Chance of an HMRC audit

Bruce Sheehan · May 11, 2026

What is the chance of hmrc doing an enquiry/audit of small digital marketing agency wtih 6 employees, 1 foreign contractor, good accountants who stick to the rules and an owner who does things by the book? The company does have a little side ecommerce business that is wrapped in the main company structure I believe. And do HMRC look closely into the foreign contractors, by that I mean do they go out of their way to check if they are actually registered freelancers in their countries or are mentioned anywhere on HMRC connect?

ctrlbrk · May 11, 2026

Bruce Sheehan said:
What is the chance of hmrc doing an enquiry/audit of small digital marketing agency wtih 6 employees, 1 foreign contractor, good accountants who stick to the rules and an owner who does things by the book?

If someone does everything by the book, what are the chances they'll worry about HMRC audits?

Mark T Jones · May 11, 2026

Statisticaly small - but if you pique their interest, Statistics are irrelevant

The scope/depth of an investigation will largely depend on what triggered it - I've had an audit that lasted 90 minutes. Conversely I've seen companies essentially prevented from trading for a month while audits happened.

Bruce Sheehan · May 11, 2026

Mark T Jones said:
Statisticaly small - but if you pique their interest, Statistics are irrelevant

The scope/depth of an investigation will largely depend on what triggered it - I've had an audit that lasted 90 minutes. Conversely I've seen companies essentially prevented from trading for a month while audits happened.

Thanks for responding Mark

Wow, 90 minutes, sounds like they barely looked through the cover letter.

Out of interest, do the audits put through all submitted documents through HMRC Connect and other systems or, at that stage, the casework is doing it manually because Connect has already done the heavy lifting?

Paul Kelly ICHYB · May 11, 2026

There are over 300k checks every year, so, based on 5.5m businesses in the UK, this is about a 5% chance, HOWEVER, only 7% of those are random checks, so, unless you are creating some red flags, it is closer to 0.5%.

If you are worried, being a member of a business group like the FSB or YBC can give you cover and support if you have a visit.

MyAccountantOnline · May 11, 2026

Bruce Sheehan said:
What is the chance of hmrc doing an enquiry/audit of small digital marketing agency wtih 6 employees, 1 foreign contractor, good accountants who stick to the rules and an owner who does things by the book? The company does have a little side ecommerce business that is wrapped in the main company structure I believe. And do HMRC look closely into the foreign contractors, by that I mean do they go out of their way to check if they are actually registered freelancers in their countries or are mentioned anywhere on HMRC connect?

If you are submitting accounts and tax return on time and complying with all necessary requirements unlikely. I'm not aware of HMRC specifically investigating foreign contractors. Ocassionally they will target certain businesses.

As mentioned by Paul above you can get some cover for dealing with HMRC enquiries via the FSB etc. Do also ask your accountant if you use one - some offer insurance cover for HMRC enquiry work. If you are relying on something such as the FSB make sure you are aware of what they cover. I've not looked myself for a while but the last time I did they didn't cover accountants fees.

Bruce Sheehan · May 13, 2026

MyAccountantOnline said:
If you are submitting accounts and tax return on time and complying with all necessary requirements unlikely. I'm not aware of HMRC specifically investigating foreign contractors. Ocassionally they will target certain businesses.

As mentioned by Paul above you can get some cover for dealing with HMRC enquiries via the FSB etc. Do also ask your accountant if you use one - some offer insurance cover for HMRC enquiry work. If you are relying on something such as the FSB make sure you are aware of what they cover. I've not looked myself for a while but the last time I did they didn't cover accountants fees.

Thanks for that reassurance

The problem is that I’m getting a bit nervous about how this specific contractor’s address will look to HMRC. Since he's based at a rural location in Italy, the address on his invoices looks quite unconventional.

My concern is that if the HMRC auditors can’t easily "place" him, they might flag it for further investigation. I’m worried they’ll suspect he’s actually living in the UK and just pretending to be abroad to bypass local tax obligations. I’d hate for a simple audit on my end to accidentally trigger a massive headache or a residency probe for him.

Do you think it’s worth suggesting he use a more "standard" address—perhaps a nearby city or a registered professional address in Italy? I want to make sure his paperwork is bulletproof so HMRC doesn't have any reason to start asking questions about his tax residency.

