What UK compliance checks should businesses expect when filing Corporation Tax in 2024/25?

Understanding what “compliance checks” mean in the Corporation Tax context

When UK businesses talk about “compliance checks” for Corporation Tax, they’re usually referring to the range of enquiries, verification steps, and risk-based interventions HM Revenue & Customs (HMRC) can use to confirm that a return is correct and that the right amount of tax has been paid. These checks can be light-touch—such as requesting evidence for a particular figure—or they can become more formal, such as an enquiry into the whole return. In 2024/25, the practical reality for many companies is that compliance is increasingly data-led: HMRC’s processes rely heavily on matching information from multiple sources, assessing risk indicators, and focusing on areas where errors are common or where tax at stake is higher.

It’s also worth clarifying what compliance checks are not. They are not automatically an accusation of wrongdoing. Many checks arise from simple inconsistencies, missing information, or unusual patterns compared with a company’s history or its sector. A proactive approach—keeping orderly records, understanding common triggers, and documenting the rationale behind key tax positions—can turn a potentially disruptive check into a manageable exchange of information.

Why the 2024/25 landscape matters: more complexity, more data, more focus

Corporation Tax in the UK has grown more complex in recent years. Changes to rates, reliefs, and the interaction between accounting and tax adjustments have increased the number of judgment calls and calculations that can be challenged. At the same time, reporting and record-keeping expectations haven’t stood still: digital records, more structured disclosures, and tighter controls around claims all affect what HMRC may expect a business to be able to produce on request.

In practical terms, this means businesses should expect compliance checks to focus on the areas where complexity meets materiality. If your return includes significant relief claims, large movements year-on-year, or bespoke transactions, it’s sensible to assume that HMRC may ask for supporting detail, even if you have always filed without issue in the past.

The main types of Corporation Tax compliance checks a business may face

HMRC’s compliance activity can take several forms. Knowing the broad categories helps you prepare the right documentation and respond effectively if you’re contacted.

1) Automated and risk-based screening

Before any human being reviews your return, it may be screened for risk markers. These can include unusual entries, inconsistencies with prior filings, or figures that differ significantly from what might be expected given your sector and size. Screening may also include cross-checks against other data HMRC holds, such as PAYE submissions, VAT returns, and information received from third parties.

2) “Aspect” enquiries (checking a specific item)

An aspect enquiry focuses on one or more specific issues in the return rather than opening up the entire filing. For example, HMRC might ask for the basis of a capital allowances claim, the calculation of interest restrictions, or evidence supporting a deduction for a large expense item.

3) Full enquiries (reviewing the whole return)

A full enquiry is more extensive. HMRC may review multiple areas, request broader records, and ask for explanations about how the tax computation was prepared. These enquiries tend to be more time-consuming and can expand if new issues arise during the process.

4) Compliance checks linked to repayment claims

If your return results in a repayment, HMRC may carry out checks before releasing the funds, especially if the repayment is large, unusual, or driven by claims that are often miscalculated. This isn’t unusual; it reflects a general “verify before pay” mindset where tax refunds are concerned.

5) Targeted campaigns and thematic reviews

From time to time, HMRC focuses on certain industries or issues. If your business sits in a sector that has been associated with recurring errors (or deliberate non-compliance in some cases), you may find enquiries concentrate on a known set of risk areas even if your own filing is otherwise straightforward.

Common triggers that can lead to a Corporation Tax compliance check

While you can’t control every factor that influences compliance selection, there are patterns that often increase the chances of questions. Understanding them helps you decide where to invest time in preparing supporting files.

Large or unusual movements year-on-year

Sharp changes in profits, significant swings from profit to loss, or big changes in tax payable compared with prior years can draw attention. Sometimes these changes are legitimate—for instance, a one-off impairment, disposal, or restructuring. The key is to be able to explain the movement clearly and reconcile it to accounts and computations.

Loss claims and group relief transfers

Loss relief is a frequent area for checks because it involves rules about the type of loss, time limits, group relationships, and restrictions. Group relief and loss transfers can be mechanically complex, particularly in larger groups or where ownership changes during the year.

Significant capital allowances claims

Claims involving plant and machinery, structures and buildings, integral features, and disposal adjustments are often checked because classification errors are common. If you have major spend on assets or property works, expect HMRC to be interested in how you categorised the expenditure and whether the claim matches the underlying invoices and asset register.

Research and development (R&D) relief claims

R&D relief has historically been an area of high compliance focus because claims can be subjective and have been prone to errors. Businesses that submit claims without detailed technical and financial justification, or that rely on generic narratives, can be more likely to receive questions. Strong record-keeping here means having a clear description of the projects, the scientific or technological uncertainties addressed, the staff and subcontractor costs included, and the methodology for apportioning mixed-use expenditure.

