If you're notified of a VAT inspection it can be a very daunting and stressful time but it really doesn't need to be. HMRC are really just looking to check that your business is operating in line with the numerous laws and regulations surrounding value added tax and that you are paying or reclaiming the correct amount.
The first thing to note is that, although they can visit or telephone you without an appointment (this usually indicates an investigation is already underway – call us asap!), they usually give you 7 days notice, in writing, of any visit from VAT officers. You can ask them to delay the visit if it is not convenient (for example, you may have an important business meeting or personal matter to attend to; they will look for a suitable date close to their intended visit although they may not accept this).
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HMRC officers should not put you under pressure: you should look upon any VAT visit as a chance to ensure you're operating correctly and maybe even pick their brains about any excise questions you may have. It's important that you keep the VAT inspection in perspective – if you been running your business with the help of your local TFMC accountant, you will be just fine, but do call your accountant as soon as you've been notified of the inspection to allow us time to prepare you.
This is one of the main questions we get from our clients and one to which there is often no direct answer. VAT inspections can occur randomly and they can occur after some indiscrepancy has been noticed at HMRC. VAT Inspections can occur for the following reasons and more;
- your VAT returns have failed a credibility check at the VAT Central Unit i.e. the purchases:sales ratio is abnormal
- your business is in a risk sector being targeted by HMRC
- information has been received or obtained by HMRC concerning your business
- VAT repayments are being claimed where none were before, or your VAT repayments are higher than normal
- the visit is being used to verify your suppliers and/or customers
- you have a history of non-compliance i.e. regular default surcharge penalties, late payment or non-payment of VAT, previous VAT assessments.
Whatever the reason, we (and HMRC) can work together to get you through the visit with the minimum of disruption and stress.
How often CAN VAT inspections take place?
That really depends on how big or complex your company is and whether you've submitted your VAT returns correctly and on time in the past. If you're a small/micro business with very little to declare, you may get a visit, but if you're often late with your returns HMRC may visit to coax you into line (they wouldn't put it that way, but most VAT inspections give the business owner a sense of urgency when it comes to their returns). If you have a large business with complex operations and even international trading, you may receive periodic inspections to help you be more efficient in your business. Try not to think of the VAT officers as the enemy – they can often help you to streamline your operation and their input can be invaluable – use them rather than fear them.
Am I required to be there during the visit?
In short, yes. You may not be required for the duration of the visit, especially if you have someone responsible for your company's VAT, but it is prudent to be present at the outset of the visit.
What happens during the visit?
The officers will want to see your VAT records and and day to day business records which could include purchase and sales books, records of daily takings including till rolls, copy sales invoices, purchase invoices, banking documents including statements, cheque books, paying in slips, and annual accounts. They may also require access to PCs and cloud bookkeeping software such as Kashflow or Xero. Their main goal during the visit is to confirm the accuracy of your VAT returns – it's really that simple.
What happens after the VAT Inspection?
The VAT officers will explain their findings to you and discuss any problems or concerns they may have. They will then contact you in writing at a later date to clarify any concerns they have and notify you of under- or over-payments. Should their findings be 'serious', they will issue you with a penalty (which can be as high as 30% of the VAT involved, although in some circumstances this can be a penalty of 100%!) – you can, of course appeal any penalty which could lead to a Tribunal Appeal. If you find yourself in this position, call us without delay and we'll do our best to help.
It's important that you carry on business in the correct way – your local TFMC accountant will keep you on the straight and narrow and work with you to avoid any VAT problems. If you haven't got anyone looking after your VAT Returns and other taxation issues, now is as good a time as any to talk to us. Want to prepare yourself a bit more for an upcoming VAT inspection? Read more here
If you would like to find out how we can help you with a VAT Inspection
call The Financial Management Centre free, on