It is well known that HMRC query large VAT repayment returns, generally prior to authorising the refund. This could be for a number of reasons, particularly if claims are larger than usual or if it is an unexpected refund. Queries lead to headaches for HMRC and businesses alike, so there has been a change to the way HMRC verify refunds.
General method of review
Businesses should ensure the following information is readily available at the point HMRC has queried the claim:
- The VAT return workings for the return under query
- Copies of purchase invoices that make up at least 80% of the claim (the largest 6 may be sufficient if there are many)
- Copies of bank statements for the months of the claim
- A reason why the business is receiving a repayment for that return period
- If future returns are likely to be refunds, an explanation as to why and when this will occur again
HMRC may raise a pre-repayment query by sending a letter requesting information to be submitted either by letter or email. They may also wish to carry out a VAT inspection at the business premises with advanced notice and on agreement at a mutually convenient date.
“VAT Truce” – new method of review
HMRC introduced a pilot project some time ago to verify VAT refunds more quickly and reduce the number of arranged visits to businesses. This was operated by the VAT Truce Team, which generally deals with claims for individuals and small businesses and has been further extended. We are now seeing more VAT refunds dealt with in this way.
This pilot involved a telephone enquiry with a business or agent (with the agreement of the business owner), to verbally obtain the reasons for the claim and request copies of relevant claim documents to be sent by email within 24 hours of the initial telephone call.
Provided HMRC receive the information satisfactorily within that time, and the claim can be verified with the information, the reviewer may be able to process the claim within a couple of days and the refund paid quickly.
Although 24 hours is not long, extensions to this deadline are not always granted, so it is important that a business has the information prepared ready for that call. If there is a delay in sending the information or the business/agent is not available, the claim will be passed for review either by letter or onsite VAT inspection – this is likely to delay the claim.
Assisting businesses with VAT compliance
Wilkins Kennedy has significant experience assisting and supporting businesses with any HMRC VAT enquiry. Please contact your local VAT specialist to discuss how we can help you prepare for an HMRC review.