Payroll operations UK-wide

Prepare for an HMRC PAYE compliance check

What to expect and how to prepare when HMRC reviews your PAYE records.

Guide summary

Keep your PAYE records for at least 3 years after the tax year ends. If HMRC contacts you about a compliance check, gather your records early and review them for errors. Cooperate with the HMRC officer and ask for help if you need it. You can face penalties of up to 100% of unpaid tax plus interest.

  • Keep payroll records for 3 years after each tax year
  • Respond within 7-14 days if HMRC gives notice
  • Gather records early before the visit day
  • Check your RTI submissions for errors
  • Disclose any mistakes voluntarily to reduce penalties
  • Appoint one person to talk to the HMRC officer
  • You can bring an accountant to the check
  • Appeal any penalty within 30 days
  • Penalties can be up to 100% of unpaid tax plus interest
On this page

Related guides in Tax & Finance

HMRC carries out compliance checks to ensure employers are operating PAYE correctly. This guide explains what triggers a check, what to expect, and how to prepare.

Why HMRC might check your PAYE

  • Random selection - routine checks on a sample of employers
  • Risk indicators - late submissions, frequent corrections, sector patterns
  • Third-party information - tips or information from other sources
  • Discrepancies - differences between RTI and other returns
  • New employer - first-year employers sometimes checked
Notice period
Usually 7-14 days written notice before visit
Record retention required
Minimum 3 years after end of tax year
Penalties for non-compliance
Up to 100% of unpaid tax, plus interest
Appeal rights
30 days to appeal any penalty notice

Records HMRC may ask for

  • Payroll records - employee details, pay, deductions, tax codes
  • RTI submissions - FPS and EPS submissions for reviewed periods
  • P45s and P60s - employee forms issued
  • Starter checklists - forms completed by new employees
  • Payment records - evidence of payments to HMRC
  • Employment contracts - to verify employment status
  • Expense claims - receipts and approval records
  • Benefits records - P11D working papers

Common areas of scrutiny

  • Employment status - are "self-employed" workers actually employees?
  • Expenses - are reimbursements genuinely business expenses?
  • Benefits in kind - are all taxable benefits reported on P11D?
  • Tax codes - are correct codes being applied?
  • NI categories - are correct categories used (especially for directors)?
  • Statutory payments - are eligibility checks being done properly?

Preparing for a compliance check

  1. Gather records early - do not wait until the visit day
  2. Review your submissions - check RTI submissions for the review period
  3. Identify any errors - better to disclose voluntarily than be found out
  4. Prepare workspace - HMRC officer needs desk and privacy
  5. Nominate a contact - one person to liaise with the officer
  6. Consider representation - accountant or tax adviser can attend

During the check

  • Be cooperative - obstruction can lead to penalties
  • Answer honestly - do not guess, say if you need to check
  • Take notes - record questions asked and answers given
  • Request time - you can ask for time to find documents
  • Ask questions - clarify anything you do not understand

After the check

HMRC will write to you with their findings:

  • No issues - letter confirming compliance
  • Minor issues - advice on improving processes
  • Underpaid tax - assessment for additional tax plus interest
  • Penalties - separate penalty notice if errors were careless or deliberate

Keeping the right employment records

PAYE records are one part of a wider set of employer record-keeping duties, covering pay, right-to-work checks, working time and pensions.