VAT Inspection - What to expect!

Discussion in 'Accounts & Finance' started by Phil., Jan 17, 2018.

  1. Phil.

    Phil. UKBF Contributor Free Member

    31 0
    Morning All,

    So, I had a phone call earlier today from the lovely HMRC VAT folk and they have requested a VAT inspection – this has been arranged for next week. Has anyone had a VAT inspection and if so can you offer any advance warning? What to expect, anything I should prepare for?

    Bit of background, I’m the sole director of a ltd company, we changed from the flat rate scheme recently to the conventional VAT input & output method and hence claimed a VAT refund for the first time, this has led to a VAT inspection.

    I’ve received an email with a list of items they require, this is all ok, I would appreciate a steer on one point if anyone can advise?

    I took a holiday earlier this year and had to spend a few days working, whilst carrying out this work I spent 3 nights in a separate hotel, I’ve charged this against the company as it was time I spent working – is this legit?


    Posted: Jan 17, 2018 By: Phil. Member since: Jun 3, 2014
  2. GlennMiddleton

    GlennMiddleton UKBF Newcomer Free Member

    29 3
    With VAT inspections, always stick to name, rank and serial number. Answer all questions truthfully, if you don't know the answer, say you don't know, never make anything up. They appreciate any backing information to the vat returns submitted. I really wouldn't tell them about the invoice, if they find it, explain the reasons why, provide any receipts or documentation to back up the claim. I really wouldn't mention you were on holiday.
    Posted: Jan 17, 2018 By: GlennMiddleton Member since: Jan 6, 2018
  3. atmosbob

    atmosbob UKBF Ace Free Member

    3,460 766
    Long time since I had one. Make sure you can find any receipts they ask for easily. Having disorganised paperwork annoys them.
    Posted: Jan 17, 2018 By: atmosbob Member since: Oct 26, 2009
  4. GraemeL

    GraemeL Pain in the neck? Full Member - Verified Business

    4,978 1,062
    My experience was that they don't go through everything, but carry out spot checks. Much like an auditor might do. For example they might look at total purchases and make an estimate of what the VAT should be, then compare it with what you have 'claimed'.

    They might ask questions though, such as "have you issued any invoices on which you did not charge VAT?".

    Ours was not aggressive, but did get the feeling they needed to find something. Picked us up on the VAT amounts charged on end of year rebates paid to customers. No penalty, just had to correct it.
    Posted: Jan 17, 2018 By: GraemeL Member since: Sep 7, 2011
  5. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,299 622
    It can vary from an hour of random checks, to a full-on several day itemised inspection.

    As above, have information nicely filed / presented, give minimal but honest and open answers to any questions

    As above if the Hotel question arises
    Posted: Jan 17, 2018 By: Mark T Jones Member since: Nov 4, 2015
  6. KAC

    KAC UKBF Enthusiast Free Member

    962 214
    Make them a drink and give them biscuits. Treat them as humans - not adversaries' :)

    As has been said above, make life easy for them.

    All they will want to do is to establish that you were on the correct flat rate, that you stopped using it when you exceeded the threshold, to check that the repayment claim is supported by valid VAT invoices and whether they can expect more repayment claims in the future
    Posted: Jan 17, 2018 By: KAC Member since: May 7, 2017
  7. Phil.

    Phil. UKBF Contributor Free Member

    31 0
    Most helpful, thanks all.

    In relation to the hotel query I’ll obviously be upfront if queried. Can anyone provide certainty if I’m in the wrong?

    I was on my holiday visiting family, but I had to spend 3 days working and hence I booked a hotel via the company card to enable me to carry out my work, desk, internet etc, all for business purposes only?

    I guess it’s much the same if I’m away from the office on none business activity but I have to spend an amount of time working can I charge accommodation to company expenses? Note, I was solely working for the three days as we had a large project that required signing off.


    Posted: Jan 18, 2018 By: Phil. Member since: Jun 3, 2014
  8. atmosbob

    atmosbob UKBF Ace Free Member

    3,460 766
    I've claimed lots of hotel costs. I usually keep some kind of record of the work activity. I think dated emails, phone calls etc would do it.
    Posted: Jan 18, 2018 By: atmosbob Member since: Oct 26, 2009
  9. Supercoach

    Supercoach UKBF Regular Free Member

    273 52
    You can charge accommodation as a company expense - whether the tax inspector will allow it to be offset against profits depends on the facts; however, this is not the issue here.
    A vat inspection is to determine whether the correct amounts of vat are accounted for and the only issue I can see is if the hotel accommodation etc contained a vat element. If the inspector says you can't claim vat on it then just pay up - they can't hang you!
    Posted: Jan 19, 2018 By: Supercoach Member since: Feb 10, 2015
  10. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,572 868
    You say you were on holiday.

