Reducing your VAT risk

Susan Cattell explains why you might find HMRC’s guidance on how to approach VAT compliance useful. It could help you identify VAT risks and develop a plan to address them.

HMRC started issuing its Guidelines for Compliance (GfC) in 2022.There are now 12 of them and they can be useful to businesses of all sizes and to agents, even though they were originally announced as part of the review of tax administration for large businesses.

Whether you are an agent or working in business, it is worth familiarising yourself with the GfC as they might help you avoid unnecessary HMRC contact and could reduce the risk of paying additional tax, interest and penalties, as discussed in my earlier article.

Help with VAT compliance controls (GfC 8)

This guidance is potentially helpful for most VAT registered businesses. It should help them to review their processes, identify any VAT risks and develop plans for addressing them (if required).

HMRC sets out good practice related to specific areas of VAT accounting and compliance processes. Not all of the guidance will be relevant to every business - HMRC notes that it should be applied to reflect the complexity and scale of the business. However, part 2 (General approach to VAT compliance controls) gives a good idea of what HMRC expects businesses to do (and what it will be looking for in any compliance intervention). Areas covered include: 

• Risk management – identifying and evaluating risks and applying appropriate controls to reduce them.
• Designing and assessing effective controls – and documenting them.
• People - documenting roles and responsibilities and ensuring appropriate training (and contingency cover for key staff).

Other sections cover a range of areas, including employee expenses, VAT reporting (and manual adjustments) and correcting any errors. 

Let us know what you think of GfC

If you use GfC 8 (or any of the other GfC), we would like to know what you think of them. Email the Tax team  to give us your input. We also welcome feedback from members on other HMRC guidance, tax consultations and on HMRC service levels. We regularly attend meetings with HMRC, where issues you raise with us are discussed.