How a VAT health check turned an HMRC Enquiry into a £12,000 refund

The challenge

Initially confident that they could manage the routine check, the organisation soon became overwhelmed by:

• The volume and complexity of information HMRC required
• Technical VAT queries around their supplies and partial exemption
  recovery
• Historic issues that had not been reviewed for several years

As questions expanded, HMRC widened the scope of the check to cover four years’ worth of VAT returns, issuing preliminary assessments totalling around £40,000.

Recognising the risk and resource strain, the organisation engaged our firm to take over.

Our approach

1. Comprehensive VAT Health Check

We began with a comprehensive, in depth review of the organisation’s VAT position, including:

• The VAT liability of all income streams
• The structure and categorisation of supplies
• Their partial exemption method (which had not been revisited for several years)
• VAT treatment of grant funding and cost sharing arrangements

This detailed analysis gave us a strong technical understanding of their operations and equipped us to represent their case confidently with HMRC.

2. Immediate HMRC Liaison

With the health check completed, we assumed full responsibility for:

• Managing all communications with HMRC
• Responding to technical queries
• Challenging incorrect assumptions
• Streamlining evidence requests

Our deep insight into the client’s processes meant we could answer HMRC quickly and accurately, reducing delays and uncertainty.

3. Voluntary Disclosure of Historical Errors

During our review, we identified historic inaccuracies that the organisation had not previously recognised. We made a voluntary disclosure, demonstrating transparency and significantly reducing the risk of penalties.

4. Reclaiming Missed Input Tax

We also identified several areas where input tax had been underclaimed in previous years, allowing us to submit additional reclaim adjustments.

The results

Our intervention completely transformed the outcome of the enquiry:

• Initial HMRC assessments of £40,000 were reduced to £0
• Additional historic input tax was identified
• With the final outcome being an approximately £12,000 refund from HMRC
• No penalties were applied

The VAT Health Check not only resolved a challenging HMRC enquiry but also strengthened the organisation’s long-term VAT compliance, improved their partial exemption methodology, and highlighted opportunities for future VAT efficiencies.

We’re here to help

Our VAT Health Check service helps organisations:

• Prepare for and manage HMRC enquiries
• Identify VAT risks before HMRC does
• Strengthen VAT processes and reduce exposure
• Maximise VAT recovery opportunities
• Achieve peace of mind in a complex and evolving VAT landscape

If you’d like to discuss how a VAT Health Check could support your organisation, please get in touch with your usual Scrutton Bland adviser, email hello@scruttonbland.co.uk or call 0330 058 6559.