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  1. #1

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    Default VAT Inspection - what to expect?

    Hi
    I got the call today for VAT inspection.
    My accountant is compiling info but won't be there when HMRC visit.
    I was just wondering what to expect.
    How far back they query?
    I've never had a VAT inspection before and been contracting since 2006.
    I took a year or so off to retrain and posted nil VAT for a few quarters so that may have flagged me up.

    It says they can inspect the premises, which is my flat so do they ask about equipment?

    Thanks

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    Contractor Among Contractors

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    Never pee'off the vat man. He has more powers than HMRC can ever hope. Good luck, but I take it you're all above board...

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    Are you a member of PCG with PCG+ in place (i.e. insurance cover for VAT inspections)? If not, you may want to consider this in future. One thing to bear in mind is that VAT inquiries can lead to other inquiries. Otherwise, just have all your documentation in order and keep on topic (i.e. VAT), not getting into a conversation about unrelated areas. I'm not sure if you can avoid a visit by providing all the required documentation in advance.

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    Last time I had a VAT visit he was a nice chap, and just sat in our spare office for a while and looked through VAT returns and sales invoices (flat rate). He was happy with explanations provided, went home, closed the file. Easy. It could have been handled by post, as I had requested it be, but I think he wanted a day out by the seaside and some decent coffee.

    Ask your accountant to clarify with HMRC exactly what they want to see, check the whole thing cannot be handled by post, and have the requested documents to hand if they do visit so that you appear organised. Also ask your accountant to confirm to you how far back they are allowed to go and what rights you have.

    Be careful of fishing expeditions, and don't be lulled into a false sense of security if the Inspector is nice

    If you've nothing untoward and your records are in good order you should be absolutely fine. HMRC are getting grumpier about bad record keeping though, and they have the power to penalise for it, so make sure you're OK on that front. Sales invoices in sequence, receipts available, bank statements to hand, statutory records in order etc.

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    And if you do have PCG Plus membership, get your claim form in now; that's what it's for.
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    Quote Originally Posted by Clare@InTouch View Post
    Last time I had a VAT visit he was a nice chap, and just sat in our spare office for a while and looked through VAT returns and sales invoices (flat rate). He was happy with explanations provided, went home, closed the file. Easy. It could have been handled by post, as I had requested it be, but I think he wanted a day out by the seaside and some decent coffee.

    Ask your accountant to clarify with HMRC exactly what they want to see, check the whole thing cannot be handled by post, and have the requested documents to hand if they do visit so that you appear organised. Also ask your accountant to confirm to you how far back they are allowed to go and what rights you have.

    Be careful of fishing expeditions, and don't be lulled into a false sense of security if the Inspector is nice

    If you've nothing untoward and your records are in good order you should be absolutely fine. HMRC are getting grumpier about bad record keeping though, and they have the power to penalise for it, so make sure you're OK on that front. Sales invoices in sequence, receipts available, bank statements to hand, statutory records in order etc.
    If on flat rate, are receipts only needed for the large (>2.?k) capital purchases (i.e. where VAT is reclaimed) which most of us never or seldom make?
    The material prosperity of a nation is not an abiding possession; the deeds of its people are.

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    Quote Originally Posted by speling bee View Post
    If on flat rate, are receipts only needed for the large (>2.?k) capital purchases (i.e. where VAT is reclaimed) which most of us never or seldom make?
    You should probably have receipts for other, non-VAT purposes (to support out of pocket expense claims and any other tax deductible company expenditure) but I would imagine the VAT man isn't interested if you aren't reclaiming the VAT.

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    Quote Originally Posted by speling bee View Post
    If on flat rate, are receipts only needed for the large (>2.?k) capital purchases (i.e. where VAT is reclaimed) which most of us never or seldom make?
    Yes, assuming they are just looking at VAT.

    That's why it's helpful to ask them to put their request in writing and outline what they want to see first, so you have it all to hand for them. You can also point out that you're losing a day's billing for the visit, which is why you'd rather they asked questions via post if possible - if you are on a decent day rate then taking a day off could be expensive, and out of proportion for a "standard" check.

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    Had one a few years ago (and my business activities tend to be a bit more diverse than you disguised employees !)

    Bloke came in, picked four random quarters from a five year period and went through all company bank statement entries for income and expenditure, asking to see the relevant invoices and ensuring that what went on the return for these quarters tied with the numbers in the accounts/statements.

    He found an addition error that resulted in a 70 underpayment of VAT which he told me to 'add to my next VAT payment' ( I questioned the fact that the numbers would then look wrong on my return, he told me not to worry about it !!)

    Job done in about three hours. The bloke was pleasant and non confrontational.

    Pretty easy really.
    I swear on the wet head of my first case of gonorrhoea, there is his ugly voice that I forever fear...

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    Fingers like lightning

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    I was expecting the Spanish Inquisition...

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