Tips for Surviving a VAT Inspection
Every year thousands of small business owners worry when they’re told to expect a visit from the VAT inspector.
Their first thought often is: “What have we done wrong?” But many of these inspections are routine, although sometimes they’re triggered by unusual events. Failing to submit a VAT return or a sudden change in the pattern of business can provoke a visit.
Unless you’re committing VAT fraud you should see the inspection in a positive light. Here are our VAT inspection tips.
1. Look on it as a positive experience. It will validate where you’re doing the right thing and highlight where you’re going wrong.
2. Review records of a previous visit. If this isn’t the first time an inspector’s called, try to find out what happened last time and whether recommended actions have been taken.
3 Take professional advice on known problems. If you’re aware that you have a VAT accounting problem, or discover one during your inspection preparation, you should seek help from a professional immediately. Mistakes happen and it’s better to admit them to the inspector and explain what you’re doing about it.
4. Have all the VAT returns available. The inspector may want to look at previous returns and their associated working papers, showing how the amounts were calculated. The HMRC website advises on the records that you’re required to keep for VAT purposes.
5. Hold a pre-inspection review. Check that all the files and documents are where you expect them to be and up-to-date. You might want to involve an external professional, such as your accountant, in this process.
6. Make sure the right person is available to answer questions. It’s tempting for the business owner to deal with the inspector even though they don’t do the day-to-day bookkeeping. This can lead to problems because they may give inaccurate answers. It’s important to give the inspector the correct information.
7. Prepare a list of questions for the inspector. Be proactive and get all the advice you can from the inspector. This is a great opportunity to get answers on how to deal with VAT on tricky or unusual transactions.
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