HMRC VAT Compliance check

[IngloriousContractor]

I was contacted by HMRC for VAT compliance check even though I have an appointed representative who is my accountant.
They asked to see 4 years of paperwork. I directed them to my accountant. My accountant provided to them what they asked for.
I am a few weeks into this compliance check process now.

They have now sent letter to all directors that they want to see some records.
What should I expect? What do they want to check? My accountant has already provided 4 years of invoices and contracts and whatever else they requested! What more could they want? There is some factsheet they have attached but thats not very helpful - it mainly talks about the way they will do inquiries and legal powers available to them if I did not cooperate. To me, this is plain harassment when I have paid the right amount of tax and provided last 4 years of documents already!

Any advice on what I can do to prepare or any other insights on what are they after would be very helpful. Thanks

[malvolio]

If you're an IPSE member or have PEI insurance, you should invoke your tax investigation cover. This is a standard way to open an IR35 inquiry.

It may be entirely innocent and routine. But it may not. Best be prepared.

[cojak]

Oh Dear.

Get to your accountant ASAP and forward that latest letter, and make sure that you have ALL of your documentation to hand, that includes everything you saved regarding in business on your own account that may not have been relevant from an accounting point of view.

Oh, and don’t talk to HMRC yourself - let your accountant do the talking.

[ladymuck]

I had a VAT compliance check a few years ago. They had spotted a discrepancy and when I looked into it, a mistake had been made. I invoked my tax investigation insurance with IPSE who then took over all the communication, essentially putting the information I'd gathered onto their headed paper, and it was all quickly closed off.

I didn't get my accountant involved until it was all resolved as all I needed them for was to ensure I put the journal entries in correctly. As I do my own VAT, my accountant wouldn't have had access to the information in the returns.

I would never, ever, directly respond to HMRC - as Mal says above this is often a way in for a full on lube-free IR35 probe. Getting professional representation from the start will help to head that off.

[IngloriousContractor]

Thanks for the responses. My accountant has provided the information they asked for. I do not have IPSE membership unfortunately and neither do I have any insurance. I don't know why are HMRC insisting on talking to me. Would IPSE cover if I joined at this stage?

The way all this started with a phone call to me rather than my accountant; 5 missed calls within space of 1 or 2 mins from the 0300 and then few others to the other director was disconcerting.

My accountant is not going to join the call. He indicated that his role is over here - in not so many words :/

[malvolio]

Thanks for the responses. My accountant has provided the information they asked for. I do not have IPSE membership unfortunately and neither do I have any insurance. I don't know why are HMRC insisting on talking to me. Would IPSE cover if I joined at this stage?

The way all this started with a phone call to me rather than my accountant; 5 missed calls within space of 1 or 2 mins from the 0300 and then few others to the other director was disconcerting.

My accountant is not going to join the call. He indicated that his role is over here - in not so many words :/

Talk to IPSE then. They can only say no but I suspect they may help. You're not yet being accused of anything, their only rule ilover joining is that you are not actively under investigation

Failing that get hold of Markel Tax or QDOS and see how much they would charge. You're potentially looking at a lot of costs if this does go south just in legal fees, so don't piss about. And don't talk to HMRC, everythingmust be in writing.

It may be nothing but I very much doubt it. They wouldn't go to that much trouble for a simple verification check.

And sack your accountant. He's there to provide advice not book keeping

[ladymuck]

HMRC want to talk to you because it's your responsibility as the director to answer their questions - yes you can appoint someone to speak on your behalf but the buck ultimately stops with you (and the other director). Just because you know everything is above board that doesn't mean they don't have the right to do a spot check to make sure you're operating VAT correctly. It was certainly one of the questions I was asked - this was back when the flat rate was still worth having - and they wanted to check I was using the correct rate and doing the calculations correctly, as well as pointing out the mistake I'd made.

If they call again, insist everything is put in writing and state that you will not act on anything requested over the phone if it is not followed up with a letter.