The VAT health check: Why now is a good time to have a look

Tuesday, October 14, 2014

by Nick Ryan

No business wants to discover it is VAT non-compliant at the hands of the tax authorities which could have a significant detrimental impact to its bottom line. Nor does a business want to miss a potential for savings and cost efficiencies by not identifying opportunities for same or for avoiding future complications by taking remedial action. Now is the right time to complete a VAT health check to review the businesses processes.
Here are some questions that should trigger the need to complete a VAT health check
• Not had a Revenue audit or query for a while?
• Recently changed focus/direction or developed a new product/income stream?
• Acquired another business, re-structured or expanded?
• Operate a VAT compliance scheme or use a dual use method?
• Your activities are subject to VAT at different VAT rates?
Our VAT health check does not focus on the past nor is it looking to identify retrospective liabilities. Our VAT health check focuses on the “now” and the future. The aim of the review is
• To assess the strengths and weaknesses of your current VAT compliance systems.
• Provide guidance on what changes can be made to improve on these to create further efficiencies.
• Identify opportunities to minimise the VAT throughput for the business and,
• Maximise VAT recoveries.
Compare your business to your car, if you don’t service the car then the likelihood of faults occurring, breakdown and under performance increase as does the cost in keeping the car if you neglect it.
The VAT Practice VAT health check operates as an integral part of the audit approach and provide for that added value of comfort, an opportunity to identify potential savings for the client both retrospectively and for the future. From recent reviews completed we have identified significant VAT savings from the use of incorrect VAT rates, internal accounting failures and incorrect use of VAT schemes. Sometimes it is the simplest of things that can produce the biggest saving though the key in all cases is the ability to look for it and identify it.
A key objective for all businesses is cost reduction in order to maximise profit yet recent surveys have identified that less than 20% of businesses consider VAT, a key component cost for most businesses, as part of the overall objectives in formulating a Strategy and have performance measures and goals set for the management and control of VAT.
The surveys also show that those businesses that do manage their VAT still experience a potential error count of circa 10% of their VAT throughput even with managed controls in place. Therefore a business with a €5m turnover and €450k VAT throughput has a potential VAT error, excluding penalties and interest, of €45k per annum. If this goes unchecked and is identified by Revenue then this could result in a six figure cost including penalties and interest to the business, excluding the additional costs in managing the process.
Just consider what the possible impact to a business would be were that business does not fall into the 20% category, potentially crippling.
Interestingly, the majority of errors identified can be caused by the simplest of mistakes within the management and control process.
Key objectives of the review:
• To identify opportunities that can improve the management processes for VAT
• To highlight areas of concern and shortfalls together with the remedies required to correct them.
• To develop the business’ focus to become VAT efficient.
• To reduce a business’ overall cost and level of risk thereby enhancing their bottom line profit.
Benefits for your business:
The review can provide a business with the kick start required to formulate and implement a clear VAT strategy to support its overall strategy and meet its targets.
By doing so, a business, through the implementation of a clear VAT strategy together with performance goals on the management of VAT can:
• Improve cash flow.
• Reduce costs.
• Improve business processes.
• Enhance bottom line profit.
Why use the VAT Practice
We are an independent practice providing a range of boutique VAT services. Our focus for these reviews is to assist businesses in developing a focused approach to VAT and in ensuring VAT becomes a business “deliverable”. A secondary aim is assist a business in strengthening their VAT management controls and improving performance in the management and control of VAT. The reviews are not there to identify specific errors requiring disclosure. We have 20 years experience in advising businesses on Irish, UK and international VAT issues.
Finally, we apply a fixed fee approach for our VAT health check service.
For more information, contact Nicholas Ryan of the VAT Practice by telephone on + 353 238838181 or email,

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