Paul Kelly ICHYB · May 13, 2026

Bruce Sheehan said:
I’d hate for a simple audit on my end to accidentally trigger a massive headache or a residency probe for him

Whilst caring for the person is great, your focus should be on doing the right thing for your business.

MyAccountantOnline · May 13, 2026

Bruce Sheehan said:
Thanks for that reassurance

The problem is that I’m getting a bit nervous about how this specific contractor’s address will look to HMRC. Since he's based at a rural location in Italy, the address on his invoices looks quite unconventional.

My concern is that if the HMRC auditors can’t easily "place" him, they might flag it for further investigation. I’m worried they’ll suspect he’s actually living in the UK and just pretending to be abroad to bypass local tax obligations. I’d hate for a simple audit on my end to accidentally trigger a massive headache or a residency probe for him.

Do you think it’s worth suggesting he use a more "standard" address—perhaps a nearby city or a registered professional address in Italy? I want to make sure his paperwork is bulletproof so HMRC doesn't have any reason to start asking questions about his tax residency.

I dont think that alone is anything to be overly concerned about.

Ensuring contractors employment status is correct is probably something which carries a higher risk for you.

Newchodge · May 13, 2026

Bruce Sheehan said:
The problem is that I’m getting a bit nervous about how this specific contractor’s address will look to HMRC. Since he's based at a rural location in Italy, the address on his invoices looks quite unconventional.

Why are you getting nervous now, when you weren't nervous when you appointed them? Are they, in reality, just pretending to be abroad?

JEREMY HAWKE · May 17, 2026

I dont see the problem
He has an EU address and not an address in some war torn African enclave

Codeunkie1992 · May 22, 2026

Bruce Sheehan said:
What is the chance of hmrc doing an enquiry/audit of small digital marketing agency wtih 6 employees, 1 foreign contractor, good accountants who stick to the rules and an owner who does things by the book? The company does have a little side ecommerce business that is wrapped in the main company structure I believe. And do HMRC look closely into the foreign contractors, by that I mean do they go out of their way to check if they are actually registered freelancers in their countries or are mentioned anywhere on HMRC connect?

If everything is properly reported and compliant, the audit risk is genrally low, as HMRC typically focuses on inconsistancies or red flags rather than routine checks. Foreign contractors aren't usually targeted specifically, but HMRC may review payments and documentation if something appears unusual or doesn't align with declared records.

DontAsk · May 23, 2026

What does a rural address even look like. Surely everything is postcode based there's days. A HMRC staff member probably doesn't know their Italian villages from their Italian cities. I certainly wouldn't.

MikeJ · May 23, 2026

Are you paying the money to an Italian bank account? Does he have an Italian phone number? If the answer to either of those is "no", I'd be a bit worried. Otherwise, he could be anywhere in the world really, and you've done what you reasonably can to make sure he's where he says he is.

louis292 · May 26, 2026

Bruce Sheehan said:
What is the chance of hmrc doing an enquiry/audit of small digital marketing agency wtih 6 employees, 1 foreign contractor, good accountants who stick to the rules and an owner who does things by the book? The company does have a little side ecommerce business that is wrapped in the main company structure I believe. And do HMRC look closely into the foreign contractors, by that I mean do they go out of their way to check if they are actually registered freelancers in their countries or are mentioned anywhere on HMRC connect?

If everything is done by the book and your accounts are clean, the risk remains low. HMRC Connect focuses heavily on data anomalies, so as long as your foreign contractor invoices match your filings and the e-commerce side is properly declared, you should be fine.

Banksbroo · Jun 29, 2026

And who are your customers? Where are they? Your name may have come up in relation to an investigation of one of your customers. Ultimately HMRC are just going to do their thing we just have to co-operate with it.

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Chance of an HMRC audit

Bruce Sheehan

ctrlbrk

Mark T Jones

Bruce Sheehan

Paul Kelly ICHYB

MyAccountantOnline

Bruce Sheehan

Paul Kelly ICHYB

MyAccountantOnline

Newchodge

JEREMY HAWKE

Codeunkie1992

DontAsk

MikeJ

louis292

Banksbroo

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