What happens in a HMRC VAT inspection

A HMRC VAT inspection is usually a pre arranged visit to your main place of business, lasting anything from a few hours to several days, in which an officer discusses how the business works, tests your VAT account and records against the returns you filed, and agrees any corrections with you. Preparation means reconciling your returns to your records before the officer arrives and disclosing any errors you already know about, because disclosure after the appointment is booked is normally treated as prompted.

Why does HMRC visit VAT registered businesses?

VAT Notice 700 (section 2.2) says a VAT officer will examine your business records, methods and premises and give you guidance, so that the correct tax is accounted for at the right time. How often you are visited depends on the size and complexity of the business and your past compliance. Businesses that send in late or incorrect declarations and payments are visited more often.

A visit is one form of compliance check. HMRC’s factsheet CC/FS3 says it only visits where it thinks this is necessary, to look at records or business assets and understand how the business operates. For the reasons checks are opened, how far back HMRC can assess and what a check typically costs, see our overview of HMRC VAT compliance checks. This page concentrates on the visit itself and how to prepare for it.

How is a VAT visit arranged, and can it be unannounced?

Most visits are agreed in advance. CC/FS3 says HMRC will contact you by phone or letter, usually give at least 7 days’ notice, and explain why a visit is the best way to carry out the check. If you think a visit is unnecessary, you can say why, as the information may be obtainable another way. Notice 700 confirms an officer will usually agree a convenient appointment but may occasionally call without one, for example to see the day to day operation of the business.

If you do not agree to a visit, HMRC can use its statutory power to inspect. Paragraph 10 of Schedule 36 to the Finance Act 2008 lets an officer enter business premises and inspect the premises, business assets and business documents there, where reasonably required to check your tax position. Paragraph 12 allows this at a time agreed with the occupier, at any reasonable time after at least 7 days’ notice, or without notice where an authorised officer agrees, in which case a written notice must be given to whoever is in charge or left at the premises. The power does not extend to any part of the premises used solely as a dwelling. Our guide to HMRC inspections of business premises covers these safeguards in detail.

What happens on the day of a VAT inspection?

Section 2.2.3 of VAT Notice 700 describes the visit. The officer will:

• discuss the various aspects of your business with you
• give an indication of how long the visit will take
• examine the records of the business
• tell you about overpayments as well as underpayments

At the end, the officer reviews the work, discusses any concerns and agrees what should happen in future. CC/FS3 adds that you do not have to be present, though it helps. If you cannot attend, someone must give the officer access to the records and assets. The officer may want to speak to the people who keep the finance records, and may take records away to check in an HMRC office. If so, HMRC will give you a receipt, keep them secure and return them as soon as it can, making copies if you need them back sooner. A small business visit may take a few hours. For a large or complex business, Notice 700 says it can last 2 or more days.

You can have an adviser with you. HMRC’s factsheet CC/FS1a says you can ask a professional adviser, friend or relative to deal with HMRC on your behalf, although HMRC may still need to speak to you directly about some things.

Which VAT records will the officer review?

The starting point is the VAT account. VAT Notice 700/21 (section 5.1) describes it as the audit trail between your business records and your VAT return, recording output tax on sales, reverse charge VAT, input tax you are entitled to claim, and corrections and other adjustments. Section 2.3 lists the business records HMRC expects to see, including:

• annual accounts and profit and loss accounts
• bank statements and paying in slips
• purchase invoices, copy sales invoices and credit or debit notes
• cash books, purchase and sales books
• records of daily takings such as till rolls
• orders, delivery notes, import and export documents
• certificates supporting special treatment such as zero rating
• relevant business correspondence

Section 1.4 of the notice says HMRC will normally specify the records it wants before a visit and those records must be available. Records must generally be kept for at least 6 years (section 2.4). Because most businesses now keep an electronic account under Making Tax Digital, expect the officer to follow figures from the source records through the software to the return. Our guide to the VAT control account explains how that reconciliation should work.

How should a business prepare for a VAT visit?

