What is VAT Investigation?

A VAT HMRC inspection can happen to any type of business at any time. The results of VAT inspections could raise some suspicion or none at all. Therefore, don't assume that a request from HMRC to visit your company's location inherently constitutes a charge of wrongdoing.

A VAT inspection entails HMRC getting in touch with or visiting your company to look over its VAT records. This inspection consists of a series of compliance checks to make sure the company is paying the appropriate amount of VAT.

HMRC will often contact a firm ahead of time to schedule a mutually agreeable time to conduct the inspection; however, in exceptional circumstances, they may also visit without notice or an appointment.

What triggers a VAT inspection?

HMRC notifies a limited group of businesses in thousands of letters each year that an investigation into their VAT problems is about to begin.

There could be different reasons for VAT inspection and some of them are as follow:

·  Your compliance history may be marked by penalties, late or non-payment of VAT, or other irregularities.

·  You do not submit your VAT return on time.

·  It's possible that HMRC has received questionable information about your company and its VAT returns.

·  HMRC noticed unusually high rises in VAT claims or new instances of VAT claims. If a first VAT return indicates a net payback, an inquiry will nearly always be opened.

·  One or more of your VAT returns underwent a "credibility check," and your company failed it.

What happens during VAT Inspection?

Any issues with your VAT will be resolved in cooperation with you by HMRC. Additionally, they will inform you of any additional taxes and penalties you may owe.

You should always be ready with all the documents and accurate explanations.

Helping them during the inspection will reduce the amount of any penalty.

How far back can HMRC investigate VAT?

Only records dating back 4 years are subject to HMRC's investigation unless fraud is discovered during the inspection. HMRC has the ability to examine records going back 20 years if fraud is suspected. However, if the eligibility for a VAT refund is being checked, a VAT inspector might only wish to look at one VAT return.

What happened after the visit?

You will be given instructions to enhance the VAT record keeping if the inspector discovers any mistakes at the conclusion of the inspection. The HMRC official will issue an assessment with a penalty if they find proof of unpaid or underpaid VAT.

How to prepare for a VAT inspection?

Before the visit, you should be ready with all the paperwork including sales books, copy sales invoices, bank statements, etc. You can confirm with them beforehand if they want anything else along with the paperwork.

If you're interested to get more details about VAT inspection, do consider Cheylesmore Chartered Accountants. HMRC also permits the presence of agents or accountants during inspections, and we are always accessible for that.