If you’re a property developer, you’re on HMRC’s radar, whether you realise it or not. With high-value transactions, complex funding and multiple taxes involved, the property sector is a prime target for investigations. And for developers who don’t have strong financial systems in place, even a small mistake can trigger costly, time-consuming scrutiny.

Why Developers Are On HMRC’s Radar

Property development is a high-cash, high-risk business and HMRC knows it. The sector sees frequent changes in VAT rules, CIS requirements and profit classifications. Many developers also work across multiple SPVs, use private funding or exit through complex strategies, which can raise red flags when not clearly accounted for.

This doesn’t mean you’re doing anything wrong. But without proper structure and documentation, even legitimate decisions can look suspicious to HMRC. That’s why the smartest developers treat financial clarity as a priority, not an afterthought.

Common Triggers for an HMRC Investigation

Some of the most common red flags include:

• Late or inconsistent VAT returns
• Large VAT reclaims without supporting evidence
• Mismatches between CIS returns and subcontractor declarations
• Sudden drops or spikes in reported income
• Undeclared director loans or dividends
• Incorrect profit classification (trading vs. investment)
• Delayed or missing Corporation Tax submissions

Even something as simple as failing to register for VAT at the right time can lead to penalties, interest and further investigation. Getting the basics right is the first step to reducing your risk.

Keeping Robust Records (Invoices, Planning, Cash Flow)

Strong documentation is your best defence in any HMRC enquiry. You should be keeping:

• Accurate, itemised records of all contractor and supplier invoices
• Clear planning permission, build phase, and site acquisition documents
• Project-based cash flow reports that match your returns
• Written agreements with JV partners, funders, or directors
• Detailed evidence of profit extraction (dividends, salaries, pension contributions)

We recommend maintaining digital copies of everything – ideally through a cloud-based accounting system with project tagging. If HMRC ever asks for clarification, being able to show a full audit trail builds trust and reduces disruption.

VAT and CIS Risks Developers Often Overlook

VAT and the Construction Industry Scheme (CIS) are two areas where HMRC often finds errors. Common issues include:

• Failing to apply reverse charge VAT on subcontractor services
• Reclaiming VAT on items that aren’t eligible (white goods, some professional fees)
• Misclassifying labour-only subcontractors
• Underreporting CIS deductions
• Forgetting to submit nil CIS returns when required

These are technical rules, and they change frequently. That’s why developers need to work with accountants who understand property-specific tax, not just generic year-end filing.

How to Respond If You Receive a Letter

If you receive a letter or notice from HMRC, don’t panic – but don’t ignore it either. Most enquiries start with a simple request for clarification. How you respond can determine whether it escalates.

We advise you to:

• Share the letter with your accountant immediately
• Respond professionally and within the given deadline
• Provide clear, accurate records – not assumptions or estimates
• Avoid trying to “explain away” issues without documentation

At GoldHouse, we handle HMRC communication on behalf of our clients, helping reduce stress and ensure that everything is presented properly from the start.

Preventative Reviews: Working With a Specialist Accountant

The best way to avoid an HMRC enquiry is to get ahead of it. We recommend regular preventative reviews of:

• VAT setup and submissions
• CIS compliance
• Profit allocation and extraction
• Director loans and dividend reporting
• Group structure and SPV accounting

At GoldHouse, we don’t wait for problems to arise. We act as your strategic finance partner, working proactively to reduce risk, support growth and ensure your accounts are investor – and HMRC-ready – every step of the way.

Book a discovery call with GoldHouse today and get the peace of mind that comes from knowing your development finances are rock solid. We’ll help you avoid surprises, reduce tax stress, and protect your business, your wealth, and your legacy.