Reply to: VAT Inspection - what to expect?

[Contreras]

... a trip to waitrose for a cafetiere and nice choccie biscuits paid of because I said 'Do you want to start on the invoices' and he said 'no lets try that coffee'.

Someone asked why I was talking to HMRC if I had PCG+ This was a VAT visit not IR35.
VAT is pretty easy to calc and rules are more certain.
Accountant was on the end of the phone to explain the adjustments and paperwork was all correct.
If it was IR35 then yes straight to PCG+ and get the experts involved.

Basic PCG covers IR35 already, PCG+ adds cover for VAT and other tax matters.

There are a few other '+' member benefits too, btw (to save anyone having to point that out).

I think dragging out lawyers for a VAT visit would really set off alarm bells for HMRC.

I really don't see why it should. They're tax consultants, not lawyers.

But in any case, well done!

[cojak]

+1 for Freeagent.

95% of my receipts are attached to my expenses logged in there.

As are my company credit card statements.

And my bank statements.

And my invoices generate my VAT calculations which I submit via FreeAgent.

[malvolio]

...snip...
Someone asked why I was talking to HMRC if I had PCG+ This was a VAT visit not IR35.
VAT is pretty easy to calc and rules are more certain.
Accountant was on the end of the phone to explain the adjustments and paperwork was all correct.
If it was IR35 then yes straight to PCG+ and get the experts involved.
I think dragging out lawyers for a VAT visit would really set off alarm bells for HMRC.

Also looking at freeagent.com

Because by not invoking your cover you would potentially have invalidated it? The point of PCG Plus is that it cover any tax query, including VAT, and that's because more than a few VAT inspections have turned into aspect inquiries; had they not accepted your explanations for the "adjustments" (which smacks of sloppy book-keeping) that's where yours would have gone.

You don't have to send in the legal wolfpack, but it's silly not to have them on standby. for the sake of a phone call.

[TheCyclingProgrammer]

+1 to FreeAgent, and thanks for the update.

I know I've had issues with some self-billing invoices ending up in the wrong VAT period before; I was just explaining the payments into my bank account as sales in FreeAgent which meant they were being recorded in the VAT quarter that I was paid, not necessarily the quarter the invoice was dated. Something to watch out for if you receive self-billing invoices outside of your normal invoice system. I now create duplicate invoices in FreeAgent to ensure my sales and VAT records are correct.

I also wonder if a VAT inspection would bring up the fact that I haven't applied the reverse charge to services I've bought from (mainly US-based) suppliers, web hosting etc. It doesn't seem like a massive deal as it has no effect on the VAT owed though.

I've had dealings with the VAT department twice to date but came out the other side just fine on both occasions. One was a bit painful...HMRC took payment for two of my VAT quarters twice (after a cancelled direct debit resulted in a missed payment, I paid by card over the phone and then after setting up the DD again they took payment a second time). I'd just moved and thought I'd updated my address but as I discovered you have to notify the VAT, CT and PAYE departments separately!

So I spoke to HMRC about the double payment and they said - don't worry, just deduct the overpayment from your next VAT payment as your account is in credit. Which I did. Unbeknownst to me, they decided to then refund the overpayment by sending me a cheque to my old address. I didn't find out anything until I started getting debt collector letters. I no longer had access to my post so HMRC had to cancel the refund cheques and update my account but it all got sorted in the end.

[clearbrian]

Well survived the VAT inspection

Survived the VAT inspection.

In the last week, between the call and the visit, I had gone through all 177 of my invoices since 2006 since the company started.
And my accountant had done the same to check all invoices and make sure all Sales Invoices were included in the correct VAT quarter.
I'd messed up a few times over the years mainly due to ending up on a contract that paid weekly and I would work the same 5 days at the same rate so would end up with a number of invoices with same amount. And when i entered these in spreadsheet I sent to accountant I put some in wrong month so got applied to wrong vat quarter.
But they would be caught later on and a adjustment on the next quarter was done.
The accountant produced a VAT reconciliation spreadsheet.

He also said there was a few things he had legally to tell me.
He listed the rules about submitting, fines, and certain procedures.
The first thing they're required to ask you is there anything you wish to tell us.

I explained there was some adjustments.
He said this is fine, adjustments if not included in the correct quarter can be added later within a specific time period so I said yes that what this reconciliation spreadsheet shows.
I said my april quarter was due so would just add it to that.
My other friend in HMRC recommended good coffee and biscuits always made him more lenient. So a trip to waitrose for a cafetiere and nice choccie biscuits paid of because I said 'Do you want to start on the invoices' and he said 'no lets try that coffee'.

He had a print out of about 3 VAT payment amount so he went back and found the invoices for that quarter. Did the calculations and checked if amt submitted matched his print out.

