VAT inspections
Case study
John Morrison owns and runs a small fast-food eatery in Cumbria. One Monday morning he is confronted by a VAT inspector on an unannounced visit, an arrival which understandably makes Morrison feel slightly threatened. He has no clear idea of the questions the inspector is entitled to have answered or any other action he may take.
The inspector begins by asking to search the premises and to look at non-VAT-related paperwork. Morrison is honest and believes his VAT returns to be correct, so he agrees to this request.
The inspector also asks questions relating to complex business details, insisting that answers be given immediately. Morrison, who is becoming increasingly anxious and agitated, provides incorrect replies in his confusion.
The inspector then asks to see the details of the bank account into which business receipts are paid. Morrison, however, considers his bank statements to be private and denies him access. The inspector then informs Morrison that, as there are no copying facilities available, he will have to take away the documentation he has received to make the necessary copies. Although the documents are needed for the running of his business, Morrison only realises after the inspector has left that he wasn't given copies or a receipt.
Like most businesses, there are also records kept on computer. The inspector is unable to operate the computer software and asks Morrison to help. Normally, he would not let them access the system but he is now so alarmed that he complies.
As a result of the visit and the incorrect replies given by Morrison, the VAT inspector calculates a very large underpayment. Morrison is also left without several documents required for the running of his business. In addition, he receives notification of a further visit. The inspector has now obtained a court order requiring Morrison to produce any bank statements relating to the business.
Morrison is concerned that he is being treated like a criminal when he has always been completely honest and above board. Plus, his business is suffering from loss of documents and the hefty bill he could be faced with when the correct tax payment is calculated.
This case study is a work of fiction and consequently the names, characters and incidents portrayed in the article are fictitious. Any resemblance to actual persons, living or dead, events or localities is entirely coincidental.
•
Next week: tax relief
