There are a lot of reasons why you might be subject to a VAT inspection. If your business is having a VAT inspection, there are a number of things you can do to make this process easier for you.
One of the best ways is to stay on top of the current VAT rates on VATIT and follow the tips below.
Get The VAT Inspection On Your Terms
You do not want to have your VAT inspection during the busiest week of your month or year. Luckily, it is possible to contact Her Majesty's Revenue and Customs (HMRC) and request a delay so you can get all of your business records together.
If you are working with accountants or lawyers on this, they can request the inspection happens at their office instead of yours. This way you can keep your business going and keep anyone from worrying unnecessarily.
A lot of business owners have found that VAT inspectors are willing to work with them when it comes to the place and time of the inspection.
Be Well Prepared
It should go without saying that you need to be well prepared before the VAT inspector arrives. Make sure you have all of the required documents and that nothing is missing.
Not preparing can lead to delays which can become expensive in terms of time. You do not want to keep scheduling these appointments over and over again wasting your precious business hours.
PLUS if the VAT inspector sees that you have meticulous records, they are generally going to be less suspicious of your record keeping. Good records will also take less time for the inspector to review.
Be Honest And Upfront At The Start
There are times when mistakes happen. This is normal with any business. It is possible that you claimed VAT on a service or product where the client was not actually charged any VAT for some reason.
If you discover an error, disclose it to the VAT inspector. Doing this will get the issue out of the way and get some pressure off your shoulders.
Plus if the VAT inspector finds the problem and learns that you knew about it, they are generally going to consider it worse than it might be. There are times where people have been open about issues they found and the VAT inspector has agreed to suspend penalties because of the honesty. Deliberately withholding information will result in a harsher penalty for your business.
Have Insurance That Covers The Inspection
VAT inspections take a lot of time to prepare for, attend, and follow up on. If you have an accountant doing this for you, it is likely there will be expenses you are not aware of plus any penalties you incur.
Check with your accountant and see if they offer VAT or tax inspection insurance. This will help you cover any additional costs and probably even get you your own investigation specialist to help out.
Get The Right Systems
Having the right accounting systems is important if you want your inspection to run smoothly. There are a number of programs that you can use including Xero.
When you have the right system, all of your sales invoices, VAT records, customer information, purchase invoices, and bank details will be available at the touch of a button. If you use a system like Receipt Bank you will have all your purchase invoices available in the archive as well.
This will put you in a much better position when it comes to your inspection. You will be able to get your records and information with ease and provide them to the VAT inspector quickly. This will save both of you a lot of time.
Follow Up Quickly
If you have to get any follow up information for the VAT inspector, get it ASAP. You do not want the inspection to drag on because this could lead to more penalties.
Implement Any Suggestions
If the VAT inspector makes any suggestions, implement them. In most cases, the inspector will just identify some issues that require improvement but won't result in a penalty.
You do not want a follow-up inspection to happen and them to find the same mistake. This will not only be an embarrassment, but it can also result in penalties that could have been avoided.