HMRC (or the equivalent bodies in Scotland or Wales in respect of devolved taxes) may challenge tax returns for a number of reasons. Broadly, these can be categorised as Technical Enquiries or as Investigations, though there is no hard-and-fast division and at the margins there may be some overlap, and challenges to suspected Avoidance may combine elements of both.
I have long experience in all of these areas. I always aim to resolve disputes as quickly and as painlessly (both in terms of stress and financial cost) as possible.  According to the circumstances that may be by securing HMRC's agreement that no adjustment to the return is required, by negotiating the best available settlement, by use of Alternative Dispute Resolution or, if need be, by taking the dispute to the First-tier Tribunal, an independent appeal body.

Investigations are where there is a challenge as to the factual accuracy of records underlying a tax return, claim, accounts or other information submitted to HMRC. In serious cases there may be allegations of deliberate understatement or fraud ('tax evasion'), such that there may be a risk of publication on the 'Deliberate Tax Defaulters' list and the case may be worked by HMRC's specialist investigations unit under Code of Practice 9 rules.
Point-blank refusal to engage, though an understandable initial response, will almost always be counter-productive and, in the long run, costly.  Active engagement will be needed to critically review any allegations or assumptions made by HMRC, to address and if possible resolve any concerns arising and, if it proves necessary to concede that irregularities exist, to negotiate the lowest settlement attainable and the best possible payment terms.