Prepare Your Cash Business for VAT Inspection

How to Prepare Your Cash Business for VAT Inspection

If there is anything scarier than HMRC, it’s a HMRC VAT Inspection – isn’t that right? Well no, not necessarily; not if you’re well prepared and on top of your finances.

We get it… it’s easy for us to say that because we do it day in, day out and us telling you that everything will be hunky dory as long as your accounts are in full working order probably won’t make a VAT Inspection any less daunting.

This can be particularly true for cash businesses or those in industries such as food and hospitality when there is often much more room for deliberate or genuine error when it comes to VAT reports.

Why do I need a VAT Inspection?

You can be reassured in the knowledge that HMRC don’t just run VAT Inspections willy-nilly. There is almost always a reason as to why you (and your business) have been chosen to go under the magnifying glass.

These include:

  • Under-declaration of sales
  • Anomalous figures that stick out from industry standard like a sore thumb
  • Consistently late or wrong accounts
  • Incorrect VAT treatment of tips, gratuity or service charges
  • VAT returns that don’t tally with the annual accounts submitted

In a nutshell, VAT Inspection is highly risk-based and will typically only be subject to those businesses or business owners who have provoked some form of risk, liability or suspicious activity through purpose or error.

Preparing for a VAT Inspection

What will normally happen is HMRC will get in touch and give you a specific timeframe they wish to see figures for. They will give you an appointment date and then leave you with adequate time to get your affairs in order.

From this moment, you will need to:

  • Present all of the information and necessary paperwork in a clear, concise format such as a spreadsheet. A trained finance professional can help with this.
  • Highlight and justify any mistakes or holes in your VAT files for full disclosure with HMRC.
  • Familiarise yourself with the VAT Inspection process so you know what to expect on the day, as well as before and after your appointment.
  • Prepare rough answers to any questions that you might be asked so you aren’t caught off-guard. Again, an experienced accountant will be able to help with this.
  • Be able to provide a full audit trail of any transactions that have or haven’t been included in your VAT submission. This is also important should you be called upon by HMRC’s Till Officers who will also want to know more about your till systems.
  • Go through your figures two times, three times, four times or however many times it takes to know the figures like the back of your own hand. This way, you will feel more confident when asked to discuss them in great detail.
  • Answer any follow-up questions, provide any additional information and make any necessary payments promptly and within the specified deadline to avoid hefty penalties.

If you’ve got a VAT Inspection on the horizon, or you’d just like some professional help in getting the right numbers in all the right places in case one should arise in the future, get in touch with one of our qualified experts.

Christopher Jones
Forensics graduate-turned copywriter and blogger. I love turning complex topics into easy to understand, yet engaging pieces of content.