VAT inspections and the penalty risk
The news that a value added tax (VAT) inspection is due still strikes fear into the hearts of many business owners and managers. If you have been accounting for VAT correctly and kept the necessary records, there should be no cause for worry. Even if you haven’t, there may still be time for us to help put things in order before the VAT officers arrive. Some answers to frequently asked questions follow.
Why and how often?
Inspections are made regularly. The size and complexity of the business or a past record of non-compliance will prompt more frequent visits.
What will VAT officers do?
The VAT officer will begin by discussing your business before asking to examine your business records. Sometimes, they may ask to view business premises and any goods stored there. Occasionally, the officer may take details of supplies made by or to you to check their treatment in your customer’s or supplier’s records.
And when it’s over?
A visit may result in no further action at all. However, if the VAT officer considers that you have failed to keep correct or adequate records, or discovers a mistake, this should be explained to you clearly, as should the reason for and the amount of any adjustment to your VAT payable. Your right to disagree with or appeal the adjustment should also be made clear.
How can we help?
If you advise us in good time of a forthcoming visit, we can arrange a quick health-check of your records and systems (this is something we advise you to have regularly, in any case). If you would like us to attend during the visit, and/or answer questions on your behalf, we can do so.
If, despite everything, the officer finds a default, the potential penalties depend on the nature of that default. No penalty will be charged if you have a reasonable excuse, although what is ‘reasonable’ is quite narrowly defined.
With our help, penalties should not arise. If they do, we shall seek to have them mitigated to the greatest extent possible in the circumstances.