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Vat Inspection:

Client (Take-away Chip Shop) is due a vat inspection shortly, first one in ten years. Firstly HMRC officer and I have got off on the wrong foot because I have insisted on being present when he interviews my client and I have also taken him to task about contacting my client directly (twice now) illiciting snippets of information.Client's business is very much run above board but I am conscious that this doesn't necessarily mean too much. Can I request that HMRC officer provide a list of questions prior to the visit. If not or if not forthcoming any advice on the likely questions that will be asked would be most appreciated. 


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Perhaps you should state that your client does not want an interruption to his business and that the records will be available at his/her request at your office(s). You might then be able to ask him exactly what records s/he wishes to see so that you can make sure they are available at your office(s). That should narrow the scope a little.

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Inspection not an investigation

Why are you worried - what are you not telling us?

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Worried - Paranoid

No skeletons but, I do have an issue with HMRC bypassing agents which appears to be happening more regularly now. Paranoid because it has recently taken me almost 12 months to sort out a new clients vat assessment arising from an inspection that had it been done by a practitioner would have led to a pi claim.(Five figure assessment was reduced by 85%) HMRC refused to admit errors or unprofessional conduct and were a nightmare to deal with.

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Right to be suspicious


You have a right to be suspicious as all visits of this type are now risk based. You can be pretty certain that HMRC have some information on your client. HMRC are currently undertaking a drive on restaurants and takeaways in various locations in the UK.

They may have already undertaken test purchases and external observations on your client's premises to ascertain the level of sales. HMRC will usually make a test purchase when the establishment first opens for trade and then one as the takeaway is closing to estimate the level of sales.

HMRC will not provide you with a list of questions beforehand but will closely examine your client's methods of recording of orders i.e. number of order pads in use; the payment of wages; the payment of drawings; the payment of cash expenses etc. You should perhaps do a 'dry run' with him prior to the HMRC visit.  HMRC may be aware that your client has another establishment which has not been declared. HMRC may have a money laundering disclosure in their possession. I'm afraid the list of potential HMRC questions is endless. I would prepare for quite a lengthy interview if you are going to attend the meeting.

Malcolm McFarlin

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VAT Inspection

HMR&C have every right to contact traders directly (after all they are the tax payer and technically it is a self assessed tax) and it's their normal practice - who best to ask about a business than the folk running it!! They also like to visit the premises where the business trades from and again it's normal practice for them. To give them grief about something they would normally do would probably only succeed in alienating the visiting officer

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Chip Shop Vat Inspection

In my experience officers are happy to conduct they actual inspection away from the business premises, but will ALWAYS want to visit the premises and meet the proprietor and ask some direct questions before examining the records.

If their is a cash register I have witnessed them take 'readings' from the register which show cumulative transaction figures etc in takeaways, florists and other business types.


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Should come from the client

It is your client who really has the call on this. To what extent does he want you involved in this inspection? Obviously you will be charging a fee for your time, so he may wish to minimise this, especially if risk factors are low.

Having said that, you may wish to advise him that most VAT inspections now are risk based and they may have information on him that has prompted it. In the light if that, he would be well advised to ensure that you are present and tell you anything "he thinks you should know" beforehand.

Any VAT inspecton should be preceded with a planning meeting between the client and his advisor(s) identifying the risk factors, deciding how to deal with them and setting out some basic procedures (eg, not letting the inspector have free rein of the photocopier, identifying any documents copied, making notes of everything discussed, etc).

He could then ask the VAT inspector to copy all correspondence to you in the first instance (or copy it to you himself) and insist you are present at the meeting. I don't think HMRC could argue with that.

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Chip shop VAT inspection

Not sure if it helps, but this brings back memories of my time in audit many years ago.

We had a client based in a town about 15 miles from our office who ran a fish and chip shop. They were assessed by the Inland Revenue (as it was then!) for a significant amount of underpaid tax based on calculations done by inspectors who had gone into the shop and bought fish and chips. They had then weighed them and calculated the theoretical gross profit based on the cost of potatoes and raw fish, as compared with the price charged for the meal. Their theoretical GP was somewhat higher than the declared GP.

To try to discredit their theory, the partner in charge came up with the idea that there would be significant variances in the size and therefore weight of portions. To prove it, he sent a colleague and me, who happened to be working on an audit near the shop, into the shop on 3 occasions to buy a portion of fish and chips. We then had to take them back to our office and weigh them, hoping to prove that the weight would vary significantly.

It was a great idea (which worked enough to reduce the assessment) other than the fact that we had to buy the fish and chips at lunchtime, go back to work at the other client for the afternoon and then drive back to our office. This was in summer, so you can imagine how my car stank after having fish and chips stored in it for 5 hours over a 3 day period!

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To the OP..

Your client is the taxpayer so HMRC will naturally contact him directly if they want to do any sort of inspection.

Its up to your client whether or not to involve you. HMRC aren't bypassing you.

I have a similar client who had a random VAT visit from HMRC. The first we heard about it was a fax from the client of the notes from the meeting taken by HMRC.



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It may be too late but ….

It is entirely normal for HMRC Officers to bypass agents and contact the client direct, which if course they do to elicit (fishing) information they know the agent wouldn’t give them, and in many cases to fabricate both client admissions of supposed irregularities and their culpability.

