VAT Inspections by HM Revenue and Customs

It should be noted that VAT (Value Added Tax) inspections by HM Revenue and Customs are no reason for alarm or stress. VAT inspections are a customary part of doing business as a limited company. VAT inspections typically take place on a schedule occurring about once every 4 to 6 years.

Generally speaking, a VAT inspection is nothing to be overly worried about, if you have been keeping decent records and are not engaged in any VAT fraud, you will usually have no issues. HMRC is only interested in making sure that you are responsibly receiving and accounting for the government’s VAT
Notice of Inspection

Generally speaking, you will be first notified of a VAT inspection via a telephone call from your local HMRC office. Most VAT inspections will take place at a meeting at your company’s office, which will usually be requested within 30 days. Once a date for the meeting has been set, you will usually receive a notification in the mail confirming your meeting. In the letter, it will usually include the request for specific records, accounts and documents that should be furnished. Usually these items will cover a period of up to 3 years from the last due return, or from the time when your business first registered, if your company is less than 3 years old.
Preparing for a VAT Inspection

Besides furnishing the documents, records and accounts for the last 3 years or from the point of registration (if your business is less than 3 years old) you should also prepare the following:
The VAT account or any related working papers
Annual accounts
Any books and accounts, this includes petty cashbook, cashbook, purchases and sales day books.
All sales and purchase invoices
Supporting documentation including contracts, correspondence, etc
Any bank statements
You should also have handy your VAT certificate and any registration papers
The Meeting

Generally speaking, an HMRC VAT inspection will take place over two meetings usually at your company’s office, however if requested, your company may be able to conduct the inspection at your account’s office as long as it is approved by the inspector. In most cases the director of the company should make an enormous effort to be present for the meeting.
The First Meeting

The first meeting will usually entail a short discussion and then some time for the inspector to go through your records. It is advisable that you make a room or at least a desk available for the inspector to work. The meeting will start off with a few questions from the inspector regarding your trading activities, level of turnover, the type of records which are kept by your company and basic facts regarding your company. Once this question and answer period is over, the inspector will usually spend about 2 hours going over any documents and records.
The Second Meeting

Usually the second meeting will be the concluding meeting which the inspector with summarize his or her findings. In most cases, they will advise you on any errors or calculations found and ask you to make changes if deemed necessary to any accounting procedures that are incorrect. If there are any monies that need to be made, it usually will be stated at this time. In addition, if any errors were made on your part, where too much VAT was collect, you will be entitled to a refund.

After the second meeting has concluded, you will receive a letter from the Inspector a few days letter confirming any adjustments to be made. These adjustments will usually start on the next quarter’s VAT return.

For the most part, the VAT inspection is straight forward and quite painless, however if you feel that you require professional representation, you should definitely seek advice from an accountant or tax advisor beforehand. In addition, any discrepancies can be appealed. However, talk to your accountant or tax advisor regarding the process.

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