An expert has issued a stark warning as a fresh HMRC crackdown gets under way.
Charities and not-for-profit organisations are being urged to ensure their procedures and records are completely watertight in light of new and intensified compliance activity by HM Revenue and Customs (HMRC). HMRC has recently launched a programme of Structured Risk Reviews (SRRs) across the charity and not-for-profit sectors, signalling a more rigorous and data-driven approach to scrutiny.
Siobhan Holmes, partner specialising in charities and not-for-profit organisations at UK top 10 accountancy firm Azets, said the new approach was designed to both recover ‘lost’ taxes and interest and further understand how the sector operates. Utilising its enhanced Connect analytics system, now bolstered by AI, HMRC draws on information from tax filings, public records, social media, and more than 30 external databases.
Siobhan said: “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. 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. As we know, HMRC fact-finding reviews can be onerous, time-consuming and often a cause for great anxiety for trustees and organisations finding themselves under investigation.”
Azets, a specialist business adviser to SMEs, charities and not-for-profit organisations, has outlined the most common triggers for SRRs, which include:
The areas that HMRC will be examining span right across the board, including
- Corporation Tax and charitable expenditure
- Gift Aid governance and processes
- VAT treatment, partial exemption, and income recognition
- Employment taxes, benefits, and payroll controls
The latest figures from the Charity Commission reveal that there were 171,173 charities in the UK in 2024, nine in 10 of which were independent and with an income of less than £500,000 per annum. Charities in the UK spend in excess of £40bn a year, employ an estimated 827,000 people and contribute over £12bn annually to the UK economy.
Siobhan said: “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 has more than 25 years’ experience providing high-quality compliance, governance, taxation and advisory services to a wide range of charities and NFPs. In the most recently published Charity Finance Magazine Audit Survey (2025), Azets ranked as one of the leading charity audit firms in the UK, receiving particular commendation for the high volume of client responses and the overall quality of service delivered.
Siobhan added: “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.”