What is it?
A compliance check is any action taken by HMRC to check a person’s position in relation to any of the major direct or indirect taxes. More than one tax can be investigated at the same time as they now have cross working teams. Examples include:
- Self-assessment tax returns
- Land transaction returns for stamp duty land tax purposes VAT assurance visits
- Employer compliance reviews
Useful links
Case Study
Background
Our client had used an accountant to submit their VAT returns, this one specific quarter had claimed a large refund due to the purchase of business equipment where the VAT was paid up front.
This set off a compliance check, which is not unusual, and they asked the acting accountant to provide all the paperwork to establish both the input and output tax which he was unable to do. The client was shocked as they take their paperwork to the accountant's place of business regularly, so was at a loss as to why these could not be provided on HMRC’s request. HMRC then started to open up every quarter that the previous accountant had submitted, requesting all papers to substantiate.
Action
Our client then approached us to assist. We recreated the VAT returns from bank statement copies (my client obliged in obtaining copies for me and complied along the whole process) which they then compared alongside the submitted figures - none of which tallied.
Conclusion
HMRC accepted our submissions and as a result our client got back all but £75 of his large VAT refund. We then had to amend or client's previous tax returns as they too had been compromised which thankfully did not change their tax position.