By Stephen Ferrie, VAT Consultant, Armstrong Watson
BACK in the dim and distant past I began my tax career as an HM Customs and Excise trainee VAT officer. Armed with my briefcase emblazoned with ‘ER’, I was often approached with suspicion, fear and (sadly) hostility.
Many years later, I find myself advising clients on VAT matters and helping them deal with inspectors on a regular basis and I am frequently asked how best to approach an impending VAT inspection.
An appointment will normally be made by phone and followed up with a letter detailing the records required, the period to be reviewed (usually four years), the time it will take (couple of hours for small business, several days for larger), who will attend and requesting someone from the business to be available to answer questions (the person making the initial telephone call is not usually the person doing the inspection).
Always speak to an adviser. Even the most straightforward inspection can have hidden VAT issues and it is always good to get a VAT specialist involved at the outset; identifying errors in advance of an inspection can save a substantial amount of time and money. If an error can be identified and disclosed at an early stage the inspector is more likely to recognise a commitment to compliance and will be able to suspend any penalty – depending on the circumstances surrounding the error of course. You may also have cover such as our ‘Tax Compliance Scheme’ to assist with associated costs.
HMRC will insist the visit takes place at the principal place of business, however part of this could take place at your accountants’ premises if this is more convenient. The officer will request to speak to someone who understands the day-to-day running of the business and will focus their attention on areas more likely to produce errors that lead to an underpayment of VAT.
Importantly, it is always preferable to try to form a rapport with a VAT inspector. Being hostile or questioning their powers is rarely a successful tactic – and there are penalties for failure to produce records!
That said, it is not always possible to maintain a convivial environment and sometimes it is necessary to stand your ground. This is where an experienced VAT specialist is worthwhile.
Even if you think the inspection is straightforward, please get in touch with a VAT adviser, we are always happy to help.
For further information contact Stephen Ferrie, VAT Consultant on 0808 144 5575 or email email@example.com