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Can accountants delay VAT inspection visits?

An accountant would prefer to have a VAT inspection delayed by three months due to their busy workload. Is it possible to put off HMRC to a much later date? Neil Warren finds out.

19th Nov 2019
Independent VAT Consultant
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Accountants are always busy in the run-up to the self assessment deadline, and this includes the pre-Christmas period. If an HMRC officer makes contact with an accountant in late October and asks to review a client’s VAT records for the last four years, is it reasonable to ask the officer to delay their visit until after 31 January?

In a particular case I was asked about, the VAT records are completed and kept by the accountant, so the HMRC officer needs to attend the accountant’s office.

Date agreed

The HMRC officer refused to delay her visit until February 2020 but did agree to wait until December, as long as the visit was carried out before Christmas. I think this was very fair and she has now agreed on a date with the accountant in early December.

Don’t forget that if HMRC finds errors on a VAT visit where careless behaviour is involved and tax has been underpaid, a potential penalty is reduced according to the level of co-operation and assistance given to the officer. A timely inspection rather than lengthy delay will probably earn a lot of brownie points on this issue.

The law

How much legislative power does HMRC have to insist on a prompt visit? Could the HMRC officer insist on coming next week, or even tomorrow? What records can HMRC check when the officer attends?

The legislation governing HMRC’s powers is contained in FA 2008, Sch 36 and here is my interpretation on the three important issues of ‘where’, ‘when’ and ‘what’.

Where

The law gives HMRC officers the power to attend and inspect business premises, as well as check records relevant to tax returns submitted by the business. HMRC’s policy note CH25140 helpfully confirms the meaning of ‘inspect’: “inspect means that you may look at what you can see but you may not look for something you cannot see.” 

What

The HMRC officer can check specified records, ie those documents that allow the submitted VAT returns to be properly reviewed. There has always been a bit of controversy about what supplementary records can be checked, eg management accounts. As VAT is a tax on the supply of goods and services, it is normally easy for officers to justify seeing most available documents to check that output and input tax figures are both correct.

When

It is expected that HMRC officers and taxpayers will be able to agree on a mutually convenient date and time for records to be checked.

Business owners should be aware that FA 2008, Sch 36, para 10(1) gives an HMRC officer the right to ‘enter a person’s business premises and inspect … the premises, business assets that are on the premises, and business documents that are on the premises if the inspection is reasonably required for the purpose of checking that person’s tax position.’

This power is not relevant if a property is used solely as a dwelling (FA 2008, Sch 36, para 10(2)).

Interviewing staff

I was also asked whether HMRC has the power to interview staff employed by a business ie, not a director or senior manager. For example, would it be reasonable for an officer to question the till operator at a bakery about how she decides which sales are zero-rated (cold takeaway food etc) and how she cashes up at the end of the day?

The answer here I feel would be ‘yes’ because the employee’s role is relevant to the accounts and VAT returns of the business. But there would be no right (or need) for an HMRC officer to speak to the office cleaner.

Conclusion

The final word goes to HMRC with a direct quote from its guidance on compliance checks: “HMRC believes that most of their customers are honest and aim to treat them all with respect.”

Replies (7)

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By Vallery Lee
20th Nov 2019 12:22

I have frequently asked VAT inspectors fora change of date - usually only about a week - and always found them to be co-operative. Clearly they have scope and authority, but I think the magic word is "reasonable " (whatever that means).

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By Ian McTernan CTA
20th Nov 2019 13:01

Never had an issue changing a date by a few weeks when it's a particularly busy time of year- for instance, any attempt at an appointment in January is always pushed into February.

Trying to delay by more than a few weeks will send the wrong signals! It will firm up any preconceptions the officer has that there is something to be found.

However, it's interesting that they want the last 4 years records to inspect at the first meeting so you might want to take a closer look yourself before the VAT people arrive and tell you what they already suspect. You can also explain that 1-3 years of the records have been archived and will take a little time to recover from storage.

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By sammerchant
20th Nov 2019 13:21

I had an instance where HMRC conducted an entire VAT inspection of a property company's VAT (with residential and commercial properties, so partial exemption was involved) by email. I had devised an Excel spreadsheet, and they were happy with that. Needles to say, the client was also pleased.

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By leon0001
20th Nov 2019 15:31

I once turned up to attend an audit client company's VAT inspection to discover that the principal director, who did all of the bookkeeping, had died suddenly the previous night.
Two VAT officers were waiting and I explained that although my firm extracted information from the books (yes, books in those days) nobody now present was involved in the day to day bookkeeping. I also said that we had not seen the books since the last year end.

They would not accept my suggestion to rearrange a visit at a future date.

They then proceeded with their visit. The other staff, already visibly upset, some in tears, were not helped by the fact that the senior VAT person had settled comfortably into the dead man's chair and desk and was asking for a cup of tea.

Unsurprisingly, practically every question they asked about the detailed nature of the business and supporting evidence or nature of specific transactions was honestly answered "I don't know. Please leave me a written list of queries and someone will get back to you - but we don't yet know who or when".

At the time I was shocked. Now I know better.

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By johnjenkins
20th Nov 2019 15:37

You must never forget that Customs and excise have the power to visit instantaneously and shut you down. So power wise they have the upper hand.
Now in practice I have found they will always agree to a delay. Don't forget they are picking dates to suite themselves at first.
The problem comes when you can't agree. If it is a genuine case and it would cause cost etc. then you could appeal to the inspectors boss, stating the facts. However the bottom line is that HMRC have the final say.

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By darkmatter
20th Nov 2019 21:42

I think the vatman who asked for tea, with that attitude, would be well parched if he visits me

As a point of advice - always send the vat records with full working papers back to the client asap, so n0 reason hmrc can waste your time and they will have no basis in law for visiting & inconveniencing you.

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By djbrown
06th Dec 2019 17:01

I would add that, whilst a VAT man can ask questions, the taxpayer is under no obligation to answer them immediately.

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