Transactions with connected parties

Connected party transactions—including management charges, royalties, intercompany loans, and asset transfers—often warrant scrutiny. HMRC may ask whether pricing is arm’s length, whether transfer pricing rules apply, and whether documentation supports the amounts in the accounts and tax computation.

Cross-border arrangements

International activity can introduce additional checks: permanent establishment risk, withholding tax considerations, controlled foreign company matters, transfer pricing, or the correct treatment of foreign exchange and overseas taxes. Even smaller businesses can trigger questions if they have new overseas customers, remote staff abroad, or service arrangements with foreign suppliers.

Thin margins or unusual profitability for the sector

HMRC sometimes compares profitability metrics across similar businesses. If your margins are unusually low (or high), or if costs appear disproportionate to revenue, you may receive queries—especially if other data (like VAT returns or PAYE payroll) suggests a different business profile from what the CT return implies.

Late filing, repeated amendments, or inconsistent disclosures

Repeated late filings can increase perceived risk. Similarly, frequent amendments, or returns that lack consistency in the way items are disclosed year-to-year, may prompt HMRC to request explanations.

What HMRC typically asks for during a compliance check

If you receive a compliance check letter or enquiry notice, you’ll usually see requests for specific documents and explanations. While the exact list varies, there are recurring themes that businesses should be ready for.

Core statutory and accounting records

Expect requests for the statutory accounts, trial balance, general ledger, and supporting schedules. HMRC may ask you to reconcile the figures in your tax computation to the accounts, and then back to the underlying ledger entries. This is where clean bookkeeping pays dividends: if your accounts are well supported, you can respond quickly and with confidence.

Tax computation workings

HMRC may ask for the detailed workings behind adjustments from accounting profit to taxable profit. That can include disallowable expenses, depreciation add-backs, capital allowance computations, provisions adjustments, and any timing differences or deferred tax considerations (even though deferred tax itself isn’t part of the CT computation, it can provide context for accounting treatments).

Invoices, contracts, and evidence of commercial rationale

For large expense items, HMRC may want to see invoices and contracts. For management charges or service fees, they may ask what services were provided, why the costs were incurred, and how the amount was calculated. Where arrangements are with connected parties, the “commercial rationale” and evidence of value received can be particularly important.

Bank statements and payment evidence

In some cases, HMRC may request bank statements or evidence of payment to confirm that transactions occurred as recorded, to review cash flows, or to test the existence of certain costs. This is more common where there’s a question around whether an expense was genuinely incurred, or where the timing of recognition is central to the tax treatment.

Payroll records and expense policies

Where staff costs or benefits are relevant—such as for R&D apportionments, travel and subsistence, or termination payments—HMRC may request payroll reports, P11D data, expense policies, and evidence of how costs were allocated to particular activities.

Asset registers and capital expenditure documentation

For capital allowances, expect asset registers, fixed asset schedules, invoices for significant capital spend, and documentation showing the nature of works. If property or fit-out costs are involved, HMRC may seek a breakdown between qualifying plant and machinery, non-qualifying building costs, and items that fall into other categories.

Group structure and ownership evidence

For groups, HMRC may want share registers, group charts, acquisition/disposal agreements, and details of changes during the year. This can matter for group relief, loss restrictions, and determining whether companies are within the same group for specific purposes.

Specific compliance focus areas businesses should prepare for in 2024/25

While every business is different, there are several areas that commonly attract attention and that tend to be technically demanding. The best preparation is to ensure your documentation tells a coherent story: what happened, why it happened, how it was recorded in the accounts, and how it was treated for tax.

Capital allowances and the boundary between repairs and improvements

Distinguishing revenue repairs from capital improvements is a classic compliance issue. For example, property works can include both routine repairs and significant upgrades. HMRC may test whether costs deducted as revenue should have been capitalised, or whether capital allowances have been correctly claimed for qualifying plant and machinery. A robust approach includes: clear descriptions of work performed, a breakdown of invoices, internal approvals, and—if relevant—professional reports allocating costs to qualifying categories.

Intangible fixed assets and intellectual property

The tax treatment of intangible assets can be complex, especially where a business develops software, acquires customer lists, or transfers IP within a group. HMRC may ask about the nature of the asset, how it was valued, and whether amortisation aligns with tax rules. Documenting the commercial deal, valuation methodology, and accounting policy helps reduce uncertainty.

