I have a client, who is due a vat return refund, but HMRC have decided to do a further investigation on this.
This is one of the things they have asked for:
A VAT audit trail detailing Sales and Purchases that substantiates the figures declared on the return
My question is how much detail should I go in to for this? do they just need to dates and vat amounts, or would they require more info than that. Hopefully someone will be able to help!!
-- Edited by lor on Wednesday 2nd of December 2009 12:37:58 PM
They will want to see all invoices and receipts that cover this refund. They must all have VAT numbers on them because the Inspector will want to check the numbers to see if the other companies have declared this and paid their portion of the VAT. Your client should have all these filed away ready for this type of inspection. The VAT inspector normally requests that the client be present at the inspection. I try not to allow this because clients have a habit of putting their foot in it when they answer questions. The last inspection I had was held at the clients premises but the client was not available, after all it was a take away and he had been working until after 3 that morning so was in bed!
I have had this happen in the past and the VAT number quoted on one receipt turned out to belong to Cadburys. The client had to refund the VAT concerned and received a fine because they had incorrectly claimed on a bogus receipt. They appealed, to no avail, they were told that they should ensure that the VAT number is bone fide!
i should have mentioned they (hmrc) are happy for the details to be emailed to them, but wasn't sure how much detail to go into on the vat audit trail.
-- Edited by lor on Wednesday 2nd of December 2009 12:41:48 PM
Have you used an accounting package to do their accounts? If so, just run the audit trails off and save them as pdf or csv formats to be able to email them to HMRC.
I would suggest that your audit trail should include the major suppliers names and VRN so that HM R & C can check to see that the supplier has declared the transaction.
Lor, you could produce the report from Sage which would show all suppliers and values in a csv file (which goes into excel) then just put the VAT number into the excel sheet. This way you dont have to type everything in.
When one of my clients had an inspection for the same reason I gave him copies of the detailed VAT report (I always print these off) and the purchase and sales invoice files covering the period. He did not want to see the petty cash receipts. TBH it was a very light touch inspection. When he arrived the accountant, admin dir and me explained the reasoning for the very high refund (due to moving into brand new premises and the costs of fitting them out) then he looked at the stuff and was gone in about an hour - we got the refund within two weeks.
The inspectors would require Purchase and Sales Invoices relation to the inspection period. also an Audit Trail of Purchases and Sales Invoices so they can reconcile against the Vat Returns made. they may require Bank Statements relating to the business.
Whenever a client is due a refund for VAT I remind them to let me know if they have contact with HMRC (sometimes refunds are paid without question). Then usually by phoning myself on their behalf this negates the need for a full investigation. In the past I've had to provide the top 10 purchase invoices for the refund period, or all invoices over a certain amount, or a copy of the purchase ledger. By reassuring the HMRC that a qualified bookkeeper is making the looking after the books rather a sole trader doing it themselves, this seems to prevent lots of communication and speeds up the process of refund.
