HMRC Compliance Checks include any area in which a taxpayer may be non-compliant, including VAT. VAT may actually be one of the most rigorously monitored of all our tax areas because, as a consumption tax (essentially, a sales tax) this is the government’s money in the first place, and businesses merely unofficial tax-collectors.

A secondary reason is that VAT is an incredibly important tax for the government purse, third to only income tax and National Insurance in terms of how much it generates.

What triggers a VAT Compliance Check?

These days the triggers for non-compliance are usually from HMRC’s super computer ‘Connect.’ This system has access to an almost unparalleled breadth of material which it scans for irregularities. Where it discovers an inconsistency, for example, a small business which suddenly makes a very large claim for VAT, it will then flag it for further investigation. These investigations are known as ‘Compliance Checks’ and range from a detailed examination of returns and accounts, to onsite visits by HMRC officers.

The Compliance Handbook

One of the best ways of really understanding HMRC’s approach to enforcing tax compliance is to read their ‘Compliance Handbook’, a document originally meant for their own staff but which is comprehensive in its explanation of their processes and legislation.

What are the Penalties for VAT (Section CH90000)

Section CH90000 covers technical guidance on HMRC’s penalties for VAT. This stipulates the areas where HM and Revenue would consider VAT penalties. They are where a person:

  • makes an unauthorised issue of an invoice showing or including VAT
  • misuses a product so that a higher rate of excise duty is payable, or
  • handles goods subject to unpaid excise duty.

They go on to state that penalties will not be charged where it can be proven that a person has either a reasonable excuse or if the excuse has ended, has remedied the situation ‘without unreasonable delay.’

Worried about a Compliance Visit?

If you are worried about an upcoming compliance visit or have substantial tax arrears we can advise and usually help with an HMRC settlement. Call 08000 746 757 for immediate help.