VAT Benchmarking.

HMRC are currently writing to around 7,500 furniture retailers and car repair businesses asking the owners to check the figures reported on their VAT returns.

If you receive one of those letters, don’t panic. HMRC do not believe your VAT return is wrong, they are just asking you to double check your sales and purchase figures.

The HMRC letter asks you to work out your VAT mark-up ratio by comparing the difference between your sales and purchases (i.e. gross profit), as a percentage of the total of the purchase costs as reported on your VAT return.

HMRC then asks you to benchmark your VAT mark-up ratio to the standard ratios for your business sector, which are provided in the letter.

It suggests you should calculate the VAT mark-up ratios from VAT returns submitted in the last 12 months, and compare those to the standard mark-up ratios for your trade sector. If your VAT mark-up ratio falls outside the standard range, you should review the figures to be included in boxes 6 and 7 on your next VAT return.

This all sounds very complicated, and it is. HMRC are trying to bamboozle you with ratios and percentages.

In fact you are not obliged to do anything in response to HMRC’s letter. It does not ask for a reply and it is not part of a tax investigation.

If you would like us to double-check the amounts reported on your VAT returns we would be happy to do so. Sometimes it is a good idea to do a random check that no sales or purchases have been left out accidentally.

News / Blog

19th
July

Understanding Bridging Loans

A rather common question that is asked by many who are new to the concept is, “What exactly can you…

5th
July

Five things to Consider before Applying for Development Finance

This week, we shall be discussing the five important questions you will need to ask yourself before choosing to give…

31st
May

The Rise of the Flexible Workspace

As we are living in a society that is forever changing, business workspaces are equally subject to change as well.…

31st
May

Planning an Exit Strategy for your Small Business

If you own a small business, or you own shares in someone else’s small business, it is likely that you…