27 Jun Where Are You Up To With Your VAT Payments?
One of life’s certainties is that if you are a VAT registered business, sooner or later you will receive a check of your VAT affairs by an HMRC officer, either at your business location or increasingly remotely.
VAT inspections, or ‘checks’, as HMRC prefers to call them, are an integral part of the system. Their main purpose is to ensure that your returns are an accurate reflection of your business activities and VAT liability.
However, their frequency is by no means predictable. You may find yourself singled out at any time if:
- You have a history of poor compliance
- There has been a change in the pattern of your VAT returns
- Your business is seen as high risk (e.g. a cash business, a partly exempt business)
The higher the perceived risk, the more likely it is that you will receive a VAT visit in person, rather than a questionnaire and follow-up telephone call.
VAT payments – where are you with yours?
Recently tax investigation insurance specialists PfP say that HMRC has collected an additional £3.3bn from SMEs, after enquiring about underpaid VAT.
PfP said that two newly created HMRC units had been tasked with carrying out the investigations: the Individuals & Small Business Compliance unit, and the Wealthy & Mid-sized Business Compliance unit. VAT is a key area of focus for HMRC, and there are a number of further inquiries planned to follow.
Kevin Igoe, managing partner of PfP said:
“VAT investigations into SMEs have proven incredibly rewarding for HMRC.
“The figure will be driven by a combination of carelessness, genuine error or misunderstanding, as well as deliberate and calculated underpayment.
“Whilst the vast majority of SMEs are compliant, the actions of a rogue few mean that HMRC is likely to look closely at the tax affairs of all over the coming months. Many innocent business owners are likely to find themselves under close scrutiny as the Revenue looks to weed out any remaining underpayment.
“It is therefore paramount tax records and systems are in order. Any uncertainty over when and how much VAT should be paid should be cleared up via professional advice, or clarification from HMRC itself.”
Don’t be caught out
The cost of being caught unawares by a VAT visit can be considerable. You could find yourself facing:
- Hours of valuable time wasted
- Extra costs incurred in sorting out all the paperwork
- Potential penalties and interest charges
- The possibility of a follow-up enquiry by HMRC
A VAT visit
This usually has two parts:
- It begins with an interview, during which the officer will seek a broad understanding of your accounting system and general commercial activities. He or she will be looking for possible areas of weakness in your accounting records.
- During the second part, the officer will examine your records to ensure that you have completed your returns correctly. Constraints of time will mean that he or she will probably focus on sensitive areas identified during the original interview. An assurance is visit is not an audit, but rather a series of appropriate checks so that the officer can form a view as to the credibility of returns filed and corresponding payment made or refunds received.
If you are not prepared, or if you are not sure of your facts, a visit can be a daunting experience. We can make your life easier by attending the meetings and assisting with answering the questions. This could save you considerable time, expense, and inconvenience. As with most other things, a professional helping hand in this area can add real value to your business.
We can help you avoid unnecessary cost and inconvenience by:
- checking that your VAT summaries agree with your returns
- reviewing non-routine operations such as large or unusual transactions, where mistakes are more likely to occur
- ensuring that you pay the correct scale charges on cars for which you incur the fuel costs
- reconciling your disclosed turnover with your annual accounts
- simplifying your procedures by arranging with Customs for your VAT return dates to coincide with your annual accounting date
- minimising penalties and interest charges by sorting out any errors we detect with Customs.
Contact us if you would like further help or advice on this subject.
Egan Roberts Chartered Accountants
Every business owner needs a team of professionals in the background who provide continuous support and advice. That’s what we do. Through years of commitment to our business clients we have developed a wide range of skills and services designed to improve business performance and profitability. We are committed to providing a first class service tailored to the individual needs of each client. We keep a close eye on all the essentials and offer proactive advice on how to improve personal, family, or business finances.