    Was it UK or overseas VAT that you've recovered on the VAT return?
    Posted: Jan 19, 2018 By: STDFR33 Member since: Aug 7, 2016
  11. NEWBY1

    NEWBY1 UKBF Newcomer Free Member

    2 0
    I had a vat inspection at the end of January. The vat inspector found a number of errors, although genuine errors she kept advising me that ignorance is no defence. She advised that we would receive a letter advising us of any invoices that were going to be disallowed as they should have been claimed through a different company not the company that paid the invoice. It is now March and we have still not received a letter. How long do they have to write to you? We have a vat repayment that is still outstanding from December. What do I do? I am tempted to let sleeping dogs lie!
    Posted: Mar 6, 2018 By: NEWBY1 Member since: Mar 6, 2018
  12. GillespieBS

    GillespieBS UKBF Regular Free Member

    348 52
    I've had 3 in the last 12 months (on behalf of clients). My approach is to find any errors before the visit and come clean. This avoids any penalties as long as they are relatively insignificant. Chances are you will find some in your favour (i.e. VAT on mileage which many don't bother claiming).

    I don't recommend that you do it yourself as it adds a lot of weight to have an accountant deal with some questions. I have heard from people that have had enquiries and dealt with them by themselves and I have always thought that an experienced accountant could have ended up with a better result.

    If you have a contentious item like the hotel then get a verdict of why you thought it was a business expense and if the Inspector disagrees then you will have to decide whether you argue the toss or accept.

    Any penalties can be suspended if you can prove that you have taken steps to improve your bookkeeping process (i.e. system or an accountant).

    For what it is worth, the way you have described the hotel so far, it doesn't sound like a business expense to me. If I work on holiday, I do not check myself into a new hotel.

    Best of luck
    Posted: Mar 6, 2018 By: GillespieBS Member since: Apr 11, 2008
  13. Matt-LW

    Matt-LW UKBF Contributor Free Member

    80 1
    In my limited experience ( I had a chap come round with his calculator when I registered 6 or so years ago, and I put in a claim for 4 years of pre-registration VAT ):

    - Make sure your paperwork is in order

    - Make sure you know whats what with your VAT account / and back claimed VAT figures

    - Be polite (& make the tea!)

    - Do your research and Fight your corner if you are right

    Chap (with a nice watch, suit and pen!) went through invoices with his calculator and a pad of paper, made sure things added up. He asked me to show him payments coming into my account for random invoices.

    He told me I had failed to add up my diesel receipts correctly, in there favour (I had been making a deduction for personal use).

    He wasn't aware he was looking at a back claim of 4 years before I register.

    He then tried to tell me I couldn't back claim VAT paid on purchases from the EU(from a company that had to register for UK VAT due to quantity of supply to the UK), because they would be acquisitions, and thus no VAT would have been paid. Duly smiled (he'd got one!! or his bonus or what ever!! ) and totted up what he though he needed to reduce my claim by and would not entertain the idea I could possibly have had to paid VAT on those purchases (I wasn't register then, so how could I, I didn't have a VAT number).

    Qick visit to the storage unit, I had expected a bit of a Q&A point to this item or that item, he in fact just stepped in the door, took one look around and departed (may have been near tea time...).

    This is where knowing your stuff came in; Several phone calls to him trying to explain, then a letter or two to his boss and I believe (s)he then explained it to him in a clearer way than I had manage to.. that if I was not resisted I would have indeed have paid the VAT at source, not had it deducted and that the company in question was registered for UK VAT. Few days later they sent my refund infull.

    That was my experience, some 6 or 7 years ago ymmv

    Posted: Mar 8, 2018 By: Matt-LW Member since: Dec 17, 2012
  14. NEWBY1

    NEWBY1 UKBF Newcomer Free Member

    2 0
    I have received the letter from the vat and have responded to the letter. Some of the invoices were not addressed correctly. I have got the relevant invoices amended. The amended invoices have been emailed to me as were the original invoices. The vat Inspector has said she requires the original invoices. In reality these cannot be provided as even the original emails were emailed, if I send her the emails proving that they have been sent from the company and not amended by me - is that enough. I understand having read the vat 700 guidance they have to ensure the integrity of electronic invoices.
    Posted: Mar 21, 2018 By: NEWBY1 Member since: Mar 6, 2018
  15. Ally Maxwell

    Ally Maxwell UKBF Regular Free Member

    299 86
    I've had two over the space of 20 years.

    They informed me (both times) prior to the visit, what years they were interested in, but that just basically amounted the last five years on both occasions..

    The inspector chose one random quarter from each year and asked to see my VAT spreadsheet for the quarter, then picked a random 'in' and 'out' invoice from each of these quarters and asked to see them. There were a couple of 'In' ones that I didn't have copies of, but was given time to produce them.

    Despite worrying about it , it was actually a very simple and amicable operation.
    Posted: Mar 21, 2018 By: Ally Maxwell Member since: Nov 6, 2015