VAT Reviews and Healthchecks

Avoid costly penalties and ensure compliance with our expert VAT analysis and support.

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Is Your Business Paying Too Much VAT?

Our team of ex-VAT inspectors and Big 4 consultants is well placed to carry out VAT Healthchecks, which allow us to identify opportunities where your business is paying too much VAT or to identify risks where your business has made errors, allowing you to correct issues as required whilst mitigating HMRC penalties.

As every business is different, our Healthchecks will be bespoke to your business's issues and add value.

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Need assistance with VAT Reviews and Healthchecks enquiry?
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What’s Included in Our VAT Healthcheck?

  • A review of the liability of your supplies and income streams to ensure that you are paying the right amount of VAT to HMRC
  • Highlighting areas of opportunity and risk, we often save businesses VAT as a result of our Healthchecks
  • Reviewing your VAT recovery procedures and processes, ensuring you are making use of relevant reliefs
  • Reviewing the treatment of one-off and large transactions, such as property transactions and deal fees
  • Determining which accounting scheme is best suited to your business (such as the flat rate scheme, cash accounting, annual accounting, etc)
  • Reviewing your accounting systems to ensure they are compliant with Making Tax Digital
  • Reviewing the implementation of specific VAT rules to your business, for example, partial exemption calculations, evidence of export for zero-rating, capital goods scheme calculations, VAT clawback and payback, retail schemes, margin schemes, etc
  • Reviewing business systems from a cashflow perspective, ensuring your business is set up efficiently, and making use of any relevant reliefs
Strategic VAT Insight

We analyze your VAT systems to uncover risks, inefficiencies, and overlooked reliefs, ensuring your business is structured for compliance and savings.

Error Detection and Documentation

Should an investigation arise, we represent your interests, manage all HMRC communication, and work to minimize disruption and penalties.

HMRC Liaison and  Protection

We manage all communication with HMRC, representing your interests and aiming to resolve issues efficiently while minimising penalties.

Frequently Asked Questions

What is a VAT Investigation?
A VAT investigation is an enquiry by HMRC to ensure that a business is correctly collecting, reporting, and paying VAT. If irregularities are identified, HMRC will work with taxpayers and/or their advisers to quantify the correct VAT position and consider whether any financial penalties would be appropriate.
 

A VAT inspection involves HMRC reaching out to or visiting the business to examine VAT records and address any questions that arise from their review. Typically, HMRC will notify businesses of a planned visit in advance. However, they also conduct unannounced visits when they suspect fraudulent activity, using the element of surprise to their advantage.

There are several factors that could trigger a VAT investigation:
  • ​Your business has a record of late VAT payments, non-payments, or repeated errors in VAT returns.

  • Your business is within a sector that is considered more prone to VAT irregularities, such as hospitality, construction companies, and hair/beauty salons.

  • There is a sudden spike in your VAT claims or make a large claim after periods without any previously, which can raise suspicions.

  • HMRC compares submitted VAT returns against industry averages, which shows your business’s VAT figures significantly differ from the expected benchmarks.

  • HMRC conducts a random VAT compliance check to ensure general adherence to tax regulations.

If HMRC finds significant errors during an initial VAT inspection, it may escalate the process into a full investigation. In such cases, HMRC could broaden the scope to include other taxes beyond VAT, such as income tax or corporation tax, if there are concerns about overall tax compliance.​

The outcome of a VAT investigation can vary depending on what HMRC discovers during their review. If everything is in order, HMRC may conclude the investigation without any further action. This means that your VAT returns and records are deemed accurate and compliant with regulations.

In some cases, HMRC may reassess the amount of VAT you owe. If they find errors or discrepancies in your records, they could adjust your VAT liability accordingly. This reassessment could lead to additional VAT payments or corrections to previous submissions.

Penalties and fines are another possible outcome if HMRC identifies errors, particularly those deemed to be deliberate or negligent. In more severe cases, particularly if HMRC suspects VAT fraud, there is the potential for prosecution. This could lead to criminal charges and significant legal consequences if HMRC believes there has been deliberate wrongdoing.

When HMRC identifies irregularities during a VAT investigation, they may impose financial penalties. The amount of the penalty depends on several factors, including whether the irregularity was intentional or accidental.

Penalties are calculated as a percentage of the tax understatement. The level of the penalty can vary based on whether the business voluntarily disclosed the issue before HMRC contacted them, and the degree of cooperation provided during the investigation.

Historically, failing to submit VAT returns or pay VAT on time, even if the amounts were correct, resulted in default surcharges. These surcharges were imposed after the first instance of lateness and increased in proportion to the VAT outstanding and the number of defaults.

However, since January 1, 2023, the penalty regime has shifted to a new points-based system. This new system replaces the previous default surcharge regime and introduces different criteria for calculating and imposing penalties.

If you choose to seek specialist advice from Nexus VAT’s Tax Dispute Experts, we will help you:

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  • Handle the VAT Investigation: Manage the entire HMRC process to resolve the matter as quickly as possible, minimising disruption to your business.

  • Review Your VAT Affairs: Conduct a comprehensive review of your VAT records to identify any issues, giving you an initial assessment of potential exposure.

  • Make Disclosures and Representations: Where necessary, communicate with HMRC to prevent unnecessary tax, interest, or penalties.

  • Negotiate Payment Arrangements: If required, arrange a manageable payment plan based on your business’s needs and circumstances.