The Audit Process: PERCET: (P) preparation and planning: sources of help
This paragraph gives further guidance, on sources of help when you come across particular situations when preparing for, or on, an assurance audit, and on people to whom you might provide information and assistance. Don’t forget, one of the best sources of help is the most easily accessible - your colleagues and line management in your own offices.
Where our guidance does not answer your query you should in the first place discuss it with your line manager, or more experienced or specialist colleagues.
The Audit Service will help with computer problems ranging from providing explanatory reports on software packages, to helping you to obtain traders’ data on disk, interrogating it and giving you reports of, for example, high value invoices, outside the norm invoices or supplies to or from a particular customer/supplier.
The Tax Avoidance Partial Exemption (TAPE) team will help with any queries relating to Partial Exemption calculations, and particularly for setting up and applying special methods. In the absence of a trade sector specialist they may advise on the treatment of supplies of land and property, and visits to particular trade classes such as pension funds, finance, insurance and educational establishments (independent schools, further education colleges) and the health sector. Team members are:
- Tax Avoidance Visiting Officers (TAVO)
- Partial Exemption Liaison Officers (PELO)
- TAPE Officers who work on both tax avoidance and partial exemption.
All requests for a new or an amendment to a partial exemption special method should be brought to the attention of a PELO or TAPE Officer at the earliest opportunity.
Units of Expertise (UoEs) provide help lines, which are able to answer most questions about their specialist area. A list of UoEs and contact numbers can be found on the HMRC Intranet.
The National Coordination Unit (NCU) Intel officer will help if you have any suspect traders. They can interrogate CENTAUR, the PNC, liaise with other government departments, and run electoral roll checks. Shadow Economy Teams (SETs) may action any information you can give them on apparently unregistered traders. They may have acquired expertise in the areas of disaggregation and agent/principal and be able to offer advice to colleagues with similar problems with registered traders.
Joint Shadow Economy Teams (JoSETs) are at the forefront of joined up government with HMRC and Department for Work and pensions working together to identify businesses that operate outside of the formal economy. JoSET teams require information and references from all officers in HMRC who suspect unregistered traders operating about the VAT registration threshold. References should be sent to the relevant risk team.
VIES Network. This consists of Local resource contacts (working with UK CLO) whose role is:
- to raise and maintain awareness of Single Market issues amongst relevant staff
- be a resource to training
- liaise with Risk teams, working closely with them to identify Projects, setting parameters for analysis and success criteria
- to act as a technical resource for staff in the use and access of VIES and Single market taxation issues
- to act as a contact point between Regions and UK CLO
- to liaise across functions within the Regions.
Incoming mutual assistance requests from other Member States (for verification of intra-EC transactions) are co-ordinated by UK CLO Operations in Liverpool. They will refer Mutual assistance requests to the relevant risk teams for verification.
INTRASTAT Liaison Officer (ILO). The ILO is the main point of contact between the Regions and SATU. ILO allocates Educational, Sampling, and Assurance visits to individual Intrastat Officers, and will normally also undertake these activities in their own capacity as a visiting officer. Intrastat Officers have access to TS93, which provides details of Supplementary Declarations, dates of submission (useful for monitoring compliance) and contact details.
ILO’S are responsible for monitoring the performance of their trader population on an ongoing basis and taking action to deal with traders who default. The ILO will be the contact point between SATU and the local office. Normally Educational and Compliance visiting is done by the ILO. Intrastat penalty regime interviews will normally be conducted by local Intrastat staff. Sampling and Assurance work may be done by the ILO or be delegated to VAT assurance staff.
Insurance Premium Tax (IPT) law bears a similarity to VAT law. Generally, supplies subject to IPT are exempt from VAT. Discussion with your IPT officer might help to identify irregularities such as supplies that have escaped both regimes, or where the boundaries are not clear such as with warranties and insurance. Joint visits may be beneficial. See V2-1 Insurance Premium Tax and the Unit of Expertise for further guidance.
The Regional Landfill Tax Regional Liaison Officers may have useful information on sites used by builders, hauliers, skip hirers and waste disposal companies. An exchange of information on the usage of a tip by particular traders may be useful in testing credibility. See X-55 Landfill Tax.
The Departmental Accountants are professionally qualified and have skills, which equip them to give advice on complex VAT law, carry out statistical analysis and advise on the fairness and validity of proposed methods of assessment. They are generally also familiar with other taxes, company law, and the workings of accountancy firms. Customs Officers can be contacted if you have any information on, for example, drugs or tobacco smuggling, and often for verification of suspect import and export documents. Drugs Hotline numbers are well publicised both within and outside the Department.
