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VAT Compliance Check
A VAT compliance check is an HMRC review of your VAT records and returns. It usually begins with a notice to inspect, giving HMRC access to your VAT invoices, bank statements and electronic records. The aim is to ensure you’ve charged, collected and reclaimed VAT correctly and met Making Tax Digital requirements.
HMRC may focus on high-risk areas such as zero-rated supplies, partial exemption calculations or irregular adjustments. They also check that digital records are complete and accurate. This process can take several weeks, depending on the complexity of your business and the volume of transactions.
Preparing for a compliance check means having well-organised records and a clear audit trail. You should maintain copies of all sales and purchase invoices, credit notes, import documents and C79 certificates for postponed VAT accounting. It is also wise to reconcile VAT returns against your ledgers monthly.
During an inspection, cooperate fully but seek expert advice if HMRC raises complex legal interpretations. If errors are found, you may need to submit amended returns and pay additional VAT, interest and possibly penalties. Proactive compliance and regular internal reviews help you address potential issues before HMRC intervenes.
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