Loan relationships, financing costs, and interest restrictions

Where companies have material borrowing, compliance checks often examine: whether interest deductions are correctly computed, whether connected-party financing is at arm’s length, and whether any restrictions apply. Even in straightforward scenarios, HMRC may test whether financing costs have been properly allocated, whether foreign exchange movements have been treated correctly, and whether the timing of recognition matches tax rules.

Transfer pricing and intercompany charges

For groups, transfer pricing can become a key area of enquiry. HMRC may ask for documentation supporting pricing of intercompany services, royalties, or goods. Even smaller groups should be able to explain: what the charge is for, how it was calculated, who benefited, and why it’s commercially reasonable. A clear service description, time records (where relevant), cost bases, and allocation keys can make responses much easier.

Employee-related costs and benefits

Corporation Tax compliance sometimes intersects with employment tax. HMRC may question whether certain staff-related costs are deductible, whether benefits have been correctly treated, or whether reimbursed expenses are supported by policy and evidence. Termination payments can be a particular focus because different components can have different tax treatments and reporting obligations.

Provisions, accruals, and “one-off” adjustments

Large provisions—such as restructuring provisions, impairment charges, or litigation reserves—can attract scrutiny. HMRC may request evidence that the accounting treatment is appropriate, and then consider whether any tax adjustments are needed. The more judgment-heavy the provision, the more important it is to keep contemporaneous documentation: board minutes, legal correspondence, calculations, and the basis for estimates.

Record-keeping expectations: what “good” looks like during a check

When a compliance check lands, speed and clarity matter. HMRC is typically looking for evidence that supports specific numbers, but they also assess whether a business has reasonable controls and governance around tax. “Good” record-keeping isn’t just about having documents somewhere; it’s about being able to retrieve them quickly and show a clear audit trail from transaction to ledger to accounts to tax computation.

Maintain reconciliations that link everything together

One of the most helpful documents during an enquiry is a well-prepared reconciliation: accounts profit to taxable profit, taxable profit to tax due, and supporting schedules for each major adjustment. If your reconciliation is clean and consistent, it often reduces the number of follow-up questions.

Keep contemporaneous evidence, not reconstructed narratives

Where a tax position depends on facts and intent—such as the nature of a project for R&D, the purpose of travel, or the commercial rationale for an intercompany charge—contemporaneous records are far more persuasive than something produced months later. This can include project plans, design notes, meeting minutes, internal approvals, and timesheets.

Document key judgments and materiality decisions

Many Corporation Tax positions involve judgment, such as allocating mixed-use costs, determining whether expenditure is capital or revenue, or deciding whether a payment is wholly and exclusively for the trade. Writing down the rationale at the time—especially for large items—helps demonstrate that the position was considered and reasonable.

Ensure consistency across taxes where possible

HMRC often holds information from multiple tax regimes. If the Corporation Tax return implies a level of activity that doesn’t align with VAT returns or payroll data, questions become more likely. While differences can be legitimate, being ready to explain them is important.

What to do if you receive a compliance check letter

The first step is not panic; it’s organisation. A methodical response can shorten the process and reduce the risk of escalation.

Read the scope carefully and identify what is actually being asked

Some letters request a specific set of documents; others open a formal enquiry. Identify deadlines, clarify whether the check is limited to an aspect or covers the full return, and note exactly which figures or transactions are under review. Responding with excessive irrelevant information can sometimes complicate matters, so aim to be thorough but focused.

Secure your internal records and establish a response process

Assign a responsible person, agree how documents will be gathered, and ensure all communications with HMRC are coordinated. If you have external accountants or tax advisers, involve them early so that responses align with the return filed and so that explanations are consistent.

Provide clear explanations alongside documents

Sending a bundle of invoices without context often leads to more questions. A short narrative explaining what the documents show, how the amounts were calculated, and where they appear in the accounts and computation can prevent unnecessary follow-ups.

Be accurate, consistent, and timely

If you don’t have a document, don’t guess. Explain what you do have and what alternative evidence supports the position. If you need more time to compile information, it’s generally better to communicate early and propose a realistic timeline rather than miss a deadline without explanation.

Outcomes of compliance checks: what businesses should expect

Compliance checks don’t all end the same way. Understanding the likely outcomes helps you plan financially and operationally.

No change

Many checks conclude with no amendment required. This is a common outcome where a business can provide strong evidence and where any anomalies are easily explained.

Amendment and additional tax

If HMRC concludes that the return understates tax, the result may be an amendment, an assessment, or an agreement to adjust figures. This could arise from a disallowed deduction, a reduced relief claim, or timing changes to when a deduction can be taken.

