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Accountancy  •  Bookkeeping  •  Business Services  •  VAT

Letters from HMRC requesting VAT benchmarking and data clarification

By Simon Paterson on 23 June 2015

 

 

In recent weeks HMRC has written specifically to furniture retailers and car repair businesses across the UK, requesting verification of data included within previous VAT returns. Given the high levels of publicity awarded to promoting the risks of tax avoidance and the increasing scrutiny taxpayers are now under, these letters may have caused some concern. This is unnecessary because they are not a notification of a VAT enquiry being opened, but a request that the taxpayer double checks previously reported sales and purchase figures.

The HMRC letter asks taxpayers to do the following:

– Calculate the VAT mark-up ratio. This can be done by calculating gross profit levels as a percentage of purchase costs (input costs) as reported on the VAT return.

– Benchmark the VAT mark-up ratio by comparing it with standard business sector ratios as provided in the letter. If the VAT mark-up ratio falls outside the standard range, figures included within boxes 6 and 7 on future VAT returns should be double checked.

The important point to appreciate is that in writing to taxpayers, HMRC is merely asking for information to be checked. They are not expecting a response to the letters. If you have concerns or would like an independent VAT audit completed on your business, please contact Simon Paterson by emailing sp@rjp.co.uk.

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In recent weeks HMRC has written specifically to furniture retailers and car repair businesses across the UK, requesting verification of data included within previous VAT returns. Given the high levels of publicity awarded to promoting the risks of tax avoidance and the increasing scrutiny taxpayers are now under, these letters may have caused some concern. This is unnecessary because they are not a notification of a VAT enquiry being opened, but a request that the taxpayer double checks previously reported sales and purchase figures.

The HMRC letter asks taxpayers to do the following:

– Calculate the VAT mark-up ratio. This can be done by calculating gross profit levels as a percentage of purchase costs (input costs) as reported on the VAT return.

– Benchmark the VAT mark-up ratio by comparing it with standard business sector ratios as provided in the letter. If the VAT mark-up ratio falls outside the standard range, figures included within boxes 6 and 7 on future VAT returns should be double checked.

The important point to appreciate is that in writing to taxpayers, HMRC is merely asking for information to be checked. They are not expecting a response to the letters. If you have concerns or would like an independent VAT audit completed on your business, please contact Simon Paterson by emailing sp@rjp.co.uk.