A VAT review is a general “health check” on how accurately your business processes VAT transactions and can highlight opportunities for savings as well as identify areas of risk where assistance may be needed. In addition, cash flow opportunities may be identified.
General health checks
It is our experience that a VAT review is most beneficial for those businesses that have grown in a short space of time, where no VAT inspection has been undertaken for a number of years, where there has been a large turnover of staff within the finance function, or where there has been high value or unusual transactions. A VAT review can therefore give senior management reassurance. Given that all businesses can be subject to HMRC inspections, ensuring VAT is being correctly applied is essential. We have recently seen a marked change and increase in the number of VAT inspections. These inspections have included HMRC requesting downloads of accounting records for its staff to analyse at its offices and then come back to the business with queries. HMRC appears to be targeting specific types of transactions, including: reverse charge services, property and ‘Option To Tax’, export evidence, Tour Operator Margin Scheme and deal fees on mergers and acquisitions.
Due diligence review
A number of businesses have asked us to undertake a VAT review 6 or 12 months prior to selling their business. The owners / shareholders are aware that due diligence work will be undertaken prior to any sale and have been proactive in authorising a VAT review to ensure their VAT accounting system is operating accurately, or otherwise, as the case may be. The VAT review will identify any risks and opportunities and these can be dealt with efficiently prior to the commencement of any sales process.
Our VAT reviews can take many forms depending on the business being reviewed. Examples of our work include:
- Commencing with a VAT questionnaire, targeting areas of weakness in compliance and systems;
- Checking the quality and accuracy of sales and purchase invoicing. This covers both routine / repetitive invoicing and the VAT liability of more complex/one-off type transactions;
- The quality of documentation of VAT compliance procedures, which are the bedrock of a high-quality VAT system. This assists new employees and those promoted from within; and,
- Assessing the skill levels of all grades of staff, and the training processes for keeping these at an adequate level. This covers both induction and ongoing training.
Engaging VAT Services (Scotland) Ltd to carry out a thorough examination of your company / organisation can identify opportunities to reclaim VAT that has been overpaid, improve cash flow and create savings, as well as highlight potential problems before they become major issues and ensure the correct systems are in place going forward.
Following the review, a detailed report will be provided, highlighting risks and opportunities within your business and, most importantly, recommendations as to how these should be addressed.