Peninsula Q&A: VAT Inspection and HMRC's Legal Powers

Peninsula Team

November 05 2010

Just what legal power does a VAT Inspector possess? Can they inspect your premises or even your home? Can they arrive unannounced and remove business records? Also, HMRC has asked for all computer records to be copied to a disc and sent to them. Is this legal?

Unfortunately, the answer to all of the above is yes. In certain circumstances, a VAT Inspector is legally entitled to do everything mentioned above. Their powers are far reaching but there are certain constraints which restrict some of their actions.

On powers of inspection, they can enter premises and inspect the premises, assets, and business records but they cannot inspect a part of a premises used “solely” as a home. However for many small businesses their home is also their place of business. As such a VAT Inspector can inspect any part of the home used for a business purpose.

In normal circumstances a VAT Inspector will agree a date and time of inspection in advance, in fact he is obliged to give at least 7 days notice. It is possible for a VAT Inspector (with a specially trained HMRC Officer’s prior approval) to make an unannounced visit. Generally however this is only happens where a business is suspect in some way.

A VAT Inspector can also legally order that business records be produced and they are also allowed to copy and remove them if necessary. They must however give a receipt specifying the documents removed and provide a copy and/or access to the original documents if required. It should be noted that it is only business records which can be legally requested not private records such as a private bank account statement. HMRC also state that confidential advice provided by an accountant or VAT Adviser will not normally be requested. Auditor’s working papers and management letters will fall into this category unless containing information relating to goods and services, etc.

On computers and computer records, a VAT Inspector may at any reasonable time, obtain access to, and inspect and check the operation of, any computer used by a business for a business purpose. The law also states that the computer operator or owner must provide assistance to a VAT Inspector in obtaining any business information required. It is these provisions that allow a VAT Inspector to obtain copies of computer records and remove them but he cannot take away the computer itself. A fine of £300 can be levied if a business “obstructs” a VAT Inspector in this regard.

The above only highlights some of a VAT Inspector’s powers; there are many others. However if you have to endure a VAT inspection (or even a tax inspection), and are unsure as to the legality of an Inspector’s requests then call the Tax/VAT Helpline on 01455 852 555

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