A proactive and open approach to HMRC VAT audits will help provide HMRC with confidence and put you in the best position in respect of potential penalties if any errors are discovered.
HMRC VAT audits can be routine check-ups or can be triggered by a large repayment claim or error disclosure. VAT audits can be a long and burdensome process, particularly if the wrong information is provided at the outset or HMRC discover errors.
It is critical that HMRC fully understands your business and the supplies it makes at the outset to avoid any misunderstanding throughout the audit process. In particular, details of any supplies not subject to VAT or subject to the reduced or zero rate and details of any VAT schemes used should be explained.
HMRC will also typically provide a list of documents it would like to review. If possible, this should be reviewed by the business ahead of the audit and any issues noted highlighted to HMRC at the outset. Any penalties for inaccuracies can be mitigated if the business takes a proactive and open approach to the audit.