HMRC Compliance Check

[Dan-88]

I received a "HMRC Compliance Check" letter today asking for all my financial information from the last seven years - They have specifically asked for all employment salaries, self-employment, benefits, properties, the purchase and sale of properties, rental income, inheritances, refunded PPI payments, animal breeding, commission, untaxed interest, gifts, loans, windfalls and any other type of taxable or non-taxable income (e.g. lottery winnings, maintenance payments, etc). My understanding is that such letters are usually an indication that you're under investigation - But this all seems a bit extreme!

I've worked for the same company for the last nine years, all tax has been paid automatically and I've not claimed benefits (other than child benefit) - They already know all this. I've only ever owned one house which I bought in 2007 and sold earlier this year. I had lodgers with me, then briefly tenants, then briefly Airbnb over the 11 years of ownership. All income after expenses fell below the £2,500 (or £4,450 and £7,500) per year limit so not declared - This advice was from the HMRC website. I've also had a little bit of self-employment income in the last few years of maybe less than £400 per year after expenses but, again, it all falls below the limits. I've had loans for about seven years, I've borrowed money from my parents and paid it back, I've had maybe £4 of untaxed interest from an ISA in five years, around £5k of PPI refunded in 2013, a sizeable chunk of equity from the sale of my house, won a few tenners on the lottery, and had small amounts of money for my birthday and Christmas - I didn't realise I had to declare all of this? As for animal breeding (what even is this?), commission and inherentances - None.

Is this just HMRC fishing for information in the hope that there may be some unpaid tax somewhere? I'm not sure I can get every bit of financial information from the last seven years - The house I owned will be a bit complicated to explain but, fortunately, I kept accounts just not any of the reciepts/bills. As for what money I was given as a gift between 2012 and now, there's no chance of me even making a reasonable guess! I can't even find the PPI refund letter.

What should I do? Just send them what I have and hope for the best?

[robbob]

I've also had a little bit of self-employment income in the last few years of maybe less than £400 per year after expenses but, again, it all falls below the limits.

What limits? - there has only been a £1,000 tax free trading allowance since 6/4/2017 - before that sole trader income should have been fully declared each tax year.

Is this just HMRC fishing for information in the hope that there may be some unpaid tax somewhere?

It is very unlikely - the fact that you are self employed and have had rental income are obvious explanations as to why they are asking the questions
The main issue is likely to be capital gains tax on your main residence if this has increased in value.

Note they probably don't have the immediate right to ask questions from 7 years ago, however if you have consistently not declared sole trader income it's probably not worth arguing on this point.

I'm not sure I can get every bit of financial information from the last seven years

Don't over worry hmrc will have your employment history details , minor amounts of non taxable income can be argued over at a later date and will hopefully not be material.

The one thing to ensure is that any disclosure made is as honest as possible with regard to taxable income sources, you have one chance to be honest with your disclosure and minimise the penalties that may be charged.

Hopefully once hmrc find out the sums involved are minimal (other than possibly capital gains?) they will hopefully not be over picky with regard to minor items that may be hard to establish due to time involved.