggest they suspect undeclared income, personal expenses claimed as business, or issues involving director loans and dividends, the stakes can be higher. In these cases, casual explanations can backfire, and it may be wise to involve an adviser early.

If HMRC requests a very broad set of information across multiple years, or if the tone shifts from “please explain” to formal demands, that can indicate escalation. The more serious the check, the more important it is to ensure your responses are accurate, complete, and consistent.

Also be cautious if you are tempted to “tidy up” records after the fact. Correcting genuine mistakes is one thing; creating or altering documents to fit a story is entirely different and can have severe consequences. If records are missing or unclear, it’s better to be honest, reconstruct what you can, and seek advice on how to correct and disclose appropriately.

Closing the review and moving forward

Once HMRC is satisfied, they will usually confirm closure in writing. Keep that confirmation and the pack of documents and explanations you provided. If you had to amend returns or agree adjustments, retain the workings and correspondence so you can explain the history in future years if needed.

Use the experience to strengthen your systems. A review often highlights where bookkeeping can be improved: better documentation, clearer categorisation, more frequent reconciliations, or a more consistent approach to VAT and payroll processes.

Ultimately, a consistency review is HMRC testing whether your numbers tell a believable, evidence-supported story. If they do, the review can end quickly with minimal disruption. If they don’t, HMRC will keep digging until they understand the gap—and that’s where time, cost, and stress increase. The best defence is strong records, clear reconciliations, and calm, coherent communication.

Key takeaways

If HMRC reviews your accounts for consistency, it usually means they’ve spotted something that doesn’t match up across your filings or with what they expect from your type of business. The process often starts with a request for information and explanations and can stay narrow or expand depending on what HMRC finds and how you respond.

Your best approach is to treat the review seriously but not panic. Identify what HMRC is asking, respond on time, provide organised evidence, and explain any legitimate reasons for differences. If there are mistakes, disclose and correct them promptly. And if the issues are complex or high-stakes, consider using an accountant or tax adviser to help you present a clear, consistent picture.