One included an adjustment which he couldnt figure out so I had accountant warned to be on the phone so we rang her and she explained it. He hung up and said "well she seems to know whats shes talking about".

Another vat amount included a large purchase of a Mac so he wanted to see the VAT invoice from apple.
A quick search of my email and managed to find it. Though best to find them now and keep them with the invoices to agencies.

So for a visit you need:
HM Revenue & Customs: Visits by VAT officers

All Sales Invoices (ones you send to agency)
All banking - Spreadsheet I send to accountant which includes all these invoices and how theyre used to calculate.
I had them downloaded but not printed and weirdly it says on the letter about the visit HMRC staff are not allowed to operate a PC on clients site. Client must do it for them. So I had printer wired up and printed anything off he wanted to see.
Any VAT invoice for large purchases you included in VAT calculation. I'm on FRS so only purchases over £2000+ are included i think.
Good coffee and biscuits. I was warned "no jaffa cakes"

He didnt look at:
Any dividends, expenses.

Someone asked why I was talking to HMRC if I had PCG+ This was a VAT visit not IR35.
VAT is pretty easy to calc and rules are more certain.
Accountant was on the end of the phone to explain the adjustments and paperwork was all correct.
If it was IR35 then yes straight to PCG+ and get the experts involved.
I think dragging out lawyers for a VAT visit would really set off alarm bells for HMRC.

Also looking at freeagent.com

[Boo]

*You* should be the one on end of the phone during the visit, ideally held at the accountant's premises.

I would say so.

Boo

[tractor]

...

My accountant has a discount with the company which works out at £18pm.

Still worth it in my view - I had Quickbooks before and it was far too fiddly for me. My accounts are shipshape and me accountant now longer has to nag me at year-end as he can see what he needs to see at any time.

I used QB for years but when the VAT rate changed twice in a short period recently it wouldn't handle it without a lot of hassle and their support is quite tulip so I moved to Xero.

Pretty good package, £21 or something pm. Everything on tap wherever I am and VAT returns published and acknowledged in seconds. Wholly worth it imo.

Why any contractor would consider doing it any other way than online, I don't know. And saving a paltry 20 quid a month doesn't cut it

[Contreras]

I shouted HELP my accountant, pcg and a mate whos been in HMRC for years.

Accountant will be on end of the phone during the visit.

I read on one site they only go back 4 years though accountant says they need to know the period being investigated so they can provide the calculations for the vat amounts.

Accountant is SJD so hopefully their size will inspire confidence.

And I can claim off pcg plus for the day as they'll be visiting my home address.

WTF

If you have PCG+ then why are you even talking to HMRC?

Why not let AbbeyTax represent you?

*You* should be the one on end of the phone during the visit, ideally held at the accountant's premises.

[CloudWalker]

You'd be amazed at the power of biscuits!
I once was sent to site to remove a paper Jam , but when the nice lady pulled out the Biscuit Selection Box I gave her a Full Service... (printer that is)

[SarahL2012]

Suffered a few HMRC inspections in permie financial controller roles. Definitely keep the coffee on tap, feed them well & turn on the charm.

And look pleased to see them - inspectors aren't used to be greeted with a smile.......

[Platypus]

My friend who worked as an inspector years ago said most important is "biscuits". He said he was more lenient if he got good biscuits

Actually, I heard the same thing. And no, I'm not kidding.

[Dylan]

I had a vat inspection once, through sheer lazyness I'd not bothered reclaiming VAT on a load of stuff but has always paid to them the VAT due on my sales invoices.

As a result she left with HMRC owing me a fair sum of money. She was very nice though, gave her biscuits and coffee, just doing a job, didn't feel like she was out to get me.

[speling bee]

OK Vat inspector booked in for end of the month.

My friend who worked as an inspector years ago said most important is "biscuits". He said he was more lenient if he got good biscuits but not jaffa cakes

as for docs required for VAT visitation
HM Revenue & Customs: Accounts and records for your VAT
from
HM Revenue & Customs: Visits by VAT officers

Yes. Jaffa cakes would be rubbing their nose in it somewhat.

[NickFitz]

Right - good quality chocolate chip biccies and decent coffee.

And I won't bother to put a receipt in for them....

Surely there's something in the regulations about "Incurred wholly and necessarily in the course of bribing a representative of Her Majesty's Revenue and Customs"?

[cojak]

OK Vat inspector booked in for end of the month.

My friend who worked as an inspector years ago said most important is "biscuits". He said he was more lenient if he got good biscuits but not jaffa cakes

Right - good quality chocolate chip biccies and decent coffee.

And I won't bother to put a receipt in for them....