VAT inspections

One of life's certainties is that if you are a VAT registered business, sooner or later you will receive a check of your VAT affairs by an HMRC officer, either at your business location or as is increasingly the case, remotely. VAT inspections, or 'checks', as HMRC prefers to call them, are an integral part of the system. Their main purpose is to ensure that your returns are an accurate reflection of your business activities and VAT liability.

However, their frequency is by no means predictable. You may find yourself singled out at any time if:

• You have a history of poor compliance
• There has been a change in the pattern of your VAT returns
• Your business is seen as high risk (e.g. a cash business, a partly exempt business)

The higher the perceived risk, the more likely it is that you will receive a VAT visit in person, rather than a questionnaire and follow-up telephone call.

Don't be caught out

The cost of being caught unawares by a VAT visit can be considerable. You could find yourself facing:

• Hours of valuable time wasted
• Extra costs incurred in sorting out all the paperwork
• Potential penalties and interest charges
• The possibility of a follow-up enquiry by HMRC

A VAT visit usually has two parts:

1. It begins with an interview, during which the officer will seek a broad understanding of your accounting system and general commercial activities. He or she will be looking for possible areas of weakness in your accounting records.
2. During the second part, the officer will examine your records to ensure that you have completed your returns correctly. Constraints of time will mean that he or she will probably focus on sensitive areas identified during the original interview. An assurance visit is not an audit, but rather a series of appropriate checks so that the officer can form a view as to the credibility of returns filed and corresponding payment made or refunds received.

If you are not prepared, or if you are not sure of your facts, a visit can be a daunting experience. We can make your life easier by attending the meetings and assisting with answering the questions. This could save you considerable time, expense, and inconvenience. As with most other things, a professional helping hand in this area can add real value to your business.

We can help you avoid unnecessary cost and inconvenience by:

• checking that your VAT summaries agree with your returns
• reviewing non-routine operations such as large or unusual transactions, where mistakes are more likely to occur
• ensuring that you pay the correct scale charges on cars for which you incur the fuel costs
• reconciling your disclosed turnover with your annual accounts
• simplifying your procedures by arranging with HMRC for your VAT return dates to coincide with your annual accounting date
• minimising penalties and interest charges by sorting out any errors we detect with HMRC.

Contact us if you would like further help or advice on this subject.