VATcompliance check
Discussion
I'm currently three months into one of these with the taxman. In context, I run a one man band Ltd company, 20 years trading this year. It's suffered a covid/brexit related downturn in the past couple of years like many others. I run it straight as possible, file vat on time, pay alll taxes etc. really nothing to hide, no swerves, didn't take any BBL or anything else during the Covid lockdowns which were actually a strong trading period.
I'm at a loss as to why I've been targeted, the turnover is relatively small, varies between 150-350k most years & generates net profits in the 20-30% range. In short, an unremarkable business. The only thing I can think of is some difficulty in switching over to MTD vat returns a couple of years ago which resulted in a failed VAT submission & a couple fo calls to HMRC to resolve matters.
Also, we were targeted before in 2018 which resulted in a visit to the offices by the taxman & effectively no action except a reminder to keep on top of our processes. I subsequently discovered that particular HMRC employee lived locally & was systematically arranging inspections of businesses on our industrial estate at 9am on Fridays in order to grab a long weekend (there were complaints & it was admitted).
Bit of a ramble but I guess the question is am I an outlier in this or is it a ramping up of inspections by HMRC? It's dragging on into four motnhs now & quite stresffull. I know I have nothing to hide, outside of errors I may have made but last week, they demanded a further 60 odd documents ranging from invoices to accounts & bank statements, so clearly they think there's something there & ultimately it's a no win game from my perspective.
I'm at a loss as to why I've been targeted, the turnover is relatively small, varies between 150-350k most years & generates net profits in the 20-30% range. In short, an unremarkable business. The only thing I can think of is some difficulty in switching over to MTD vat returns a couple of years ago which resulted in a failed VAT submission & a couple fo calls to HMRC to resolve matters.
Also, we were targeted before in 2018 which resulted in a visit to the offices by the taxman & effectively no action except a reminder to keep on top of our processes. I subsequently discovered that particular HMRC employee lived locally & was systematically arranging inspections of businesses on our industrial estate at 9am on Fridays in order to grab a long weekend (there were complaints & it was admitted).
Bit of a ramble but I guess the question is am I an outlier in this or is it a ramping up of inspections by HMRC? It's dragging on into four motnhs now & quite stresffull. I know I have nothing to hide, outside of errors I may have made but last week, they demanded a further 60 odd documents ranging from invoices to accounts & bank statements, so clearly they think there's something there & ultimately it's a no win game from my perspective.
Gone are the days of 'random VAT checks' because HMRC simply don't have the resources for this nowadays, and that's even before huge numbers of staff were dragged away from their usual jobs to prop up the Covid support schemes or deal with the enormous backlog of letters.
Do you usually claim VAT refunds every quarter? I work for a sizeable financial services company in the accountancy arm and the only VAT checks we've had are for clients who have been claiming refunds for a lot of periods or an unusually high refund in one quarter, which can usually be explained by the client buying an expensive asset or vehicle / piece of machinery etc. The VAT checks are often intensive but it sounds like yours might be nearing the end. They just like to cross all the t's and dot the i's.
Do you usually claim VAT refunds every quarter? I work for a sizeable financial services company in the accountancy arm and the only VAT checks we've had are for clients who have been claiming refunds for a lot of periods or an unusually high refund in one quarter, which can usually be explained by the client buying an expensive asset or vehicle / piece of machinery etc. The VAT checks are often intensive but it sounds like yours might be nearing the end. They just like to cross all the t's and dot the i's.
One refund a year ago related to a capex purchase in the neighbourhood of £800. Far as I can remember, that's the only one in 20 years. You think that may have flagged up my company?
Should add I ran all this past the accountant who reckoned I'm straight enough to have nothing to worry about. OTOH it's not his bank account on offer.
Should add I ran all this past the accountant who reckoned I'm straight enough to have nothing to worry about. OTOH it's not his bank account on offer.
They have algorithms (wasn't me!) looking for unusual patterns etc, and for firms in certain businesses where it's easier to scam the VAT. You will have been given a risk profile. I remember a few years ago watching on the News, one of my clients being raided by HMRC using a helicopter etc. He was in the alcohol import/export business (running the VAT carousel scams).
There's nothing you can do about it except to be as polite and compliant as possible. If they continue finding nothing, that should improve your risk profile and be less of a target.
There's nothing you can do about it except to be as polite and compliant as possible. If they continue finding nothing, that should improve your risk profile and be less of a target.
Al Gorithum said:
There's nothing you can do about it except to be as polite and compliant as possible. If they continue finding nothing, that should improve your risk profile and be less of a target.
I think those are wise words. There is a part of me that wants to tell them to poke it but Ithere's no any benefit in picking a fight with HMRC. The last chunk of documents they demanded clearly indicates they're looking to follow individual transactions through my bank & onto subsequent VAT returns. They won't find anything there but no point in me telling them that. I guess I just have to let the thing play out.Gassing Station | Business | Top of Page | What's New | My Stuff