Common Questions About VAT Investigations

If you’ve received a letter or visit notice from HMRC about your VAT, don’t panic — it doesn’t always mean you’ve done something wrong.

A VAT investigation usually means HMRC wants to check your VAT returns, records, or VAT reclaim claims to make sure everything adds up.

Below are the common questions people ask us when facing a VAT check or investigation.

Why has HMRC opened a VAT investigation?

There are several common reasons HMRC may review your VAT returns:

• Large or irregular VAT repayment claims
• Turnover or input tax that doesn’t match your previous returns
• Differences between VAT output and Corporation Tax revenue figures
• Late or missing VAT returns
• Reports from third parties or automated risk triggers

Increasingly VAT investigations are less random — and more often because something in your returns looked inconsistent.

What types of VAT investigations are there?

HMRC conducts three main types of VAT checks:

• Pre-repayment checks – before they release a VAT refund or reclaim.
• Compliance visits – reviewing VAT returns, invoices, and records.
• Fraud or evasion investigations – where HMRC suspects deliberate wrongdoing, often under COP8 or COP9.

Most checks are civil and routine, but if HMRC believes false returns were submitted deliberately, the matter can escalate quickly.

What documents will HMRC ask for?

Be prepared to provide:

• Full VAT account and return workings
• Sales and purchase invoices
• Bank statements and ledgers
• Till rolls or POS reports
• Import/export paperwork (if applicable)
• Details of any large adjustments or bad debt claims

If records are incomplete or disorganised, HMRC may assume higher tax is due — so preparation and accuracy matter.

How long does a VAT investigation take?

The timescale depends on the complexity and your level of cooperation:

• Minor queries: a few weeks
• Full audits: 3–12 months
• Suspected fraud cases: up to 2–3 years

It’s also important to remember that document preparation and reviewing old accounting records take time.

The more organised and transparent you are, the sooner HMRC will close the case.

What are the most common VAT errors?

HMRC frequently finds:

• Incorrect VAT rates (especially on mixed supplies)
• Claiming VAT on non-business or exempt expenses
• Missing import/export evidence
• Failing to apply the reverse charge correctly
• Inaccurate partial exemption calculations
• Late registration or deregistration
• Gaps in record-keeping or undeclared sales

Many of these happen by mistake — but repeated or uncorrected errors can still attract penalties.

What penalties can HMRC apply?

Penalties depend on the cause of the error:

• Careless errors: up to 30% of unpaid VAT
• Deliberate errors: up to 70%
• Deliberate and concealed: up to 100%
• Late payment or return filing: daily surcharges and interest

If you come forward voluntarily and cooperate, HMRC often reduces penalties significantly.

Can VAT investigations turn into tax fraud cases?

Yes — if HMRC suspects deliberate false accounting, they can escalate the case to a COP9 investigation or even a criminal probe.

This happens most often in:

• Missing Trader (MTIC) fraud
• Fabricated invoices
• False repayment claims

If you think HMRC might see your case as deliberate, seek professional advice immediately before responding.

Can I correct VAT mistakes before HMRC contacts me?

Yes — and it’s highly recommended.

If you realise you’ve made errors, you can file a voluntary VAT disclosure through your online account or by contacting HMRC.

Correcting errors before an investigation begins usually means lower penalties and fewer questions.

What should I expect during a VAT inspection visit?

An HMRC officer will:

• Ask to see your VAT records and returns
• Review a sample of invoices and receipts
• Reconcile figures to your accounts and bank records
• Question unusual transactions or reclaim patterns
• They may visit your premises or your accountant’s office.

After the visit, you’ll receive a letter summarising findings — if errors are found, HMRC will issue an assessment or request repayment.

How can our professional adviser help with VAT investigations?

A VAT specialist can:

1. Review your records before HMRC does
2. Identify weaknesses or errors in your VAT returns
3. Prepare explanations and documentation for HMRC
4. Negotiate reduced penalties and repayment terms
5. Handle all correspondence and meetings on your behalf

In short, they make sure you stay compliant, protected, and in control of the process.