What can trigger an HMRC investigation into a sole trader's tax return?

HMRC uses a risk-based system to select returns for investigation. Common triggers include: - Unusual or inconsistent expenses: costs that seem disproportionately high relative to turnover, or that increase sharply without explanation - Declared income significantly lower than industry norms for your sector - Missing income: bank deposits that don't match declared turnover - Cash-intensive businesses with no receipts - Expenses that look personal: gym, holidays, luxury items claimed as business costs - Patterns that suggest under-declaration: very consistent round-number profits year after year - A tip-off from a third party or former associate - Random selection: HMRC runs a small percentage of random enquiries regardless of risk signals The best defence is good records: retain all receipts and invoices, keep a mileage log, reconcile your bank accounts, and only claim genuinely allowable expenses.

• Disproportionately high expenses relative to turnover: a red flag
• Income below industry averages for your sector: triggers scrutiny
• Bank deposits that don't match declared income: often the most telling
• Personal expenses claimed as business: gym, holidays, luxury items
• Best defence: maintain meticulous records and only claim allowable expenses