Tax FAQ
Customs Inspection
I have had a call from Customs about carrying out an
inspection. Why are they coming and what will they do when they are
here?
Customs are not necessarily carrying out an inspection because
they believe something is wrong. Customs organise their inspection
programme to visit all registered businesses over a period of time,
so it is possible that ten years can elapse between visits.
However, the inspection programme is based on the potential
complexities of the business and the risk to the revenue, so
certain events can cause visits to happen more frequently or
outside the standard visiting routine. Such events include:
- Failure to submit VAT returns on time on a regular basis. This
indicates weaknesses in the VAT accounting system, so Customs will
visit with the intention of improving the compliance record and VAT
accounting of the business.
- References from another VAT office where a previous visit to
another business has indicated that one of its suppliers is not
dealing with VAT correctly. This could mean that the business is
not issuing invoices properly, or that the transaction may not have
been accounted for in the right return.
- Risk analysis - certain types of businesses will be visited
because Customs believe there is a high risk that VAT may not be
dealt with correctly. For example, cash businesses, such as
restaurants or takeaways, may be visited as part of a national
programme.
- Abnormal trading patterns. A sudden drop in the amount of tax
being declared, or an unexpected claim for VAT, can also trigger an
inspection.
During the inspection, the Customs officer will spend most of
the initial visit discussing the activities of the business to
establish the full scope of the VAT position. The officer will then
examine the VAT records, tracing the VAT returns back through the
accounts to the original invoices or takings. The officer will
usually carry out a detailed examination of three or six months’
records (depending on the volume of records) and a superficial
check of previous periods, to establish whether the VAT accounting
is credible and a reasonable reflection of the business.
The officer will end the inspection by raising any concerns with
the operator of the business and, if necessary, make
recommendations for improving the VAT position. If there is an
under-declaration of VAT, the officer will inform the business of
the reason and raise an assessment back at the VAT office.