Reply to: VAT Inspection. Standard procedure or should I be concerned?

[Greg@CapitalCity]

Hardly a long track record though is it?

Capital City is one of our brands, the other one has been up and running since 2005....

[Waldorf]

Likewise, we have never had a VAT inspection turn into a IR35 investigation. The VAT inspectors have only ever looked at VAT. We once had two inspectors turn up, one for VAT, and one for PAYE which indicates the individuals at the HMRC still specialise in one form of tax when undertaking a compliance visit.

From Capital City's website:

01 May 2011 - We are very pleased to announce the launch of a new accounting firm specialising in the contractor and freelancer market, called Capital City Accountancy.

Hardly a long track record though is it?

[Greg@CapitalCity]

Likewise, we have never had a VAT inspection turn into a IR35 investigation. The VAT inspectors have only ever looked at VAT. We once had two inspectors turn up, one for VAT, and one for PAYE which indicates the individuals at the HMRC still specialise in one form of tax when undertaking a compliance visit.

[simondolan]

Maybe I'm just anti-social

[Clare@InTouch]

Really nothing to worry about provided you haven't set out to deliberately defraud. Personally, we've never had a VAT inspection go to a IR35 investigation, but then we've not had a single IR35 investigation in over 3 years.

I disagree with Clare on this - I always used to be of the opinion its better in writing, but for a simple VAT visit, let them come over, give them what they want, don't answer anything you are not 100% sure of and it'll be over before you know it. In writing it can take months before you get a conclusion.

Maybe I'm just anti-social

[simondolan]

Really nothing to worry about provided you haven't set out to deliberately defraud. Personally, we've never had a VAT inspection go to a IR35 investigation, but then we've not had a single IR35 investigation in over 3 years.

I disagree with Clare on this - I always used to be of the opinion its better in writing, but for a simple VAT visit, let them come over, give them what they want, don't answer anything you are not 100% sure of and it'll be over before you know it. In writing it can take months before you get a conclusion.

[malvolio]

Will PCG get involved as early as VAT inspection then? (standard PCG membership).

Standard only covers IR35. Plus covers anything vaguely related to taxation. That's why close to 50% of members have it.

[psychocandy]

WSS. And if you're a PCG member, call them now and get a claim form. (And if you're not, it's likely you're about to find out why that was a bad idea. )

General rules - meet at your accountants, not your home, all questions to be asked in writing with time to respond, do not talk contractual terms (in fact, do not talk), make sure you have VAT receipts (or at the very least proof of payment) for all business expenditure. Do not be complacent, nothing Hector does is casual. You may be lucky and they'll be done in an hour or so. Or you may not.

Will PCG get involved as early as VAT inspection then? (standard PCG membership).

[TestMangler]

There's been a couple of IR35 inquiries following VAT inspections as opposed to PAYE checks, but I can't name names. But why do you suppose PCG Plus covers VAT Inspections and Business Records Checks? The idea is to stop an IR35 investigation happening as a result of something you say during any HMRC compliance check. Which rather implies there is good evidence that the two are connected.

I'm aware of that. I've been through it, remember ?

Was simply asking if there was any documentary stuff or case details in the public domain on a VAT investigation turning into an IR35 enquiry. All the stuff I've read online and all the stuff I know of personally (quite a few) always start with PAYE and records compliance.

[MickeyP]

The initial VAT inspection isn't covered by the policy (it's usually easier for your accountant to deal with it), but any subsequent dispute/enquiry would be. We'd obviously provide any advice necessary at the outset, so you should let us know as soon as you get any correspondence.

Thanks. Is there any intention of extending TLC35's cover to include VAT Inspections and Business Records Checks as the PCG Plus insurance seems to go one step further in this regard? As Mal says "the idea is to stop an IR35 investigation happening as a result of something you say during any HMRC compliance check".

[malvolio]

Is there any evidence of that Mal ? (Links to stories etc).

I know several people who've had IR35 enquiries and have had one myself and they all started off as PAYE compliance. At my last VAT inspection the guy actually asked me what it was as it had been mentioned on the news that morning. Previous VAT inspection to that, the guy was only interested in his own stuff. Payments in and out and VAT due and paid. He never asked about how I made the money, contracts or anything like that.

There's been a couple of IR35 inquiries following VAT inspections as opposed to PAYE checks, but I can't name names. But why do you suppose PCG Plus covers VAT Inspections and Business Records Checks? The idea is to stop an IR35 investigation happening as a result of something you say during any HMRC compliance check. Which rather implies there is good evidence that the two are connected.

[Qdos Contractor]

Anyone from QDOS reading? If this happened to me would I activate my QDOS TLC35 cover at this point?

The initial VAT inspection isn't covered by the policy (it's usually easier for your accountant to deal with it), but any subsequent dispute/enquiry would be. We'd obviously provide any advice necessary at the outset, so you should let us know as soon as you get any correspondence.

[MickeyP]

Anyone from QDOS reading? If this happened to me would I activate my QDOS TLC35 cover at this point?

[TestMangler]

Keep us posted, always good to know how these things pan out.

But don't be too complacent - several recent IR35 trawls started as VAT inspections.

Is there any evidence of that Mal ? (Links to stories etc).

I know several people who've had IR35 enquiries and have had one myself and they all started off as PAYE compliance. At my last VAT inspection the guy actually asked me what it was as it had been mentioned on the news that morning. Previous VAT inspection to that, the guy was only interested in his own stuff. Payments in and out and VAT due and paid. He never asked about how I made the money, contracts or anything like that.

[malvolio]

OK thanks. Feeling a bit better now about it.

I use an accountant and they are registered to post my VAT returns online etc. They also helped me set up everything from VAT registration to FRS etc.

So sounds like I need to speak to my accountant and then speak to HMRC telling them my accountant will deal with it. Even if my accountant charges a fee for this sort of thing I'd rather that than me spending a day face to face with Hector. Plus the loss of the days earnings would undoubtedly be more than the cost of getting accoutant to front it.

Appreciate the feedback.

Alan

Keep us posted, always good to know how these things pan out.

But don't be too complacent - several recent IR35 trawls started as VAT inspections.