HMRC Inspections & VAT Disputes

Our experienced VAT disputes team is here to help you navigate the complexities of the VAT investigation process and minimise any potential penalties.

Contact Our Experts

Are you under VAT investigation?

HMRC VAT inspections can be highly disruptive for businesses, particularly when they lead to assessments for underpaid VAT and the potential imposition of financial penalties. These situations can have significant operational and financial consequences. The team of VAT specialists at Nexus VAT provides expert advice and support to businesses facing HMRC assessments, helping you navigate this complex and often stressful process with confidence.

How we can help you with HMRC Disputes

Disputes with HMRC over VAT can lead to serious financial, legal, and reputational consequences for businesses and individuals. These may involve disagreements over VAT liability, input tax recovery, or goods and services classification — all requiring in-depth knowledge of the UK VAT system.

Given its complexity, mistakes or misinterpretations can result in unexpected assessments, penalties, and even personal liability. Poorly managed disputes may escalate into costly litigation and disrupt cash flow and business continuity.

That’s why expert advice is essential.

Contact Us

Need assistance with an HMRC enquiry?
Contact us today to speak with our Tax Dispute Experts and protect your interests.

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Our Approach

Our team of seasoned VAT consultants — including former HMRC inspectors and Big 4 professionals — bring deep insight into HMRC’s systems, processes, and enforcement powers. We work closely with clients to:

  • Clarify the nature of the dispute

  • Evaluate all options available

  • Communicate and negotiate effectively with HMRC

  • Ensure timely, fair, and cost-efficient resolutions

  • Represent you in a tribunal or litigation, if required

Expert Guidance and Advice

We offer clear, practical advice tailored to your situation, helping you understand and navigate the VAT investigation process effectively.

Thorough Record Review

We thoroughly examine your VAT records to identify and correct potential issues before HMRC does, ensuring your documentation is accurate.

Representation and Negotiation

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.