Cornwall Charities Warned Over New HMRC Compliance Reviews

Trustees across Cornwall could be forgiven for thinking their books are in order. HMRC may not agree.

Charities and not-for-profit organisations in the county are being urged to tighten up their procedures and records as the tax office ramps up compliance activity across the sector.

What is changing

HMRC has begun a programme of Structured Risk Reviews (SRRs) targeting charities and not-for-profits, marking a more intensive and data-driven approach to oversight.

The reviews are powered by HMRC’s enhanced Connect analytics system, now supported by AI. It pulls information from tax filings, public records, social media and more than 30 external databases, and cross-references the lot.

Siobhan Holmes, Partner specialising in charities and not-for-profit organisations at UK top 10 accountancy and business advisory firm Azets, said the approach is designed to recover lost taxes and interest, and to give HMRC a better picture of how the sector actually operates.

“We expect payrolls, tax returns, VAT returns and Gift Aid claims to be examined in detail to see whether they correlate with public statements and whether tax has been underpaid,” she said.

“This is likely to pick up a great deal of data which was previously not considered and, as a result, even minor discrepancies, inconsistencies or unusual patterns can prompt a review.”

She added that fact-finding reviews of this kind can be onerous, time-consuming, and often a cause of great anxiety for trustees and organisations under investigation.

What triggers a review

Azets has listed the most common triggers for an SRR:

• Large or geographically dispersed employee populations
• Multiple or complex income streams
• Repayment claims
• Trading or commercial activities
• Overseas operations, projects or subsidiaries

The areas HMRC will examine are wide-ranging and include Corporation Tax and charitable expenditure, Gift Aid governance and processes, VAT treatment, partial exemption and income recognition, and employment taxes, benefits and payroll controls.

Sector by the numbers

According to the latest figures from the Charity Commission, there were 171,173 charities in the UK in 2024. Nine in 10 were independent with income of less than £500,000 a year.

UK charities spend over £40bn a year between them, employ an estimated 827,000 people, and contribute more than £12bn annually to the UK economy.

What charities should do

Siobhan’s advice for trustees who think they may be in the firing line is straightforward.

“Our advice is to seek professional advice without delay if you become the subject of an SRR or if you feel your procedures may not stand up to review. The quicker action is taken the more chance there is of mitigating against potential penalties.”

Azets, which has offices across the South West including in Truro, has more than 25 years’ experience advising charities and not-for-profits on compliance, governance, taxation and advisory matters.

In the most recently published Charity Finance Magazine Audit Survey (2025), the firm was ranked as one of the leading charity audit firms in the UK, with particular commendation for the volume of client responses and quality of service.

“Azets achieved 100% positive feedback for charity expertise, technical competence, and overall service, a result we are proud to have maintained consistently year on year,” Siobhan said.