HMRC VAT Enquiry

[LondonManc]

ISBC = Individuals & Small Business Compliance

Sounds like a back door IR35 probe, but aiming for a VAT grab first. As long as you've got good reason for out of normal numbers, be as relaxed as your accountant.

[quackhandle]

I had a VAT enquiry also, with visit to my home office. VAT enquiry was also due to FreeAgent software categorising things incorrectly.

Solving the VAT issue took a couple of hours. After this HMRC want to talk about IR35...

Speaking to other contractors the snidey feckers of HMRC are known for this, start with VAT chat over tea and custard creams then wham! jump straight onto IR35.

You would have been within your rights to say, whoa there, I have that dealt with by IPSE/QDOS/Man Down street, etc and you can deal with them over my IR35 status.

And send it in a letter beforehand you unprofessional oik! (or words to that effect).

qh

[rootsnall]

Solving the VAT issue took a couple of hours. After this HMRC want to talk about IR35 and asked to see all my paperwork and all my contracts. After looking at the contracts and talking about IR35 for another few hours, he seemed comfortable with my status.

That's making me sweat even though my Ltd is now no more.

Back in student days I used to work for a very dodgy geezer doing bar work at shows and carnivals. We had a full on VAT raid, big blokes suddenly emerged from the crowd with badges and shut us down and seized everything. I have always had respect for the VAT man.

[_V_]

I had a VAT enquiry also, with visit to my home office. VAT enquiry was also due to FreeAgent software categorising things incorrectly.

Solving the VAT issue took a couple of hours. After this HMRC want to talk about IR35 and asked to see all my paperwork and all my contracts. After looking at the contracts and talking about IR35 for another few hours, he seemed comfortable with my status.

I think I was lucky in this regard, he seemed to think IR35 was a blunt instrument.

Others may not be so lucky.

Moral of the story, it depends the level of bastard tax inspector you get assigned to, whether it is routine or the start of hell on earth.

[TheCyclingProgrammer]

I have also had a VAT enquiry - about 10 years ago now - relating to the flat-rate scheme and invoices to non-UK clients. The supplies were outside the scope of UK VAT but FreeAgent was at the time including the sales in Box 6 on the VAT return when they are supposed to be excluded entirely (as its not part of your flat-rate turnover). Thus the box 6 figure was inflated compared to the VAT being paid and HMRC wanted to know why. It was easily dealt with by explaining what had happened and supplying invoices for the quarter. FreeAgent have since fixed this fortunately.

[ladymuck]

I've had one VAT enquiry, not a full on inspection, where there was a calculation query on one return and they wanted to check I was using the right category (this was before the flat rate changes).

I engaged with whoever IPSE had at the time covering such things and gave them the response I would have sent back, where I acknowledged a mistake had been made, explained how it happened and provided justification for the flat rate category I was using. The firm made a few tweaks to my wording, stuck the letter on their letterhead with a letter from me giving them permission to act on my behalf, and off it went.

All dealt with in a few weeks.

I had made a mistake and, on checking out their claim, spotted very quickly where it came from and why. I guess HMRC were happy to have recovered that couple of hundred quid and left it at that.

[nomadd]

What's your experience with these enquiries? Should I be preparing for a meticulous white glove inspection and go through every VAT purchase receipt for the last tax year with a fine tooth comb, making sure that each and every one has every single detail the VAT rules require, or do they tend to take a broader view (i.e. Clearly legitimate expenses, each one has a VAT number, mostly correct etc, therefore they move on to an easier target rather than nit-picking...?)

Bit in bold is your wishful thinking; forget such thoughts until they are realised.

FWIW, my experience after thirty-one years of contracting and four of these inspections, two specially for VAT:

First one was a breeze - very pleasant lady, and everything went fine. She was gone in about one hour.

Second one - old guy was a complete "twunt"; he stayed for hours and hours, going through five years of returns. He left my premises and a few days later sent me a a letter with a huge demand for "unpaid VAT". After trying to contact him for several days to discuss - I'd gone through all the VAT returns myself and they were perfectly correct - I decided to escalate the matter a few management tiers above his level. That got him back at my place pronto. I presented him with a mound of calculations and asked him to point out my mistakes over a cup of tea. He left within two minutes, no kidding. Got an updated letter a few days later saying nothing was payable.

In other words, if everything is "present and correct" in your paper trail and business practices, take no bull, and stand your ground; there is nothing they can do, so be cool with them and remain polite, professional and above all factual. If, however, you've been a naughty boy, well..

[ladymuck]

Do you have tax investigation insurance with the likes of Qdos or IPSE? Get them engaged asap if you do. It may be nothing but, if it turns out to be something, they won't take your case if they've not been involved from the start.

[man]

Hope your outside IR35 evidence is ship-shape and up-to-date...

Iron clad (this thought occurred to me too).

[cojak]

Had a call from HMRC (I know, I thought it was a scam too - but I've checked and to my surprise it was genuine) asking about the 'nature of my business' as my last VAT return shows they owe me a few hundred quid (when I was previously paying them every quarter - thanks COVID).

I refused to answer any questions in the spot (as I couldn't verify their identity on the phone) and have referred to my accountant, who sounded very unconcerned when I mentioned the VAT enquiry to them. I don't share their relaxed approach as I've read a lot of horror stories about HMRC.

What's your experience with these enquiries? Should I be preparing for a meticulous white glove inspection and go through every VAT purchase receipt for the last tax year with a fine tooth comb, making sure that each and every one has every single detail the VAT rules require, or do they tend to take a broader view (i.e. Clearly legitimate expenses, each one has a VAT number, mostly correct etc, therefore they move on to an easier target rather than nit-picking...?)

There was one curious detail - the guy did a follow up email and his signature states: "Compliance Caseworker | ISBC | T&SC" (not 'VAT Office' like he said on the phone).

Hope your outside IR35 evidence is ship-shape and up-to-date...

[man]

Had a call from HMRC (I know, I thought it was a scam too - but I've checked and to my surprise it was genuine) asking about the 'nature of my business' as my last VAT return shows they owe me a few hundred quid (when I was previously paying them every quarter - thanks COVID).

I refused to answer any questions in the spot (as I couldn't verify their identity on the phone) and have referred to my accountant, who sounded very unconcerned when I mentioned the VAT enquiry to them. I don't share their relaxed approach as I've read a lot of horror stories about HMRC.

What's your experience with these enquiries? Should I be preparing for a meticulous white glove inspection and go through every VAT purchase receipt for the last tax year with a fine tooth comb, making sure that each and every one has every single detail the VAT rules require, or do they tend to take a broader view (i.e. Clearly legitimate expenses, each one has a VAT number, mostly correct etc, therefore they move on to an easier target rather than nit-picking...?)

There was one curious detail - the guy did a follow up email and his signature states: "Compliance Caseworker | ISBC | T&SC" (not 'VAT Office' like he said on the phone).