Dealing with a visit from the VAT inspector: Top 10 tips for rural businesses

14 Feb 2018


Barring the unannounced dawn raid and the unexpected early morning knock on the front door, for which no planning is possible, there are a number of steps that can be taken to ease a planned visit from the VAT inspector.

Here are 10 important pieces of advice which you should heed:

1. Plan ahead

HM Revenue & Customs (HMRC) usually advise of their intention for an inspector’s visit by way of a letter prepared on a standard HMRC template. Firstly, ensure the date suits you, and also that you have enough time to prepare for the inspection. Generally, the initial letter advising a visit sets out the VAT points to be reviewed and a suggested date of the visit. Where you are given contact details of the inspecting officer, it may be worth contacting them to find out precisely what they are looking for, as this will help you to prepare.

2. Make a good first impression

Have your VAT and other tax files and accounts properly organised. First impressions matter and you need to present the appearance that you are in control. Lost, torn and dog eared paperwork will do you no favours.

3. Know your business inside out

At the start of the visit explain exactly what your business does. Understanding exactly what you do will assist the VAT inspector in determining whether there are particular aspects of your activities they should look at.

4. Dealing with questions

Where you don’t have an answer to a question, say that you will find out the answer and respond as soon as possible. This will give you the opportunity to speak to your professional adviser to discuss the issue.

5. Have your papers in order

Have copies of VAT invoices that you have received available and in order. This is vital for large expenditure items. Where you don’t have a VAT invoice you will need one, so ask the relevant supplier to issue you with one prior to the inspection.

6. Understanding treatment of vehicles

VAT inspectors are hot on the treatment of cars and other vehicles. Normally, VAT incurred on the purchase of cars is not recoverable, although VAT on lease charges is 50% recoverable even if there is private use. Where you are unsure, or have several different types of vehicles – cars, vans, lorries, pick-ups – it may be best to check with your adviser.

7. Avoid VAT hot potatoes!

There are other areas where VAT is reclaimed and shouldn’t be, such as non-business expenses and business entertaining – another VAT hot potato!

8. Explain your calculations

If you are partially exempt, you may be required to show clear and concise workings as to how your VAT has been calculated. Have you completed the annual partial exemption adjustment for the last VAT year? Again, professional advice might be a good idea.

9. Create separate lists for property

If your business sells or rents property then have a separate list of properties and the VAT treatments of them; likewise with options to tax on assets including properties and land.

10. Managing an inspector’s suspicion

Where the inspecting officer indicates that something potentially remiss has been found, you should ask for full details and take note of the invoices and other paperwork to which their uncertainty relates. They may, of course, not be correct – but for you to brief your professional adviser you should know exactly over what aspect suspicion has been aroused.

The above tips will help to aid and speed up your inspection. However, above all else, the number one rule is to be welcoming and friendly. You may prefer not to have to undergo a VAT inspection, but the more co-operation you provide then the sooner the process is likely to be over and this is, of course, of benefit to both parties.