Can HMRC See That? Yes — And Here’s What They’ll Flag First

Think your bookkeeping quirks are invisible?
Think again.

Many business owners still believe HMRC is too overwhelmed to notice small inconsistencies. Some think their numbers are “close enough.” Others assume a tidy spreadsheet is all it takes to stay under the radar.

But behind the scenes, HMRC is running a quiet, data-driven operation — fuelled by algorithms, patterns, and software that doesn’t sleep. It doesn’t matter whether you’re a sole trader, a limited company, or a freelancer — if your numbers don’t make sense, HMRC will see it.

And when they do? You’re one flag away from an audit.

So let’s break down exactly what HMRC is looking for — and what’s most likely to trigger their attention.

Perfectly Round Numbers (Over and Over Again)

Claimed exactly £1,000 in travel each month? All your marketing costs are neat £500s? Office supplies that consistently round off to the nearest ten?

To HMRC, round numbers = red flags.

In real life, expenses are messy. £47.39 here, £83.12 there. If everything in your return looks like it came from a calculator with a “tidy mode,” HMRC’s systems take notice. They assume you’re estimating, not evidencing — and that’s a big no-no.

Filing Late (Even Just a Bit)

Late VAT submissions. Delayed corporation tax returns. Missing self-assessment deadlines.

You might think HMRC’s too busy to care if your form is a week late. But each missed deadline gets recorded, and patterns matter. Too many late filings can make your business look sloppy or disorganised — exactly the kind HMRC thinks is worth digging into.

Even if you’re not doing anything wrong, consistent lateness can trigger closer inspections.

Director Loans That Don’t Get Repaid

Taking money out of your company? That’s fine — as long as it’s documented as a director’s loan and repaid properly.

Here’s what HMRC watches for:

• Loans that stay unpaid after 9 months post year-end
• “Loan-hopping” — taking new loans to repay old ones
• Repeated large withdrawals without clear explanation

These loans aren’t invisible. They appear in your company’s balance sheet, and HMRC keeps a close eye on them — especially if you’re trying to avoid tax via Section 455 loopholes.

If your company bank account looks more like a personal wallet, expect questions.

Expenses That Don’t Fit the Business

You’re a web designer with £5,000 in “tools and equipment.”
A business coach with £3,000 in fuel.
A copywriter claiming £400 a month in “client entertainment.”

HMRC doesn’t just check your return — it compares your spending to industry norms. If your expense categories are far outside what’s typical, it raises suspicion.

A one-off is fine. But a pattern of odd or exaggerated expenses? That’s a classic audit trigger.

Declaring Low Income While Living Large

Here’s a scenario HMRC sees more often than you’d think:

You report modest profits — say £15,000 for the year. But you drive a new Audi, post luxury holidays on Instagram, and seem to be at bottomless brunch every weekend.

Here’s the part most people don’t realise: HMRC now checks social media.
They use their internal Connect AI system to cross-reference tax returns with publicly available information — including your lifestyle online.

If your Instagram suggests you’re living the high life, but your accounts tell a different story, it’s not just suspicious — it’s evidence.

Yes, it’s legal for them to look. And yes, they do use it.

So… Can HMRC Really See All This?

Yes. Through the Connect system, HMRC can:

• Spot unusual activity across your tax returns
• Compare your spending habits to your sector
• Analyse late filings, inconsistent data, or mismatched reports
• Use external sources — like Companies House, Land Registry, and yes, social media

You’re not being paranoid. You’re being watched — by software that’s been trained to catch exactly the sort of “small stuff” many businesses ignore.

What Should You Do About It?

Here’s the good news: you don’t need to be perfect — just honest and careful.
Here’s what we recommend:

• Avoid guessing or rounding your numbers
• Keep receipts and match your claims to real expenses
• Repay loans properly and record them clearly
• File everything on time — seriously
• Double-check claims that feel a bit “too convenient”

And if you’ve got that little voice in your head saying:

“I’m not sure if this would hold up in an audit…”

Then that’s your sign to check again. Or better yet — ask someone who will.

Need a Second Opinion?

If you’ve read this and feel a bit twitchy about your last return — that’s normal. Most issues aren’t deliberate fraud — they’re accidental, rushed, or “everyone does it” habits that can easily be fixed.