Need for VAT Inspection Solicitors
The recent surge in HMRC VAT inspections has left many businesses concerned about compliance and potential penalties. With the UK government intensifying efforts to enforce tax compliance, being prepared has never been more important for businesses.
Our VAT inspection solicitors and experienced accountants possess extensive experience in successfully managing HMRC disputes and VAT investigations.
What are the Common Issues Related to VAT?
At Axis Solicitors, our team of VAT specialists is highly experienced in advising and representing businesses undergoing VAT inspections and investigations. We understand the complexities and pressures involved, and offer confidential, expert guidance tailored to your specific situation.
Common issues we encounter include:
- VAT misdeclarations or underreporting on VAT returns
- Unreported cash transactions (“cash in hand”)
- Businesses facing accusations of inflating purchase or input invoices
- Allegations of fabricating invoices, or falsifying accounting records
Such practices not only affect VAT but often lead to the evasion of corporation or partnership tax, as well as personal income tax liabilities for business owners.
What may begin as a routine VAT inspection can rapidly escalate into a thorough investigation covering all business and personal taxes.
Recent Updates in VAT Inspections
In recent years, large-scale VAT investigations have received significant public attention, particularly in cases involving fraudulent VAT reclaims or refund applications. These are commonly linked to carousel fraud or Missing Trader Intra-Community (MTIC) fraud, where missing or hijacked traders are involved. These cases often lead to lengthy, complex prosecutions, involving extensive documentation and trials, and are frequently classified as Very High-Cost Cases (VHCC).
Additionally, the use of the Extended Verification Process (EVP) by HMRC has increased in cases where fraudulent VAT refund claims are suspected. This process can delay legitimate VAT refund claims, negatively impacting businesses. It is therefore essential that businesses can demonstrate their awareness regarding the legitimacy of their entire supply chain.
If your business is facing a VAT inspection or investigation, contact Axis Solicitors for trusted, professional advice. We are here to support you every step of the way.
How VAT Inspections Work?
The majority of VAT investigations begin as routine VAT inspections. HMRC may initiate an inspection due to suspected discrepancies or irregularities that they believe a targeted inspection will uncover.
More commonly, businesses will face routine VAT inspections as part of standard HMRC practice. The risk arises if there has been any under-declaration of VAT or inflation of input VAT. Even if HMRC does not initially suspect wrongdoing, such issues can be identified during the inspection, leading to further scrutiny and requests for additional records, making it difficult to conceal any inaccuracies.
What is Legal Professional Privilege?
If you are deciding between contacting an accountant or a solicitor regarding a VAT investigation, it’s important to know that information you provide to a solicitor benefits from Legal Professional Privilege (LPP).
It is a protection that ensures confidential communications between lawyers and clients cannot be disclosed, even in court. This privilege covers both written and verbal communications for the purpose of obtaining legal advice, and for cases involving existing or potential litigation.
LPP is a right that applies exclusively to lawyers, not to accountants or tax investigation advisers. However, at Axis Solicitors, we offer the best of both worlds.
Our Legal Expertise for VAT Investigations
While our solicitors handle the legal aspects of your VAT investigation, we also benefit from having expert VAT accountants available to provide specialist knowledge and advice whenever required. This collaboration ensures that both our solicitors and clients receive comprehensive, informed guidance.
- Assessing tax implications and challenging HMRC’s claims;
- Drafting responses to HMRC inquiries;
- Representing you in and managing any meetings with HMRC;
- Making proactive voluntary disclosures to prevent an investigation;
- Developing strategies and negotiating to minimise penalties;
- Preventing HMRC from ‘naming and shaming’ your business;
- Representing you during criminal investigations and formal Caution Interviews;
- Preparing forensic investigation reports and written defences against prosecution;
- Handling Formal Review requests and Appeals to the Tribunal;
- Managing all HMRC communications on your behalf;
- Applying Legal Professional Privilege and ensuring solicitor-client confidentiality as your protection.
At Axis Solicitors, our integrated approach, combining legal and accounting expertise, ensures that you receive the highest level of support during your VAT investigation, protecting your rights and safeguarding your business.
Penalties Resulting from VAT Inspections
If you or your business is found to have breached VAT regulations, you could face prosecution for:
- VAT, invoice, and payment fraud
- Tax fraud
- Excise or diversion fraud
- Violations of customs law
- Cheating the public revenue
Penalties resulting from VAT inspections can be extremely severe.
