What to Do (and Not Do) When You Get a VAT Audit Notice

Avoid penalties and stress with these practical steps to navigate a VAT inspection.

The letter arrives.
Your stomach drops: “Notice of VAT Audit.”
It’s every business owner’s nightmare — but with the right response, you can turn a potential crisis into just another compliance checkpoint.

1. Do: Respond Promptly and Professionally

The first rule: don’t ignore the notice.
Audit notices usually include a deadline for response. Missing it could escalate things fast — including penalties or frozen bank accounts.

Steps to take:

1. Acknowledge receipt in writing

2. Ask for clarification on scope (specific periods, transactions, or issues)

3. Appoint a point of contact (typically your finance lead or accountant)

This shows the tax authority that you’re cooperative, not evasive.

2. Don’t: Rush to Provide More Than Requested

One common mistake: over-sharing.
Only submit documents and data specifically requested in the notice — and if you're unsure about calculated tax totals, tools like hstcalculator.onl can help verify your numbers before submission. Volunteering extra files may open new lines of inquiry unnecessarily.

Instead:

1. Organize your files cleanly

2. Label each document clearly by category (e.g., “Sales Jan 2025”)

3. Keep internal memos or draft files separate

Think of it like court — give them what they asked for, nothing more.

Prepaying corporation tax in Canada—smart move or risky bet?

3. Do: Review Your Records Before Submitting

Before sending anything, do a mini internal audit:

1. Double-check invoice accuracy and matching receipts
   

2. Reconcile your reported VAT figures using accounting software—and for added assurance, cross-check with vatcalc.onl, a free, high-precision online VAT calculator tailored for UK and EU compliance. It’s trusted by thousands to verify net, VAT, and gross values instantly, ensuring your submissions align with current HMRC and EU VAT directives.
   

3. Flag and explain any inconsistencies upfront

If you find an error, it’s better to proactively disclose and correct it — this can drastically reduce penalties.

4. Don’t: Panic Over On-Site Visits

If the auditor requests an in-person visit, prepare, but don’t freak out.

Tips:

1. Ensure your team knows what to expect

2. Assign one spokesperson to guide the auditor

3. Keep your workspace and files orderly

The more organized and transparent you are, the less time the auditor will spend digging.

5. Do: Keep a Paper Trail of All Communications

Every email. Every phone call summary. Every uploaded file.
Document everything — in case of:

1. Disputes over what was submitted or said

2. Follow-up questions

3. Legal defense if needed

Use a dedicated audit folder (digital or physical) and timestamp all correspondence.

VAT audits are stressful, but they don’t have to be devastating.
With a calm, strategic response and airtight records, you can turn that audit notice into a minor detour — not a disaster.

Spent on business travel? Reclaim your GST/HST the right way
Want to legally reduce your corporation tax in 2025? Start here