A strong VAT control system should clearly identify who is responsible for VAT, document the processes involved and regularly check that controls are working. HMRC also recommends keeping procedures up to date when the business, its systems or the VAT rules change.
Businesses should also review how VAT data moves through their systems. This includes checking tax codes, customer and supplier information, VAT reporting and the use of manual adjustments. For larger businesses, HMRC recommends a VAT risk register to record risks, controls and how their effectiveness is tested.
It is also important to check that controls are working as intended. This could include reviewing a sample of transactions, checking VAT calculations and reconciliations, and investigating any unusual or unexpected results. Any errors or weaknesses identified should be recorded and followed up to reduce the risk of the same problem happening again.
The guidance also covers Making Tax Digital, including ensuring that VAT records are complete and accurate and that digital links between systems work correctly.
While the guidance is aimed particularly at larger and more complex businesses, it provides useful points for any VAT-registered business to consider when reviewing their VAT control system.
