Getting Ready for VAT inspection! Couple questions...

escortg3

We had a VAT inspection last year. A very nice lady came to our office. She asked for all our files. She randomly picked out items from ledger then located the receipt or invoice for said item. I Think she did three random checks and all was fine.

She gave us some good pointers. Ie. Paying a fuel surcharge, claiming VAt back for more things we hadnt thought of.

olly300

crazyguy wrote: »

With 10 years worth of trading never once had a vat inspection,

Most of them are random but a few businesses do trigger them off.

nikki1520

martindow wrote: »

Plying them with tea, coffee and biscuits does no harm at all.

indeed!!:T

nikki1520

No, you don't need to raise an invoice, although you can if it's easier for you to remember it that way- just do it as an adjustment when you're working it all out- like fuel scale charges, if you do those?

Horace

If you are not sure about something - ask the inspector, it is better to be upfront about something than let them find it.

I can remember working for a firm that had a VAT inspection 6 months after setting up because they were making so much money. There was something that we weren't sure about - should we have claimed or not because our accountant was vague, we mentioned it to the VAT man - who was understanding and we weren't penalised for it because we had been upfront and he did say that if he had found the discrepancy then the consequences would have been different. We changed our accountant after that too because he gave us duff advice about the item that we weren't sure about. I also learnt at the time not do do double entry book keeping in pencil - I never thought any of it because the accountant had advised that I use pencil, everything then had to be written over in pen (I had to keep manual and computerised ledgers).

bengalknights

seismicryan wrote: »

Bengalnights, do you mean they are basically looking for falsified stuff? I don't do any of that.. if there are any mistakes they would be purely innocent..

Nikki, vat has been paid on the goods that are used for staff use... im just wondering what is the correct proceedure for accounting for goods that are bought in, and used by staff and hence no longer in sellable stock..

Thanks
Ryan

Some of the searches depending on how large a business you are tends to look more towards invoices issued that could be handwritten ie those issued by soletraders to yourself and the rest mainly is ensuring that your expenses and sales are adding up and that the vat element is correct.

The type of business i work in they seem to look more towards the foreign invoices and inter company invoices that we issue.

seismicryan

Thanks for all the responses guys..

I called the VAT office today to get some advise and I think what we are doing is fine, but I will bring it up with the vat man that comes out just to be sure..

I think they will be mostly looking at our importsand exports, according to the letter I got..

Ryan

nikki1520

seismicryan wrote: »

Thanks for all the responses guys..

I called the VAT office today to get some advise and I think what we are doing is fine, but I will bring it up with the vat man that comes out just to be sure..

I think they will be mostly looking at our importsand exports, according to the letter I got..

Ryan

Ryan

Are you sure you're having a VAT inspection, and not an Intrastat or International Trade visit? There is a difference - and it's common for the officer to turn up for one of these and find someone very well prepared for a VAT visit!

seismicryan

nikki1520 wrote: »

Ryan

Are you sure you're having a VAT inspection, and not an Intrastat or International Trade visit? There is a difference - and it's common for the officer to turn up for one of these and find someone very well prepared for a VAT visit!

Nikki, its definitly a VAT check.. got the letter yesterday explaining what they need to see.. in the section "what you need to do before the visit" it says "The officer will verify late submitted returns and to check all the sale and purchases records for the business and in particular imports and exports".

Ryan

JasonLVC

seismicryan wrote: »

... lets imagine a company that sells football boots and the company has a staff team and all staff are given boots to wear when playing football.. again not what we do, but just an example...

The right to reclaim input tax is that the goods are used for a taxable purpose (in English, you can reclaim VAT on what you buy provided those goods are used in selling stuff with VAT on it).

If you take stock and give it freely to your staff to wear/use, then the goods are not being used for a business purpose (as they're not being sold).

This sort of comes under the business gifts rules (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_CL_000873&propertyType=document#P20_1028)

Para 1.1 "Where you have been entitled to claim input tax (on the goods you bought in) and the cost of the item to you is more than £15 or the gift forms part of a series or succession of gifts given to the same person output tax is due normally on its cost value."

In effect you treat it as if you've sold the goods at cost to your employee, you declare the output tax only as a sale on your VAT return.

It'll not be a big issue, the VAT officer is highly unlikely to spot these transactions (becuase they are given freely there'll be no audit trail, but if they are high value items officer may pick up in it and cross reference against stock take to see how many 'freebies' have occured). I'm thinking here like laptops or LCD TV's, etc. HMRC don't generally cross reference against stock levels (too time consuming and for little benefit) so they'll never know you bought in 8 items, sold 2, gave away 1 and have 5 left on the shelf....unless its really obvious to them like (ie, high value goods).

HMRC Officer will start with VAT returns and audit 1-2 returns back to soruce documents. They'll be testing to see that a sale or purchase makes its way onto the VAT return properly, so most inspections are painless and dealt with in a day (but always still a worry to have them sniffing around your books).