HMRC Compliance Check After MTD Filing: What Records to Keep

HMRC Compliance Check After MTD Filing: What Records to Keep

Filing your MTD quarterly update is not the end of the story. HMRC can - and does - request records after you file. This is called a compliance check (sometimes referred to as an enquiry). Most people are never selected, but if you are, being unprepared can turn a routine request into a stressful and expensive problem. This guide explains what HMRC might ask for, how long you have to respond, what happens if you do not, and the practical steps you can take right now to keep your records in good shape.

What Is an HMRC Compliance Check?

A compliance check is when HMRC decides to look more closely at the figures you have reported. Under Making Tax Digital for Income Tax (MTD ITSA), you send quarterly updates throughout the year and then complete a final declaration at the end of the tax year. Either of these can trigger a check.

HMRC does not have to give you a reason for opening a compliance check. It can be random, or it can be because something in your figures looks unusual - for example, your expenses are significantly higher than in previous years, or your income does not match what HMRC already knows from other sources (such as bank interest data or data from payment platforms).

The legal basis for HMRC opening a check into your quarterly updates comes from Schedule A1 of the Taxes Management Act 1970, which has been extended to cover MTD quarterly returns in the same way it covers standard tax returns.

Which Records Might HMRC Ask For?

HMRC can request any records that are relevant to the figures you have reported. The specific documents will depend on whether you are a sole trader, a landlord, or both. Below is a breakdown of what is commonly requested.

Bank Statements

This is almost always the first thing HMRC asks for. Bank statements let HMRC cross-reference the income and expenses you reported against the actual money moving in and out of your account. You should keep statements for all accounts used for your business or property - including personal accounts if you mix business and personal spending.

Keep statements in a format you can access quickly. Downloaded PDFs from your online banking, paper statements filed in a folder, or scanned copies all work. The key point is that you can produce them without delay.

Sales Invoices and Income Records

For sole traders, HMRC may ask to see invoices you issued to clients, payment records, or receipts from customers. If you take payments through an app or platform, keep a record of those transactions separately - do not rely solely on the platform's own records, which you may not be able to access years later.

For landlords, income records include tenancy agreements, rent statements or rent book entries, letting agent statements, and any evidence of rent received. If you use a letting agent, their monthly statements are particularly useful because they show gross rent collected before the agent deducts their fees.

Expense Receipts and Invoices

Every expense you have claimed needs to be backed up by a receipt or invoice. HMRC may want to see the original documents rather than just your own summary. This includes:

• Receipts for materials, tools, or equipment you have purchased for work
• Invoices from tradespeople or contractors you have paid
• Receipts for travel, fuel, or parking claimed as a business expense
• Utility bills or insurance documents where you have claimed a business proportion
• Phone and broadband bills where you have claimed a business percentage
• Receipts for any office supplies, subscriptions, or software costs

HMRC understands that not every expense comes with a formal invoice - for example, a small cash purchase at a hardware shop. In those cases, keep whatever evidence you have. A photo of the receipt on your phone is better than nothing.

If you are unsure what counts as an allowable expense in the first place, our guide on allowable expenses for MTD covers this in detail.

Property Records for Landlords

If you are a landlord, HMRC may ask for a broader range of documents. These can include:

• Signed tenancy agreements for each property
• Evidence of rent paid - bank credits, letting agent statements, or rent receipts
• Mortgage statements showing interest paid (if you are claiming finance costs)
• Insurance certificates and premium payment records
• Invoices for repairs, maintenance, and landlord safety certificates (gas, electrical)
• Records showing how you have calculated any mixed-use or private-use adjustments

Our guide to landlord expenses in your MTD quarterly update explains which property costs are claimable and how to record them correctly.

Mileage and Vehicle Records

If you claim mileage as a business expense, HMRC may ask to see a mileage log. This should show the date, starting point, destination, purpose of the journey, and miles travelled. A spreadsheet or a mileage app both work - the important thing is that you have a record for each journey, not just a rough total. Our post on mileage allowances and simplified rates explains how to record these properly.

Records Supporting Mixed-Use Expense Claims

If you have claimed a percentage of a cost that is partly personal and partly business - such as your home broadband, a phone contract, or a vehicle - HMRC may ask how you worked out the business percentage. Keep a note of your calculation and the evidence behind it. For example, if you claim 40% of your phone bill as business, note how you arrived at 40% and what records support that.

More detail on this is in our guide to mixed-use expenses and the business percentage.

How Long Do You Have to Keep Records?

Under HMRC's rules, you must keep your records for at least five years after the 31 January submission deadline for the relevant tax year. In practice, for MTD ITSA, this means you need to keep records relating to the 2026-27 tax year until at least 31 January 2033.

This applies to digital records, paper records, or both. If you keep digital copies, make sure they are backed up and that you can actually open and read the files years later. A folder of photos on a phone that you no longer own is not useful.