1. Read the appointment letter closely. Note the periods and records listed, and ask the officer if the scope is unclear.
2. Reconcile each return in scope. Agree box totals to the VAT account, the VAT account to the ledgers and the ledgers to the bank. Explain any differences before the officer finds them.
3. Disclose known errors before the visit. VAT Notice 700/45 (section 4.9) says enquiries normally begin when HMRC makes an appointment to inspect your records. To avoid a penalty, errors need to be disclosed in full before HMRC begins its enquiries. Use the correction routes in our guide to correcting VAT errors.
4. Check the higher risk areas. Look for large input tax claims without valid invoices, partial exemption calculations, reverse charge entries, zero rated sales without evidence, and any unusual repayment returns.
5. Prepare a short business explanation. Cover what you sell, how sales are recorded, who keeps the books and any changes in turnover or VAT treatment. Notice 700 suggests telling HMRC early about the reasons for significant changes in the tax you declare.
6. Arrange the people and space. Make sure the bookkeeper is available, give the officer somewhere to work, and organise access to the software.
7. Keep filing and paying. CC/FS1a asks you to continue sending returns and making payments during the check.

Notice 700 also warns that an officer will not normally have time to look at every aspect of the business. A visit that finds no errors does not confirm that everything is right.

What happens if the officer finds errors?

Under section 2.2.3 of Notice 700, the officer will describe how any adjustment will be made, agree it with you where possible, and tell you about your right to a review by an officer not previously involved or an appeal to the tribunal. You can still appeal after a review if you are unhappy with it. HMRC usually corrects underdeclared VAT by assessment. Section 73(6) of the VAT Act 1994 requires an assessment within the later of 2 years after the end of the VAT period or one year after HMRC has enough evidence of the facts. Section 77 caps this at 4 years after the end of the period, or 20 years where the loss of VAT was deliberate. Where records are poor, see our guide to best judgement assessments.

Penalties depend on behaviour and on how far you helped. CC/FS1a explains that HMRC measures the quality of disclosure by how much you tell it, how much help you give in working out what is wrong, and how much access you give. Refusing a visit or holding back documents reduces the reduction you receive. Our guide to penalties for errors on VAT returns sets out the percentages. CC/FS1a also says contract settlements cannot be used for VAT or VAT penalties, so VAT outcomes are made by assessment and penalty notice. An appeal to the tribunal against a VAT assessment generally requires the VAT to be paid or deposited first unless that would cause hardship (section 84(3) and (3B)), as our guide to the VAT pay first rule explains.

What if a business refuses an inspection?

CC/FS3 says that if you do not allow an inspection under a notice of inspection, HMRC may ask the tribunal to approve it. If the tribunal approves it and you still refuse, the penalty is £300, with further penalties of up to £60 a day until the inspection is allowed, unless you have a reasonable excuse. Concealing, destroying or disposing of documents HMRC has asked for, or has said it intends to ask for, in an information notice can lead to a penalty. Where the notice was approved by the tribunal, it is a criminal offence.

Common mistakes before and during a VAT visit

• Correcting a known error on the next return after the appointment is booked and treating that as a disclosure.
• Producing a VAT account that does not reconcile to the returns, which invites wider testing.
• Assuming that silence from previous visits means a treatment has been approved.
• Offering estimates or opinions on the day that you have not checked. It is better to note the question and reply in writing.
• Letting the deadline for a review or appeal pass while discussing the findings informally.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• Why is my VAT repayment delayed
• Representing a client in an HMRC compliance check
• What happens if you register for VAT late
• Zero rated vs exempt supplies
• Filling in a VAT return: the nine boxes
• Should you meet HMRC during an enquiry
• What happens at an HMRC ADR mediation
• HMRC powers to inspect property for valuation
• Penalties for obstructing an HMRC inspection

Sources

• GOV.UK: Vat guide notice 700
• GOV.UK: Visits by agreement or advance notice ccfs3
• legislation.gov.uk: Act 2008 c. 9, schedule 36
• GOV.UK: About compliance checks ccfs1a
• GOV.UK: Record keeping for vat notice 70021
• GOV.UK: How to correct vat errors and make adjustments or claims vat notice 70
• legislation.gov.uk: Act 1994 c. 23, section 73
• legislation.gov.uk: Act 1994 c. 23, section 84
• legislation.gov.uk: Act 1994 c. 23, section 77

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.