HMRC has published new guidelines for compliance which outline expectations and suggested good practice in respect of VAT accounting and VAT compliance processes.
The guidelines are aimed at helping businesses to establish an appropriate tax control framework and to eliminate the possibilities of errors as much as possible.
Rural businesses need to take note and act on these guidelines, where relevant, as failure to do so may increase the risk of future investigation by the authorities and increased likelihood of penalties where errors are identified, and the guidelines weren’t followed.
The guidelines are extensive and touch upon many aspects and elements of a business and its control points covering, for example, sales and purchase processes and transactions; accounting adjustments including credit notes, reverse charges, bad debt relief etc; employee expenses; accounting systems; VAT reporting; and correcting errors.
One key recommendation in the guidelines is for businesses to have a well-documented VAT compliance process through which key risk areas are successfully managed. The guidelines are intended to assist businesses and reduce the risk of VAT errors, interest, and penalties.
John Butterfield, VAT Director, and a member of the firm’s Land and Rural Practice Group, says:
“The new guidelines for compliance serve as a useful reminder to businesses that no matter how small, or how straightforward their VAT may seem, that appropriate controls and processes should be in place to ensure VAT reporting is accurate and the risk of errors is minimised. These controls offer valuable guidance.
“When reviewing some of our client’s VAT we find that controls may not be a strong as they should be and sometimes just taking a step back and considering if the figures make sense and considering what controls are in place, or not, is a valuable exercise.
“If you are implementing a new accounting or enterprise resource planning (ERP) system, or considering doing so (or you’re going to be using a new expense reporting platform), it’s highly recommended you work with your professional advisers to ensure there is the appropriate VAT set-up, and also to test existing VAT compliance controls to identify any weaknesses or risks.
“Now that HMRC has published these new guidelines, any errors which do occur which indicate that the appropriate controls and processes weren’t in place as recommended, there is a chance that HMRC is more likely to levy penalties which would otherwise not have been the case.”
If you have queries regarding the new VAT guidance for compliance, please get in touch with John Butterfield.
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