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HMRC internal manual

VAT Small and Medium Enterprises Assurance Manual

Introduction to Assurance: agreement with accounting bodies

“Customs and Excise explained that, because VAT accounts and returns are based upon a number of individual business transactions and judgments, with scope for misunderstanding and errors by the taxable person, Customs and Excise regard it as normally necessary to see him, with his books and accounts, at the premises where his day-to-day business is conducted, even when those records are normally kept elsewhere. It is also necessary at the same time to see physical evidence of business activities where this exists.”

From such evidence and from business records, questions need to be asked which usually only the taxable person can answer. For Compliance officers to see the taxable person and his records separately would tend to weaken control and make for less economical administration.

Officers are given some discretion to depart from the above rule, and exceptionally, to regard the place where the books are normally kept as the “Principal Place of Business”.

Such exceptions are allowed only in the comparatively rare cases, where it is unavoidably difficult to see the taxable person at his true “Principal Place of Business” (for example, where the taxable person is an individual frequently abroad) and where the type of business is such that the difficulties of contacting him would outweigh the revenue advantages. Exceptions are not therefore regarded as justified simply because the books are normally kept elsewhere.