Ensuring businesses pay the correct amount of VAT is a key priority for HMRC since the tax is one of the Government’s main sources of revenue. Accordingly, it undertakes thousands of HMRC VAT compliance checks each year. Taxpayers have various rights during an HMRC VAT compliance check, including the right to professional representation.

If you need legal advice in connection with an HMRC VAT compliance check or any other HMRC or border force matter, our team of HMRC solicitors and barristers are on hand to help. With decades of experience in this complex area of law, we provide commercially focused advice aimed at minimising the disruption caused to your business and securing the very best outcome, whatever the issue.

 

For a confidential free discussion, call us today on 01908 414990,  alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.

 

Why does HMRC carry out HMRC VAT Compliance checks?

HMRC undertakes VAT compliance checks for several reasons, including the following:

  • To check that you’re paying the right amount of VAT.
  • To discourage tax evasion.
  • To ensure that the tax system operates properly and fairly.

 

When will HMRC carry out an HMRC VAT Compliance check?

HMRC has the right to check any taxpayer’s affairs to confirm they are accurate. However, most HMRC VAT compliance checks are risk-based, meaning they are prompted by a suspicion that you have underpaid VAT.

The factors that can lead HMRC to open an HMRC VAT compliance check include the following:

  • The figures on your tax return appear to be incorrect.
  • You have claimed a significant VAT refund when your turnover is low.
  • Your VAT returns are inconsistent. For example, a large increase in VAT claims or making VAT claims when you haven’t done so in the past can trigger an HMRC VAT compliance check.
  • Your VAT returns seem to be at odds with the average rates in your industry.

 

How will you be notified of an HMRC VAT Compliance check?

HMRC will contact you by phone or in writing to inform you of its intention to undertake an HMRC VAT compliance check and explain its reasons.

You are entitled to instruct a professional advisor to liaise with HMRC on your behalf. If you choose to do so, you must give them formal authorisation, otherwise HMRC’s officer cannot deal with them.

 

What happens at an HMRC VAT Compliance check?

 When it opens an HMRC VAT compliance check into your business, HMRC may ask you to provide specific information or documentation for its officers to review. The officers might ask to visit your premises to inspect your records. You do not have to meet with HMRC’s officer if you don’t want to, but the more you help HMRC, the quicker the check will be concluded and the less disruption it will cause to your business. Furthermore, HMRC is more likely to be lenient with any penalty it decides to impose if the HMRC VAT compliance check uncovers anomalies.

You can query the relevance of any information or documentation requested by HMRC to the compliance check. HMRC must carefully consider your objection and decide whether it has any merit. If the officers maintain that they need the information or documentation to properly carry out the check and you refuse to supply it, it might issue you with an ‘information notice’.

An information notice is a formal legal document requesting that you provide specific information or documentation to HMRC. If you believe that the request is unreasonable or irrelevant and HMRC will not back down, you can appeal to the tax tribunal, unless the information notice has already been approved by an independent tribunal.

You must continue to file your VAT returns and pay any VAT that falls due during the HMRC VAT compliance check.

 

What happens at the end of an HMRC VAT Compliance check?

If the HMRC compliance check shows that your affairs are in order, HMRC will close it. If it transpires that you have paid too much tax, HMRC will repay you with interest. If HMRC officers discover that you have underpaid tax, you will need to pay what you owe with interest. HMRC may also charge you a penalty. If you can’t afford to pay the sums demanded by HMRC in full, it might agree to a payment plan.

 

If the HMRC VAT compliance check uncovers fraud, HMRC may pursue a criminal investigation. It only does so in the most serious cases or when it is keen to send a strong deterrent message. If the criminal investigation leads to a successful prosecution, you might receive a fine and even a prison sentence.

 

For a confidential free discussion, call us today on 01908 414990,  alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.