HMRC can open a compliance check up to 12 months after you file your final tax return for a given year in a straightforward case. If HMRC believes there may be an error or something has been left out, this window can extend to four years. In cases where HMRC believes the error was careless, that becomes six years. For deliberate errors, HMRC can go back 20 years. This is another reason to keep records well beyond the minimum period where you can.

Our post on HMRC record-keeping standards for MTD goes into further detail on the specific rules.

How Long Do You Have to Respond to HMRC?

When HMRC opens a compliance check, they will write to you - either by post or through your HMRC online account - explaining what they want to look at and what documents they need. The letter will usually give you a deadline to respond, which is typically 30 days from the date of the letter.

If you need more time, you can contact HMRC and ask for an extension. HMRC will often agree to a short extension if you have a genuine reason, such as needing to gather records from a previous year. Always request an extension in writing (or through your HMRC account) so you have a record of it.

You can also appoint a tax agent or accountant to deal with HMRC on your behalf at this point, even if you have been filing yourself. This can be helpful if the check becomes complicated.

Penalties for Non-Compliance

Failing to provide records when HMRC asks for them is a separate issue from the original compliance check. HMRC can charge a penalty of up to £300 for failing to produce documents on request. If the failure continues, HMRC can charge a further £60 per day until the documents are provided.

These penalties are in addition to any tax, interest, or penalties that arise from errors found during the check itself. If HMRC finds that you have underpaid tax, you will owe the tax plus interest calculated from the date it was due. Whether you also face a behaviour-related penalty depends on whether HMRC decides the underpayment was a genuine mistake, careless, or deliberate.

• Genuine mistake with no carelessness: no penalty, just the tax and interest
• Careless error: penalty of up to 30% of the unpaid tax
• Deliberate error: penalty of up to 70% of the unpaid tax
• Deliberate and concealed error: penalty of up to 100% of the unpaid tax

These penalty percentages can be reduced if you tell HMRC about the error yourself (unprompted disclosure) rather than waiting for them to find it. If you realise you have made a mistake in a quarterly update, you can correct it - our guide on amending your MTD quarterly update after filing explains how.

Practical Steps to Prepare Now

You do not need to wait for a compliance check letter to get organised. Here is what to do now, whether you are a sole trader, a landlord, or both.

Keep a Folder for Each Quarter

Create a folder - digital or physical - for each quarter as you go. Label it clearly (for example, "Q1 April to June 2026") and put all relevant documents in it as they arrive: receipts, invoices, bank statements, letting agent reports. At the end of each quarter, do a quick check to make sure nothing is missing before you file your quarterly update.

Save Digital Copies of Everything

Photographs of paper receipts are acceptable to HMRC. Get into the habit of photographing receipts as soon as you receive them, then filing them in a clearly named folder on your phone or computer. Back up your files regularly to a cloud storage service so they cannot be lost if a device fails.

Keep a Mileage Log if You Claim Travel

A simple spreadsheet with date, start, destination, purpose, and miles is all you need. Do not leave this until the end of the year - it is very difficult to reconstruct accurately from memory.

Note Your Calculations for Mixed-Use Claims

If you claim a percentage of a cost, write down how you calculated that percentage and why. Keep this note with the relevant bills. This takes five minutes per expense and can save significant time and stress during a compliance check.

Reconcile Your Records with Your Bank Statements Each Quarter

Before you file each quarterly update, check that the income and expense figures in your records match what has actually moved through your bank account. Unexplained differences are exactly what HMRC looks for. Our post on Q2 bank reconciliation for MTD walks through this process step by step.

Do Not Delete Old Records

Old emails, invoices, and bank statements take up very little space digitally. Keep everything for at least five years, and longer if you can. Archiving old records into a clearly labelled folder costs nothing and could be invaluable if HMRC opens a check into an older year.

Check Your Filing Is Accurate Before You Submit

Errors that slip through into a quarterly update are harder to deal with once they are filed. Use a pre-submission checklist - our Q1 final checks before submission guide is a good starting point. If you do catch an error after filing, correct it promptly rather than hoping HMRC does not notice.

What Happens Once a Compliance Check Is Resolved?

Most compliance checks are resolved by correspondence - you provide the documents HMRC asks for, they review them, and they either close the check with no further action or tell you that additional tax is owed. If HMRC finds nothing wrong, they will write to confirm the check is closed. If they find an underpayment, they will set out what is owed and give you a chance to dispute their findings if you disagree.

You have the right to appeal HMRC's decisions, including penalty notices, if you believe they are wrong. The process for this is set out in the letter HMRC sends you.

Summary

Filing your MTD quarterly update accurately is important - but so is keeping the records to back it up. HMRC can open a compliance check at any point, and when they do, they will want to see the documents behind your figures: bank statements, invoices, receipts, tenancy agreements, mileage logs. The best defence is good organisation from the start. Keep records by quarter, save digital copies, reconcile your figures with your bank statements before you file, and hold onto everything for at least five years. If you do receive a compliance check letter, respond within the deadline and ask for an extension if you need one. Ignoring it is never the right approach.