Repayment reduction or delay

If your return leads to a repayment and HMRC questions an element of the claim, they may withhold or reduce the repayment until the issue is resolved. This can affect cash flow, so businesses expecting large repayments should plan for the possibility of verification questions.

Penalties and interest

Where additional tax is due, interest may apply, and penalties can be charged depending on the nature of the error and the behaviour involved. Businesses that can demonstrate reasonable care—through documented processes, professional advice, and strong internal controls—are generally in a better position when HMRC considers behaviour-based penalties.

Wider review

Sometimes a check into one area leads to questions about others, particularly if HMRC identifies systemic issues. This can happen where record-keeping is weak, where key controls are absent, or where similar errors may have occurred across multiple periods.

How to reduce the chance of a compliance check becoming disruptive

You cannot eliminate the possibility of HMRC contacting you, but you can reduce disruption and risk by treating compliance as an ongoing process rather than a last-minute filing exercise.

Build a “CT enquiry-ready” file each year

A practical approach is to maintain a structured file—digital or physical—that includes the tax computation, key reconciliations, major supporting schedules, and documentation for material judgments. If you do this as part of year-end close, it’s far easier than reconstructing everything under pressure later.

Review relief claims with the same rigor as revenue recognition

Reliefs such as capital allowances and R&D can be valuable, but they require discipline. Ensure claims are based on evidence, that cost pools and apportionments are defensible, and that narrative explanations reflect what actually happened. Overly broad claims can increase risk and may take longer to defend.

Check connected-party and cross-border positions early

Intercompany charges, loans, and cross-border services are areas where small documentation gaps can become big problems. Preparing transfer pricing support, clear agreements, and evidence of benefit received can significantly streamline any future queries.

Keep your bookkeeping tidy and your audit trail complete

Many compliance issues start with basics: unclear ledger postings, missing descriptions, inconsistent coding, and unreconciled accounts. Improving these basics reduces both error rates and the time needed to respond to questions.

Align finance, tax, and operations

Tax positions often rely on operational facts: what a project team did, how software was developed, what a service agreement covered, or why a payment was made. Encouraging collaboration between finance and operational teams helps ensure the tax return reflects reality and that supporting evidence exists.

Sector-specific considerations that can change the compliance picture

Different sectors face different compliance pressures. While the core principles are similar, certain industries should expect greater scrutiny in particular areas.

Construction and property

Property-heavy businesses often face questions about repairs vs improvements, capital allowances on fit-outs, lease incentives, and the treatment of professional fees. Keeping detailed project cost breakdowns, surveys, and invoice narratives can be especially helpful.

Technology and software businesses

Software development can raise questions about capitalisation, intangible assets, and the boundary between routine development and qualifying R&D activity. Clear project documentation, version histories, and time allocation evidence can support both accounting and tax positions.

Professional services

For service firms, common focus areas include staff costs, subcontractor treatment, travel and entertainment, and the deductibility of certain expenses. Consistent expense policies, approvals, and client engagement documentation reduce ambiguity.

Retail and hospitality

Cash flow patterns, stock and wastage controls, and payroll profiles can be reviewed alongside Corporation Tax positions. Good stock records, till controls, and reconciliations can help explain margins and cost profiles.

Groups and multinationals

Larger structures bring complexity: transfer pricing, financing, group relief, and cross-border tax interactions. Groups that maintain consistent documentation and keep their governance clear are better placed to handle enquiries efficiently.

Practical checklist: what to have ready before you file

Businesses often find it useful to run through a pre-filing checklist geared toward the kinds of questions that arise in compliance checks. The goal is to ensure you could defend the return if asked, not merely to meet the filing deadline.

First, ensure you have a clean reconciliation from the accounts to the tax computation, with schedules for each significant adjustment. Second, compile supporting documentation for any material relief claims: capital allowances schedules tied to invoices and the asset register, and R&D narratives and cost breakdowns tied to payroll and supplier records. Third, confirm that connected-party transactions are supported by agreements, calculations, and evidence of benefit and delivery. Fourth, ensure provisions and exceptional items are backed by contemporaneous evidence such as board minutes, contracts, and professional advice. Finally, check that your Corporation Tax position is broadly consistent with other filings and business realities, and that any differences can be explained clearly.

Final thoughts: treat compliance checks as a normal business process

In 2024/25, businesses should expect that HMRC’s approach to Corporation Tax compliance will continue to emphasise risk-based selection, data matching, and targeted scrutiny of complex or high-value areas. The most effective way to prepare is not to fear enquiries but to assume that you may need to explain key numbers and judgments at some point, and to keep records accordingly.