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Posted June 22, 2026

How to prepare for a VAT enquiry from HMRC

With HMRC increasing its focus on VAT compliance, businesses should expect a higher likelihood of enquiries in the coming years. Driven by efforts to reduce the tax gap, alongside increased recruitment of VAT officers and the growing use of data and technology, HMRC is becoming more proactive in reviewing VAT returns. Preparing in advance is therefore essential – not only to reduce risk but also to ensure enquiries are handled efficiently and with minimal disruption.

checkUnderstand HMRC’s Focus Areas

Recent trends suggest that HMRC is taking a closer look at repayment VAT returns, often requesting detailed transaction data and supporting invoices before releasing funds. There is also greater scrutiny of whether VAT has been correctly charged by suppliers and, crucially, whether input VAT has been validly reclaimed.

In addition, HMRC is increasingly reviewing governance, systems and controls, particularly in larger organisations. Initiatives such as “Project Snowball” demonstrate a shift towards examining how VAT data flows through a business, rather than simply checking individual transactions. This means businesses must be able to evidence not just accuracy, but also robust processes.

Review and Strengthen Your Processes

Preparation starts with ensuring your VAT processes are fit for purpose.

Businesses should:

  • Carry out a VAT risk assessment to identify potential problem areas
  • Implement appropriate controls to mitigate these risks
  • Where possible, automate processes to reduce human error
  • Regularly review VAT returns against underlying records

HMRC’s Guidelines for Compliance 8 (GfC8) provide a useful framework for this. While not legally binding, following this guidance demonstrates that a business has taken reasonable care – something that can significantly reduce the risk of penalties if errors are identified.

Document Decisions and Judgements

VAT is a complex tax, and many areas require judgment rather than straightforward application of rules. Different professionals can interpret the same issue differently, so it is vital to clearly document your reasoning.

If you take a particular VAT position:

  • Record the facts considered
  • Explain the rationale behind your decision
  • Obtain professional advice where appropriate
  • Keep written evidence of that advice

This documentation can be invaluable in demonstrating to HMRC that your business acted responsibly and made informed decisions, even where there is disagreement on interpretation.

Prepare for the Practicalities of an Enquiry

HMRC enquiries can be resource intensive, often covering multiple VAT periods and requiring access to detailed records.

To reduce stress and disruption:

  • Ensure records are complete, organised and easily accessible
  • Reconcile VAT returns to accounting systems regularly
  • Test your data extraction processes in advance
  • Identify key contacts within your business to handle enquiries

Carrying out an internal review before HMRC gets in touch can highlight and resolve issues early, making any eventual enquiry more manageable.

Take a Constructive Approach

While a VAT enquiry may feel daunting, it can also be an opportunity, it allows businesses to review systems, strengthen controls and gain clarity over their VAT position. Engaging openly with HMRC and asking questions where requests are unclear can help streamline the process. It’s also important to remember that an enquiry does not guarantee a “clean bill of health”, HMRC can revisit periods if new issues arise, so ongoing compliance remains key.

VAT enquiries are becoming more frequent, but with the right preparation, they don’t have to be disruptive. By strengthening controls, documenting decisions, and staying aligned with HMRC expectations, businesses can not only reduce risk but also approach enquiries with confidence.