Quickly; ensure you get notes of the Officers conversations with the client and compare such with client’s version, note irregularities and possible angles used by HMRC. Record all phone conversations. Get the Officer to state, in writing, reason(s) why he didn’t conduct the enquiry through yourself as agent; expect to go to his supervisor for a semi-intelligent answer. Generally plan a case at a Tax Tribunal, even if you think all is in order, as that is what HMRC were doing from the start!!!

In future, advise your clients not to communicate with HMRC except through yourself. At the start of a VAT enquiry ask the Officer if he has any questions for the client which YOU can ask (evidences cooperation). The Officer will invariably say no, or not at that stage, because there is no point in a VAT Officer asking loaded questions to the agent!  Since the Officer doesn’t have any questions there can’t be any reason to speak with Client! (Don’t be too surprised in the VAT Officer claims to have questions for the client, but he can’t remember what they are….they just want to avoid you as agent). Get the business records to your offices, quickly, and let the VAT officer know they are ready for inspection and ask him for an appointment (evidence in writing again) for him to visit (cooperation again). Chase up after a week, evidenced by email/fax again, if the Officer hasn’t booked an appointment.

The Officer will invariably get up to all sorts of mischief, lie, still try to speak with client etc etc. However, keep the Officer away from Client and their premises. Client must be well briefed to say nothing other than “my agent is dealing with it, contact them”.

Seriously consider telling client that you will resign if he communicates directly with HMRC, that if he wishes to communicate with HMRC it has to be through yourself as agent.


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Trevor Scott

Absolute gibberish.

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Please explain...

MuDu wrote:

Absolute gibberish.


.... exactly what you mean. Plain english please. Please also disclose your true identity.

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Paranoid ramblings

Trevor Scott wrote:

MuDu wrote:

Absolute gibberish.


.... exactly what you mean. Plain english please. Please also disclose your true identity.


Not a VAT inspector.

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Am I unusual?

I have never had any problems with VAT Inspections ... and touch wood ... I hope it stays that way!

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If you've never had any problems ...

.... with VAT enquiries and records inspections then I would review your practises. It isn't a case of looking for trouble, just being aware of why HMRC Officers act the way the do and their true reasoning for doing it.....for the benefit of the client.

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3 years

I was approached by a chip shop when they had a visit from VAT. They carried out an economic exercise from information that the previous accountant gave them. They worked out the gross profit to be 73% and the accounts showed 58%. You can imagine the pleasure on there faces. Turnover was almost 700k (ex VAT). The previous accountant did not try to defend the client but tried to negotiate down from 73%. What my client was looking at was financial ruin.

When I got it I went through the economic exercise that they had done. Primary school kids could have done a better job it was very poor. HMRC do have a redundant economic exercise for chip shops you can look at. A line I loved was 'we have been examing accounts for similar businesses in the area and your GP is low'. They do not have to produce the evidence to back this up even when asked.

 After 3 years of argument we reached an agreement last week,no liability case dismissed. Do not give up, do not give in and fight for your client they will try every dirty trick to get something, agree to nothing.

The chances are their is nothing in it to worry about. Do not allow HMRC to talk to your client and tell the client to say nothing, they will tie him in knots which can be hard to unpick.



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Gross margin of 58%

is decent for a F&C shop. A simple try on by HMRC, which was needless and a disproportionate deployment of resources. I come across some in the area of 40% gross margin, little profits yet the owners invariably drive a Merc/BMW. HMRC should be able to pick these us by computer analysis of VAT return figures, the ratio of inputs to outputs being different.

You'd think, considering the Farthings Steak House case, that HMRC would be wary of economic exercises and anything resembling a cash/food business...especially with reasonable gross margins.....but it seems that they never learn.


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Liars and Freeloaders

I had the misfortune to be "investigated" by vatman at the turn of the century. The business was a small dry cleaners with a turnover of about £100k. They sent in 22 different staff from their cash team over a period of two weeks for free dry cleaning as they admitted. One woman spent almost £100.00 on personal cleaning, sheer greed. More than half of them gave a false name when handing in their freebies for processing. I was just recovering from open heart surgery and left the running of the business to staff who I trusted. My accountant and I attended a meeting at their request at their offices, we were on time, they were 20 minutes late. The meeting started at 11-30 and finished at 2 p.m., contrived to pass through lunch time. They assessed an amount of £20.000.00 I asked to go to a tribunal which was in London and they made this difficult knowing my age and state of health by wanting a hearing of one week, not possible for me. i employed an accountant recommended to negotiate and after running up a large bill managed to obtain a reduction to £10.000.00, which was paid over six months. They also removed my papers from my accountant in two canvas bags which were never seen again despite my many requests. My complaints about their behaviour were not heeded, just backed up by their superiors. This was a bad experience and I feel unjustified. I felt they were poor quality staff and were prepared to go to any lengths to get a result.

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Not poor quality...

.... corrupted. They usually think it is a game, and are usually politically if not personally motivated. Their "superiors" are the ones who trained them, so the only purpose in complaining to them is to collect evidence of a whitewash by prejudiced senior officers.

Unless there was evidence of errors, and full disclosure of such by HMRC, also an agenda and list of questions, you yourself shouldn't have met HMRC.

It is cases such as yours that make honest taxpayers start fiddling their taxes. 

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