Allstar can help reduce the risks of a VAT inspection

19 October


It’s the nightmare scenario for any business: a call from the VAT office to announce ‘you’re under investigation’.

The inconvenience, extra work, worry and sheer cost of an official probe into your VAT records is a major fear for companies of all sizes. Accountancy fees alone can top £5,000.

The scrutiny often exposes tiny failings or mistakes. VAT expert Paul Taylor of Taylor Cocks Accountants explains: “On conclusion of their investigation, HMRC will issue you with an assessment of the VAT understated or over-claimed, together with a proportionate penalty.

“The penalty rates for an inaccurate VAT Return depend on why you made the error. The more serious the reason, the greater the penalty can be.” You can even be charged interest on missed payments going back years.

Many businesses pay sizeable insurance premiums to cover them against the accountancy cost of a VAT investigation. This doesn’t cover against any VAT charges or fines. But there are some simple measures you can take to minimise the risk of being a victim of a VAT check.

According to one former tax inspector- turned tax consultant, around 7% of inspections occur at random — "so that nobody feels safe". The vast majority, however, he says, happen when HMRC believes there's something wrong.

You can't rely on your accountant, he says. "Business owners, sole traders and the self-employed make the decisions about how to keep their accounts. An accountant can only do as good a job as the records they are presented with."

His advice? “Businesses that keep good records and declare everything should have nothing to fear.”

VAT experts like these have three tips to avoiding inspections. They are designed to minimise the chance that something appears to be wrong to HMRC officials.

* Firstly, simply ensure your VAT returns are always submitted on time.

* Secondly, avoid major changes from one year to the next that will ring alarm bells.

* And finally, make sure your records are accurate and complete. And THAT is where Allstar can help.

If your fleet use Allstar cards you will have clear records of all fuel purchases. Our simple invoices clearly show the VAT paid. These bills are approved by HMRC and offer a much more accurate and reliable way of accounting for your company’s fuel purchases than a bag of individual receipts.

Share this article