The Personal Transport Unit at Dover is able to provide information on imported vehicles, which can be a very useful credibility check when visiting car or motorbike dealers. This information is supplied routinely to sift managers, who will use it as the basis for selection of some audit activities. Contact details and operational guidance can be found in V1-17 New Means of Transport.
Excise Officers and International Trade officers. As a normal part of their assurance effort, Excise staff now place less emphasis on physical checks, and more on the commercial systems of the trader. There should be a two-way flow of information when the trader has both VAT and excise involvement (for example importer with IPR, exporter with OPR). If a trader has excise involvement you should discuss with the excise officer whether they have any information, which can be of assistance in the VAT audit, or whether there are any indicators, which you may recognise, which may assist him in his assurance activities.
VAT Registration Service*. *Registration and deregistration work is done by the VAT Registration Service (VRS). The VRS will help with queries regarding changes in legal entity, re-allocation of VAT numbers, TOGCs, VAT groups and divisional registrations, exemptions from registration (if the majority of the turnover is zero-rated and the trader does not want to register), belated notifications, voluntary and intending registrations and disaggregation. Details of the postcodes served by the VRS and their contact details can be found in the Supplement to notices 700/1 and 700/11. Audit staff can help Registration sections by ensuring that all changes in address, bank details, etc, are confirmed in writing by the trader. The effective date of registration should also be checked on the first visit. These matters are covered in greater depth elsewhere in this volume, and in the VAT Registration (VATREG) manual.
The VRS can help with any technical problems on deregistration. You should note in your report any request by the trader to deregister, particularly any information on deregistering on the grounds of reduced turnover. Any decision regarding compulsory deregistration must be made by the visiting officer, not by the deregistration section.
Debt Management Units (DMUs) for “time to pay” requests and enforcement of outstanding debts. You should remember that enforcement action will not be taken if some inhibits are in place, so it is essential to review inhibits at every opportunity and remove them as soon as they are no longer needed. A check on DTR notes prior to your visit will alert you to any recent or imminent enforcement action. You should note on your visit report whether any assets are owned or leased. This makes any future distraint action more effective. DMUs should be advised of any appeals or reconsiderations against assessments as soon as possible.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Banking - Accounting adjustments can re-allocate money paid by a trader against the wrong VAT number and make other accounting adjustments if required.
Policy branches should be contacted if the problem is in their policy area and cannot be resolved by looking in guidance or consulting a UoE. Contact details for each policy area can be found in the Policy Group organisation chart on the intranet.
IeS Library Services at New King’s Beam House and Ralli Quays can, apart from offering a book loan service, provide information about individual Large Traders and about developments in particular trade sectors using commercial databases. The library can also provide details of tribunal decisions, EC cases, press articles, for example. Some of these are also available on the INTRANET and in the newsletter, Article Alert.
Large Payers Unit (LPU) is sited at Queens Dock, Liverpool. It is responsible for monitoring the payments of those traders paying in excess of £300,000 net tax per annum (S8-21 Section 8) and for the administration of the Payment on Account (POA) scheme. All requests for time to render returns and/or pay tax, whatever the circumstances should be referred to the LPU immediately. The LPU need to be notified of any registration changes, and requests from traders to change their existing arrangements. The LPU user interest should be set on EF and review code 443 (LPU) will be set on VISION. Payment on Account (POA) traders will also have review code 442 set.
There are many outside sources of help and information available to you, the following is not an exhaustive list. Care should be taken whenever contacting any of these sources. Information is disclosable only if it has been acquired by any department in the course of their own enquiries.
Colleagues within direct tax (former Inland Revenue) can provide information on levels of trading declared on annual accounts, which is of particular use to the Shadow Economy teams. They can also confirm or refute a trader’s argument that a tax avoidance scheme has only been implemented for direct tax reasons, any VAT implications being incidental. The Risk teams regularly liaise with their counterparts in the direct tax and should be the first point of contact for requests for information.
Exercises are in progress on closer working with the DTI, HSE, Department for Work and Pensions, the Immigration Service, Trading Standards and others. These should improve services to businesses through joint working (for example, combined visits where legislation allows and trader education) and help traders understand what they need to do to meet legislative requirements, whilst in return finding ways of raising compliance and reducing fraud, and creating a level playing field so that legitimate businesses can thrive.
Specifically in the area of Business Education, many closer working initiatives are in place, such as national trade exhibitions and seminars. Business Advice Open Days are events run throughout the country offering advice on all aspects of starting up and running a business. These events are run in partnership with all regulatory government bodies, as well as local and national business support agencies.
Local Authorities can be approached (via the Risk Teams) for trader specific information on planning permission, taxi firms, licences, for example.