1
May
2006
Written By .

HM Revenue and Customs (HMRC) have issued a list of the most common problems with VAT accounting detected by their compliance officers when they visit businesses.

Other than mere computational errors, their 'top ten' are:

  • claiming input tax on cars which are not used wholly for business purposes;
  • claiming input tax on purchases for personal use, such as telephone calls;
  • claiming input tax on business entertainment expenditure;
  • failing to retain proper documentation for input tax recovery;
  • not accounting for output tax on sales of goods to private individuals in other EU countries;
  • not accounting for output tax (via the 'fuel scale charge') for fuel used for private motoring;
  • failing to charge output tax at the correct rate;
  • failing to account for output tax on sales of business assets;
  • failing to retain proper evidence for zero-rating of export sales; and
  • getting the tax point wrong - failing to account for VAT at the right time.

    HMRC have started sending out what have been described as 'fishing letters' to traders, pointing out 'common mistakes' and implying that a control visit is likely. So far these have involved businesses where there is a significant risk of loss to the Exchequer - such as those which trade just under the VAT limit and those in 'cash trades'.

    If you are concerned about the accuracy of your VAT returns or any tax matter, we suggest you take professional advice. For advice on specific VAT compliance matters, you can call the National Advice Helpline on 0845 010 9000.

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