HMRC publishes good practice in relation to VAT accounting and compliance processes
The UK’s HMRC has published on 18 September 2024 a wide ranging Guidelines for Compliance (GfC) set of best practises for VAT controls. GfC’s are a series of summaries of HMRC’s views on complex, widely misunderstood or novel risks that can occur across tax regimes. Aside from VAT, they also cover Corporation Tax, Capital Allowances, Transfer pricing and Employer duties.
This new set, GfC8, covers recommending controls, processes, systems and reviews for:
- General compliance controls
- Order to Cash
- Procure to pay
- Employee expenses
- VAT reporting
- Outsourcing
Read more in our UK VAT Guide.
GfC* – help with VAT compliance controls
HMRC guidelines provide businesses with recommendations to ensure accurate VAT declaration through proper accounting and compliance processes. They highlight key areas of a business’s operations, such as sales, purchases, and VAT return preparation, that influence VAT compliance. The guidelines aim to reduce the risk of VAT errors by promoting the use of Making Tax Digital (MTD)-compliant software and offering additional control points to support good compliance practices.
These control points are suggestions, not mandatory, and are tailored to reflect the complexity and size of different businesses. They help businesses assess whether they have adequate controls in place, identify risks, and develop strategies to improve compliance. While not exhaustive or universally applicable, the guidelines provide businesses with tools to mitigate the risk of VAT assessments, interest, and penalties by encouraging regular reviews of systems and processes.
Who should read the VAT guidance
GfC8 is particularly relevant for those involved in VAT governance, controls, and submission, including VAT managers, finance and IT professionals, senior management with VAT oversight, and VAT specialists, whether in-house or external providers like agents and shared service centres. Since different business areas may have conflicting objectives, the guidelines emphasize the importance of collaboration between departments whose decisions impact VAT reporting to reduce errors.
In cases of technical uncertainty, businesses should refer to HMRC’s existing manuals and guidance. These guidelines complement, but do not alter, HMRC’s interpretation of VAT law. Overall, the guidelines are designed to assist businesses in minimizing VAT risks and improving compliance through better internal controls and processes.