Additionally, the reputation and future of your company, as well as the security of your employees, may be jeopardised if the outcome of an investigation is unfavourable. Therefore, it is crucial to seek advice from experienced VAT inspection solicitors as early as possible to protect your interests and mitigate risks.
HMRC VAT Investigations
VAT is a major revenue stream for the UK government, and as a result, HMRC is vigilant in ensuring businesses meet their VAT obligations. Each year, HMRC conducts hundreds of thousands of VAT investigations to verify that taxpayers are paying and reclaiming the correct amounts of VAT.
If you have received notification from HMRC regarding a VAT investigation into your business, our experienced team of HMRC solicitors is ready to assist. As recognised specialists in VAT and HMRC-related legal matters, we will guide and support you throughout the investigation process. Our goal is to ensure that you meet your legal responsibilities while also ensuring HMRC officers do not overstep their authority.
HMRC VAT Investigations
VAT is a major revenue stream for the UK government, and as a result, HMRC is vigilant in ensuring businesses meet their VAT obligations. Each year, HMRC conducts hundreds of thousands of VAT investigations to verify that taxpayers are paying and reclaiming the correct amounts of VAT.
If you have received notification from HMRC regarding a VAT investigation into your business, our experienced team of HMRC solicitors is ready to assist. As recognised specialists in VAT and HMRC-related legal matters, we will guide and support you throughout the investigation process. Our goal is to ensure that you meet your legal responsibilities while also ensuring HMRC officers do not overstep their authority.
How We Can Assist You?
Should the investigation reveal issues with your VAT accounting, or if you suspect there may be discrepancies, we will provide expert advice on how to address these problems and work towards securing the most favourable outcome and minimal penalties.
Documents Required During VAT Inspection
When meeting with the VAT inspectors, be sure to have the following readily available:
- Your company’s VAT certificate
- Your company’s registration certificate
- Annual accounts
- Records of all VAT paid and claimed throughout the tax year
- Detailed accounts, including petty cash and sales registers
- Invoices for both sales and purchases
- Company bank statements
- Any other supporting documentation relevant to the inspection
If the HMRC officer wishes to take original documents, make sure you obtain a detailed receipt of everything they remove from the premises.
Types of VAT Inspections Recognised in UK Law
Desk Audits (Off-Site Reviews)
- Conducted remotely based on VAT returns and submitted supporting documents.
- Focus on accuracy, consistency, and high-risk VAT positions.
- May escalate if discrepancies are identified.
Field Audits (On-Site Inspections)
- Carried out at the taxpayer’s premises to review records and operations.
- Verify transactions, systems, and actual business activities.
- Typically cover broader periods and issues.
Refund Audits
- Initiated to verify the validity of VAT refund claims.
- Examine supporting invoices and eligibility for recovery.
- Often delay refunds until completion.
Thematic or Sector-Specific Inspections
- Target specific industries or transaction types.=
- Address identified systemic VAT risks.
- Apply consistent criteria across selected taxpayers.
VAT Investigations
- Triggered by suspected fraud or serious non-compliance.
- Use enhanced legal and information-gathering powers.
- May lead to penalties or prosecution.
What to Expect in VAT Inspection Visits?
Attendance and Presence
- Usually, one HMRC officer attends, but large or complex businesses may have two.
- The business owner must be present and available for questions.
- Staff responsible for accounts should also be available to assist.
Access to Documents
- HMRC officers can take copies of any documents needed for review.
- Previously inspected documents can be retrieved without additional approval.
- New documents must be provided as originals or copies upon request
Handling of Original Documents
- If originals are taken, always obtain a detailed receipt of items removed.
- Keep a record of what has been handed over to prevent disputes.
- Originals are usually required only for first-time inspection of specific documents.
Rights and Guidance
- You have the right to question the officer’s actions during the inspection.
- Legal advice from a solicitor can be sought if any concerns arise.
- Cooperation is expected, but safeguards exist to protect your rights.
Conduct During the Visit
- You don’t need to stay with officers for the entire inspection.
- Ensure officers can easily ask questions when needed.
- Maintain professionalism and provide clear access to requested documents.
