What does our VAT return review service

VAT returns are more than just routine filings — they’re a crucial compliance touchpoint that can carry significant financial and legal implications if errors go unchecked. Reviewing a client’s VAT return is never just a tick-box exercise, it’s a comprehensive process that ensures accuracy, maximises recoverable VAT, and protects clients from HMRC scrutiny.

In this blog, we explain what we look for when reviewing VAT returns — and why that level of diligence matters.

Accuracy of VAT Calculations
One of the first steps is ensuring that figures submitted to HMRC are accurate and reconciled. We review:

• VAT on sales (output VAT) – Has VAT been correctly applied to all taxable sales? Are the correct rates used (standard, reduced, zero, exempt)?
• VAT on purchases (input VAT) – Is VAT being reclaimed only on allowable business expenses? Has the correct amount been claimed?
• Net VAT position – Does the return reconcile with the accounting records (e.g. bookkeeping software, bank statements)?

Why it matters: Even small mistakes can lead to over- or underpayment, interest charges, or HMRC penalties.

Correct VAT Rates and Classifications
Businesses often deal with a mix of VAT rates — and that’s where errors can creep in. We check:

• Whether goods/services are standard-rated (20%), reduced (5%), zero-rated, exempt, or outside the scope.
• Correct treatment of international transactions (EU and non-EU imports/exports, reverse charge).
• If sector-specific VAT rules apply — e.g. for hospitality, construction, farming, education, or health.

Why it matters: Misclassifying supplies can result in underpaid VAT, leading to HMRC assessments going back four years or more.

Eligibility of Input VAT Claims
Not all input VAT is recoverable. We scrutinise claims to ensure:

• Purchases are for business purposes (not private or mixed-use unless properly apportioned).
• VAT invoices meet HMRC’s requirements (correct VAT number, description, etc.).
• Items such as cars, entertainment, or non-VAT-registered supplier invoices aren’t wrongly reclaimed.

Why it matters: Ineligible claims are one of the most common areas flagged by HMRC during inspections.

Partial Exemption and Apportionment
If a business has both taxable and exempt income, we review how input VAT is apportioned:

• Is a partial exemption method in place?
• Has the de minimis test been applied correctly?
• Are mixed-use costs split using a reasonable, justifiable method?

Why it matters: Incorrect partial exemption calculations can distort VAT returns and trigger HMRC enquiries.

Reviewing for Compliance with VAT Schemes
We check whether the client is using a VAT scheme and whether it’s still suitable:

• Flat Rate Scheme – Are the correct sector rates being applied? Has turnover exceeded the threshold?
• Cash Accounting Scheme – Are VAT liabilities matched to payments received/made?
• Annual Accounting Scheme – Are instalments correctly calculated and returns submitted on time?

Why it matters: Using an unsuitable scheme could lead to cash flow issues or compliance breaches.

Review of Digital Record-Keeping and MTD Compliance
Making Tax Digital (MTD) is now mandatory for all VAT-registered businesses. We ensure:

• Digital links are in place between software systems.
• The VAT return is submitted using MTD-compliant software.
• Records are being kept in the correct format and retained for the required time.

Why it matters: HMRC is actively enforcing MTD requirements. Non-compliance can lead to penalties.

Late VAT Returns or Payments
We always review:

• VAT return submission dates and payment deadlines.
• If previous returns were late or underpaid.
• If Time to Pay (TTP) arrangements are needed in case of cash flow challenges.

Why it matters: Repeated late filings or payments can lead to default surcharges and increase HMRC scrutiny.

Identifying Trends, Anomalies, or Risks
We don’t just look at one return in isolation. We review trends across multiple periods:

• Are there sudden spikes in VAT reclaimed or charged?
• Is there a pattern of errors or inconsistencies?
• Do the VAT returns tie back to annual accounts or management figures?

Why it matters: A proactive review helps us identify and fix issues before they escalate.

Final Sign-Off and Submission
Before any VAT return is submitted to HMRC, we ensure:

• Our client has reviewed and approved the figures.
• We have supporting documentation in case of future inspection.
• The return is submitted on time and with confidence.

Final Thoughts: Why Expert VAT Review Matters
VAT is a self-assessed tax — but HMRC expects you to get it right. Errors can lead to backdated assessments, interest, penalties, or even investigations. That’s why having an experienced accountant review your VAT returns is about protecting your business, improving accuracy, and adding value.

Looking for Expert VAT Support?
At Lewis Brownlee we support businesses across a wide range of industries with reliable, accurate VAT compliance and strategic advice. Whether you’re handling VAT in-house and want a second set of eyes, or you’d prefer us to manage everything for you — we’re here to help.