Although the days where regular, even annual HMRC VAT visits to businesses are seemingly long gone, in the past 12 months I have seen a steady increase in the amount of VAT enquiries being raised by HMRC, with a significant number of these enquiries arising from a VAT visit.
It is important to manage these visits in the best possible manner and the intention of this article is to give you some guidance around this in the form of the following 10 top tips:
1. Be prepared
A visit from HMRC will almost certainly be stressful for most, so if HMRC do get in touch to arrange a VAT visit, for peace of mind it is best to know everything is already in order.
Therefore my number one tip would be to have your VAT position reviewed by your advisors regularly. A VAT health check can highlight any potential issues with your VAT accounting, identify any weaknesses in your accounting systems and look for any opportunities to improve your position.
Although a health check is not guaranteed to pick up everything that HMRC may, it will definitely give you significant comfort that should HMRC come knocking, you have done everything you can to ensure compliance.
2. Take out a tax enquiry fee protection policy
Armstrong Watson offer a tax enquiry fee protection service, which for a small annual subscription provides you with cover for any professional fees incurred should HMRC raise an enquiry. Included within this policy, is that a member of our VAT team will attend the HMRC VAT visit. This allows us to help you manage the enquiry, at no additional cost to your business.
3. Make sure the relevant persons are available for the visit
As well as reviewing your records, as part of the VAT visit, HMRC will want to speak with both the person responsible for completing the VAT returns and a director of the business.
Both of these persons should be available at the start of the meeting and be prepared to discuss the business and how the VAT returns are prepared.
4. Make sure the business records are available
HMRC can go back four years to correct any non-deliberate errors, so the investigating officer may wish to review records dating back this far. You should make sure that these records are to hand for the officer to review.
5. If you are aware of any errors in your records, be upfront and disclose them
If you have discovered VAT errors in your records prior to the visit, then it is highly likely that HMRC will also discover them as part of their visit.
Where VAT errors have resulted in an underpayment of VAT to HMRC, penalties may be applied. By being upfront with HMRC and disclosing these errors at the earliest possible opportunity, this gives you the best chance of mitigating any penalties or depending on the circumstances, potentially even eliminating them.
6. Be nice to the officers
Although this sounds simple, it doesn’t always happen. One of the worst things you can do is get on the wrong side of the officer(s). They will be much more likely to look deeper for issues and should any arise, are less likely to be lenient on potential penalties.
By offering the standard hospitalities, such as a reasonable working space and refreshments, as well as answering their questions politely and accurately, it will increase the chances of the visit running smoothly.
7. Don’t answer questions if you are not sure of the answers
During the visit HMRC will ask various questions about your business and your accounting records. If you are not 100% sure of the answer, tell the officer that you are not sure, and that you will find out and come back to them as soon as possible.
This is a reasonable response to give. It is important not to guess an answer which may then turn out to be incorrect as this could lead to issues later on.
8. Keep notes from the meeting
It is highly recommended to keep notes from any visit, which you can refer back to if required. The notes should include comments on what was discussed as what you said and what the officer said is useful and may be required to be referenced at a later date.
If you are professionally represented at the meeting by your accountant, then the notes can be completed by them.
9. Obtain a summary of HMRC’s findings
If HMRC raise any issues as part of their VAT visit then they should provide you with a summary of their findings, which you can then review to confirm that their summary is in agreement with your recollection of the meeting.
10. Don’t necessarily agree with HMRC’s findings
HMRC do make mistakes. If an error has been highlighted in your records and an assessment raised by HMRC, don’t just pay this without seeking agreement from your advisors. There are numerous cases where the officers have made a mistake and the assessment is wrong.
Having the position reviewed by your advisors prior to making any payment is important. I have various examples of where I have disagreed with HMRC’s opinion and ultimately had the assessment overturned.
The same goes for penalties. If a penalty is being charged, it is beneficial to have the amount of the penalty reviewed. In many cases, the penalty can be reduced, or even perhaps suspended if it is challenged.
Contact David if you would like more information on VAT visits from HMRC and the best ways to prepare for them
