VAT Investigation

Value Added Tax, commonly referred to as VAT, is a tax applied to the purchase of most goods and services in the UK. Businesses must register for VAT if their turnover exceeds the VAT threshold which currently stands at £85,000 a year. VAT is a consumption tax, meaning that it is not a tax on businesses involved in the supply chain but is ultimately paid by the consumer. However, businesses still need to account to HMRC for the VAT they have charged to their customers. HMRC can carry out a VAT investigation on a business to ascertain that it has paid the correct amount of tax.

If you are facing a VAT investigation, we are here to help. Our specialist HMRC team has vast experience in providing VAT investigation advice to businesses of all sizes.

If you would like to have a free confidential discussion with a member of our team, please either make a Free Request For Call Back or call us directly on 01908 414990 and we will be pleased to help you.

What is a VAT Investigation?

HMRC instigates a VAT investigation to confirm that a business is paying the correct amount of VAT. It can also carry out a VAT repayment investigation to check that the business is not reclaiming more VAT than it is entitled to. These preliminary investigations are known as ‘compliance checks’.

When will HMRC carry out a VAT Investigation?

HMRC conducts thousands of VAT investigations every year. Businesses are selected on the basis of risk assessments, and the factors that might give rise to an investigation include the following:

The business operates in a high-risk sector.
The business has a history of non-payment or late payment of VAT.
HMRC has noticed a significant increase in the amount of VAT claims made by the business, or the business has started to make VAT claims when it previously has not.
HMRC has received a ‘tip-off’ regarding the business’s VAT activities.
The business’s VAT claims are at odds with others operating in the same industry.

What happens during a VAT Investigation?

Most VAT investigations involve HMRC officers attending the business premises. HMRC will usually give written notice of its intention to undertake an investigation. The letter will advise the business of the records and documentation the officers would like to review and how long the visit is likely to take, which can be anything from several hours to several days. During their visit, the HMRC officers will ask questions arising from the information contained in the business’s records.

Sometimes, the circumstances of a case are such that HMRC will attend a business’s premises to carry out an investigation without giving advance notice of their visit.

What are the possible outcomes of a VAT Investigation?

The outcome of a VAT investigation depends entirely on the officers’ findings. The range of potential outcomes is extremely broad and includes the following:

If no mistakes or concerns come to light, the investigation will be concluded.
The officers may request additional information to enable them to clarify specific issues that have arisen.
HMRC may make suggestions regarding how the business might improve its VAT record keeping.
If an error is identified, how HMRC deals with it will depend on the nature and extent of the error and whether the officers believe it to be innocent, negligent or deliberate.

For small, innocent mistakes, the business might have to simply adjust a subsequent VAT return to take account of the previous underpayment.

More serious errors might result in a fine and a thorough investigation into all of the tax affairs of the business. If further investigation uncovers serious VAT fraud, the penalties can be severe and include a prison term of up to 7 years.

Can a business appeal the outcome of a VAT Investigation?

Yes, a business can appeal the outcome of a VAT investigation. However, it must do so within 30 days, so timely action is crucial.

How we can help if you are facing a VAT Investigation

Our specialist solicitors and barristers have decades of experience assisting clients facing HMRC investigations of any nature, including giving VAT investigation advice. We can act as your nominated agent and liaise with HMRC on your behalf in respect of the investigation, corresponding with HMRC, attending meetings and, where necessary, appealing the officers’ findings. We are skilled negotiators, and if the officers identify an anomaly, we will use our expertise to secure the most lenient penalty possible. We understand the stress any HMRC investigation can place on a business and aim to give clear, commercially focused advice to enable you to gain a swift, comprehensive appreciation of your position and the options available. We will work closely with your accountant and any other professional advisors to expertly guide you through the process and ensure your interests are fully protected.