HMRC regards cash traders as a high risk for underpaying VAT, and they are usually targeted by special teams. Many HMRC visits focus on mainly Cafés and restaurants. HMRC’s computers usually detect businesses that are paying less VAT than similar businesses in the same trade or region. HMRC has the power to asses tax from the last 20 years if an officer thinks that the business owner has deliberately underpaid VAT. The officers will then focus on two methods:
1) They will call into your business unannounced and ask the owner or manager to produce a till roll of the days takings. They will then compare the total sales figure to the average declared sales figures on recent VAT returns. If a significant shortfall is noticed then the officers will carry out further checks and observations.
2)Officers will visit your business and acting as ordinary customers over the period of two or three days. They will record your level of trade, this could include how many customers you receive on each of their visits, what appears to be the average spend, the level of sales they see.
HMRC has the power to asses tax from the last 20 years if an officer thinks that the business owner has deliberately underpaid VAT.