With many VAT registered businesses receiving infrequent VAT audits these days – HMRC aim to audit VAT registered businesses at least once every 4 years – it is worth familiarising yourself with what to expect beforehand.
HMRC undertake VAT audits as part of their checks to make sure that businesses are paying the correct amount of VAT. HMRC officers also use these visits to review whether VAT accounting and record keeping within a business are accurate and up to date.
HMRC should contact you in advance to arrange a visit. They normally give at least 7 days’ notice and will confirm what information they’ll want to see as well as giving an indication of how long it is expected to take. A visit to a small business might only last a few hours, whereas one to a large or complex business might take several days. The business should provide relevant records to the visiting officer and assist with any queries arising.
If the business uses a professional VAT adviser to deal with, or assist with, its VAT affairs they can also be present during the audit.
At the end of the visit, the HMRC officer should discuss their findings with you. This is likely to include:
- reviewing the work carried out during the visit,
- explaining any areas of concern identified and agreeing what future action may be required,
- explaining any VAT adjustment required and agreeing with the business as far as possible how that should be done,
- advising whether any VAT has been overpaid or underpaid.
Where there is VAT owing to HMRC, or a repayment due to you, the officer should confirm this in writing within a few days. HMRC will typically then raise an assessment for the VAT errors discovered during the audit – they have the power to assess for errors going back up to 4 years. Interest and penalties may also be charged depending on the nature of the error discovered.
It is worth noting that if you disagree with an HMRC VAT decision or assessment it may be possible to challenge it. In the first instance however, it is usually best to try and resolve the matter by sending further information to the officer who sent the decision.
If no agreement can be reached then there are generally two options for progressing the issue, either:
- request a case review of the disputed matter by an unconnected HMRC officer, and/or
- ask for the appeal to be heard by an independent tribunal. It is important to note that an appeal must be made in writing within 30 days of the date of the disputed decision or VAT assessment.
In an ideal world of course your VAT officer will go away happy having found no issues with your VAT processes and VAT accounting arrangements.
If you would like more information on what to expect from a VAT audit, please do get in touch and we’d be happy to help.