What happens during a VAT inspection?

Most inspections are pre-arranged. HMRC writes proposing a date and lists what it wants to see, giving you time to prepare rather than turning up unexpectedly.

On the day, or through correspondence if it's a desk-based check, an officer works through your VAT returns comparing them to underlying invoices, your accounting system, and how supplies have been treated for VAT purposes.

The officer will typically ask questions about how the business works: what you sell, who your customers are, how you price and invoice. This context helps them judge whether the VAT treatment makes sense, not just whether individual figures tie up.

Schedule 36 Finance Act 2008 gives HMRC the power to inspect business premises, assets and records where reasonably required to check your tax position, and to request documents in advance of or instead of a visit.

HMRC generally needs to give reasonable notice for a visit unless it has specific grounds to believe an unannounced inspection is necessary, which is rare outside of suspected serious fraud.

You have the right to ask why particular information is needed and, if you think a request goes beyond what's reasonably required, to challenge it, including by appealing a formal information notice.

Preparation is the difference between a straightforward visit and a stressful one. Have your VAT returns reconciled to your accounting records before the officer arrives, and know where key evidence sits.

You don't have to face an inspection alone. Your accountant can attend, answer technical questions, and make sure responses are accurate and consistent rather than off-the-cuff.

Be factual and consistent in what you say. Officers often follow up verbal answers with document requests, so what you tell them during a visit should match what your paperwork shows.

There's no charge for the inspection itself, but your time and your accountant's time preparing and attending has a real cost, especially if the visit spans a full day.

If the inspection identifies an error, you'll face the underpaid VAT, interest, and potentially a penalty depending on whether HMRC views the error as careless or deliberate.

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Don't leave reconciliation until the officer is on site; scrambling for evidence during the visit creates a poor impression and invites more questions.

Don't guess answers to questions you're unsure of. It's fine to say you'll confirm and follow up in writing rather than speculate.

Don't treat the visit as purely a box-ticking exercise. Officers form a view of how well-controlled your VAT processes are, which can influence how closely future returns are watched.

HMRC normally writes afterwards summarising its findings, whether that's no change needed, a proposed adjustment, or a request for further information before it can decide.

If an adjustment is proposed, you can discuss the figures before they're finalised. Agreeing where you genuinely accept an error is usually better than disputing every point, since cooperation is reflected in any penalty calculation.

Keep the correspondence and any agreed adjustment on file. It often becomes the reference point if HMRC revisits the same VAT periods or issues in a future check.