.png)
.png)
I have not had a VAT visit since 1992 and I am therefore expecting another one in the not too distant future. I am not sure what records I would need to show. Would it be the records since the last visit (1992) or would they only be able to look at the three years prior to the date of the visit?
Readers' comments would be appreciated.
(Query T15,959) - Vatman.
I have not had a VAT visit since 1992 and I am therefore expecting another one in the not too distant future. I am not sure what records I would need to show. Would it be the records since the last visit (1992) or would they only be able to look at the three years prior to the date of the visit?
Readers' comments would be appreciated.
(Query T15,959) - Vatman.
Customs clearly set out their requirements in Notice 700 (The VAT Guide): 'You must normally keep your business records for six years. If, however, this causes storage problems, involves you in undue expense or causes you other difficulties, you can ask the VAT Business Advice Centre for your area if you can keep some of your records for a shorter period. Small businesses with limited storage space may find this particularly useful. You must get the agreement of Customs and Excise before any of your business records are destroyed before six years.'
If 'VATman' has any assets that are subject or could be subject to a capital goods scheme adjustment, then he is required to keep such records as will enable him to calculate such adjustments (Customs Notice 706/2/01 Capital Goods Scheme). Briefly, if he has incurred expenditure on which VAT has been reclaimed on a property or conversion, extensions or refurbishments to a property in excess of £250,000, records of the expenditure should be retained for ten years.
'VATman' is expecting a visit. In Taxation, 31 January 2002 there is reference to VAT Inspectors collecting, on average, a total of £440,000 extra VAT each year. If Customs from their examination of his returns, and their notes of the 1992 visit, consider he is a reliable trader in a non-cash trade with little scope for suppression and few technical problems, they might send him a questionnaire, in an attempt to avoid a visit that is unlikely to provide any major benefit to the Exchequer.
The questionnaire seeks to check that there are no material changes in the business and whether any difficult technical areas are involved. Needless to say, such a questionnaire should be completed with care and checked by someone with knowledge of the operation of the business and an appreciation of VAT. - R.N.G.
Much the same problem beset me in the mid-1990s, the only difference being that no VAT control visit was pending. But vouchers accumulated since the last visit in the early 1980s were taking up too much space. Before then, audits had been three-yearly, when either there was a visit or one had to deposit records and vouchers at the VAT office for examination, and recover them a day or two later. So the local VAT office was telephoned for advice. The advice received was that control visits were not necessarily now made three-yearly to traders rated by the assessor as orderly, and that the requirement to preserve all vouchers since the last audit had been changed. The period of retention is now six years, in line with the statute of limitations, and with Inland Revenue enquiry practice in cases free of negligence or fraud. One should routinely obtain written confirmation of advice from the VAT office, but on this occasion it was omitted, as I place a fair degree of reliance on the statute of limitations.
My returns are made quarterly, so six years equates 24 return periods. Records are retained indefinitely, being the prime entry part of the accounting records as a whole. Input vouchers and copy output vouchers are trashed as soon as they exceed 24 clear reporting periods in age, the only exceptions being invoices for significant (usually capital) items that might be needed later, say, for capital gains reference. A like system is recommended to the querist. But it would be a good idea to acquire from the VAT office the same advice as was given to me. So telephone and ask them about vouchers that are more than six years old. You may also wish to have them confirm the advice in writing. That will do if a control visit is merely 'expected' but not yet a firm appointment. If, however, there is a firm appointment, the following is suggested.
Preserve the output and input journals as long as your books of account are normally retained. They are, after all, records of prime entry, and not mere compliance extras. Sort the vouchers into three lots; namely last three years, three previous years, and older still. As a visit has actually been arranged, retain everything until it is over, in case of dire need. When it is over, all vouchers audited, and any from earlier periods, can be discarded.
At the meeting present the material for the last three years and, if requested, present also the material for the preceding three years. - Man of Kent.
Extract from reply by 'JGF':
During the mid-1990s, Customs changed the rationale behind their visiting programme. A new régime was born, based on local selection by the visiting officers themselves. This in turn led to even greater targeting in perceived risk areas and left whole swathes of businesses without an inspection from one year's end to the next. Perhaps, therefore, 'Vatman' should simply concentrate on getting his returns and payments in on time and he may well avoid what would previously have been the inevitable visit.
However, in the event that a visiting officer appears, what exactly will Customs expect to see? The records which the officer will hope to have available are listed in section 8 of Notice 700, The VAT Guide, and include all the sales and purchase documentation that you would expect, as well as annual accounts, bank statements, paying in books, etc. On a recent inspection, a client of mine was asked to produce payroll records and, when challenged, the Inspector explained that they do form part of the accounting records and should thus be available to officers if required (though in most cases clearly they will have little to do with the VAT being declared on the returns). In this case the records were produced when requested, but the officer decided he did not need them after all!
It is easy to imagine how records peripheral to the main VAT issues would be useful to officers when trying to assess the credibility of the business VAT returns. If an officer requests such items, then ultimately he or she probably has the right to inspect them. However, anything beyond these areas, such as accountants' notes, should not in my opinion be provided, although an auditor's management letter to his client is generally considered fair game for inspection.
