HMRC letter re flat-rate VAT scheme

[shazbot]

Hi,

My accountant has forwarded a letter from HMRC about my company's flat-rate scheme VAT registration (Fraud Investigation Labour Providers dept). The VAT registration came through a few weeks ago, this is an anti-avoidance followup/investigation that's being done for a sample of the accountant's customers to check if there's an abuse of FRS VAT going on.

Here are the 9 questions as scanned images from letter, omitting a couple about confirming I've not been part of an umbrella scheme previously:

• questions 1-3
• questions 4-9

My setup is quite legit (standard limited company, no tax avoidance schemes, well known contractor accountant) so I should be fine, but I want to avoid problems.

Has anyone else had similar questions, and do you have any tips on how to truthfully answer the questions in a way that doesn't cause further investigations? Or recommendations for a good (paid) advisor?

[Lance]

they're not usual questions. I would just answer them honestly, and fairly quickly. It reads like a basic avoidance check so assuming you have nothing to hide there's no issue.

Daft question.... Have you applied for any FRS rate other than 14.5% (13.5% for year 1)? If so then these may be additional checks.

[Patrick@Intouch]

I agree, these questions do not seem standard and I would just answer them promptly and accurately. Would also be good to know the outcome.

[shazbot]

Thanks for the quick responses and I will follow up once I know more.

The questions may be more to do with the accountant by me as they do a lot of FRS VAT applications and letter mentions "before we can progress the FRS applications" i.e. later applications from other companies.

Not sure if HMRC or accountant selected my company to be part of sample, I imagine HMRC did.

I'm on the 14.5% rate for "Computer and IT consultancy and data processing", as suggested by accountant.

This isn't a full-blown VAT inspection, but letter does mention that HMRC may contact the PSC (my company) for more information.

[Darren at Fox-Bartfield]

VAT

Agree with the guys above but just to add, is your accountant not replying to this on your behalf? Surely he should be dealing with initial enquiry letters as part of the service. If they've other clients that have had a similar response then he'll likely have had conversations with HMRC and possibly best placed to reply. The accountant should act as a barrier between HMRC and yourself which can be very useful.

These questions look like part of a fishing expedition so would suggest speaking with your accountant in order for them to reply directly to the letter.

[shazbot]

Agree with the guys above but just to add, is your accountant not replying to this on your behalf? Surely he should be dealing with initial enquiry letters as part of the service. If they've other clients that have had a similar response then he'll likely have had conversations with HMRC and possibly best placed to reply. The accountant should act as a barrier between HMRC and yourself which can be very useful.

Yes, accountant will reply to HMRC - they've sent me an email with these questions (inserting my company name) to which I will reply, so they can reply based on the various companies being checked.

However, the accountant is not providing any advice to me on how best to answer the questions and it seems they will just pass my replies straight through to HMRC. I called the accountant to get some context and their view is it's a way of HMRC delaying the VAT registration process because of overload - surprised to hear this, considering it's from a fraud investigation dept.

[SueEllen]

Depending what tax investigation insurance you have I would contact the insurer BEFORE answering the questions.

[pr1]

Agree with the guys above but just to add, is your accountant not replying to this on your behalf? Surely he should be dealing with initial enquiry letters as part of the service.

I definitely wouldn't want my accountant replying to anything like this on my behalf - advise me yes, but acting on my behalf no - I'm the Director and the one legally responsible for my company

AbbeyTax (via IPSE) warn that letters like this are often the spark to further investigations so answering them "right" is very important if you don't want further hassle

[shazbot]

Depending what tax investigation insurance you have I would contact the insurer BEFORE answering the questions.

I have the QDOS Contractor IR35 insurance, I contacted them and they just said "answer quickly and promptly", no other advice.

Not finding the accountant or QDOS providing any advice really - can try pushing them, does anyone know how to get to someone in QDOS who can cover this?

[SueEllen]

Yes, accountant will reply to HMRC - they've sent me an email with these questions (inserting my company name) to which I will reply, so they can reply based on the various companies being checked.

However, the account is not providing any advice to me on how best to answer the questionsand it seems they will just pass my replies straight through to HMRC. I called the accountant to get some context and their view is it's a way of HMRC delaying the VAT registration process because of overload - surprised to hear this, considering it's from a fraud investigation dept.

Potential flat rate "scams":

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