New HMRC Guidelines for VAT Compliance

19 September 2024| CATEGORIES: HMRC, process controls, VAT guidelines| TAGS: New HMRC guidelines, VAT compliance

HMRC has published its Guidelines for Compliance (GfC8) – Help with VAT compliance controls. The guidance sets out what HMRC considers to be good practice in relation to VAT accounting and compliance processes.

The guidelines highlight particular business systems and processes that may impact overall VAT compliance. This includes sales, purchases, and preparation of the VAT return. The guidelines set out HMRC’s recommended approach to compliance and include controls that are designed to help businesses reduce the risk of error when accounting for VAT.

Whilst Making Tax Digital for VAT is aimed at reducing the risk of human errors in the compliance process, these guidelines help businesses with additional controls. The guidelines include examples of good compliance controls and are intended to help businesses assess whether they have sufficient controls within their systems and VAT processes.

The guidance is not intended to be exhaustive or expected to apply equally to all businesses.  The controls should be applied to reflect the complexity and scale of a business. They are designed to help businesses identify risks and develop a robust strategy to mitigate those risks.

The guidance highlights that HMRC expect all key VAT processes and controls to be documented and kept up to date.

The guidelines cover the following areas:

• Purpose, scope and audience
• General approach to VAT compliance controls
• Order to cash
• Procure to pay
• Employee expenses
• Record to report
• VAT reporting
• VAT reporting – manual adjustments
• Outsourcing
• Next steps – correcting errors and guidance.

Who should use these guidelines?

These guidelines will be especially helpful to those responsible for the governance, controls, processing and submitting of VAT returns. This would include:

• VAT and tax managers
• finance and IT professionals involved in VAT and tax
• senior management with VAT and tax oversight, such as the designated senior accounting officer
• VAT specialists who process and submit the VAT return, whether in-house or within third party providers including shared service centres
• VAT agents.

Businesses should review the new Guidelines for Compliance to assess whether HMRC’s recommendations align with their existing VAT risk and control framework.

A survey is included at the end of the guidance that enables businesses to provide feedback which will be used by HMRC to establish any areas that are difficult to understand so future improvements can be made.