Why the timing of discovery matters
VAT errors are rarely dramatic and almost never deliberate. A supply type is coded once and then repeated for three years. An overseas subscription is expensed without a reverse charge entry. An export is zero-rated and the evidence is never filed anywhere.
What makes them expensive is duration. A misclassification worth a few thousand dirhams per quarter is unremarkable in one return and substantial across twelve of them.
And the route available to fix it depends entirely on who finds it first. A voluntary disclosure made before the authority raises a query is treated quite differently from the same error surfaced in an audit. That difference is the reason this exercise exists.
Who needs it
Businesses that have been filing their own returns and want to know whether the treatment holds. Businesses with mixed supply types, meaningful overseas costs, exports, or partial exemption — all of which involve judgement rather than transcription.
Businesses changing adviser, on either side of the handover. Businesses about to raise investment or sell, where somebody else is going to run this review less sympathetically. And businesses that have received an FTA query and want to understand their position properly before responding.
How we do it
Every engagement is different in detail, but the shape is consistent:
- Sample the supply classification across periods, testing standard-rated, zero-rated, exempt and out-of-scope treatment against what was actually supplied rather than how it was coded.
- Test input tax recovery. Valid tax invoices held, blocked items excluded, apportionment applied correctly where the business is partly exempt.
- Check the reverse charge population. Overseas purchases identified from the ledger, and the corresponding entries traced in the returns.
- Verify export evidence supporting zero-rated supplies, on a sample basis.
- Reconcile returns to the accounting records for each period, which frequently surfaces differences nobody had noticed.
- Quantify the exposure, error by error and period by period.
- Recommend a route. Voluntary disclosure, prospective correction, or no action — with the reasoning for each.
What we find most often
The findings are consistent enough that we can predict most of them before opening the file:
- Exempt supplies treated as zero-rated, with input tax recovered that should have been restricted
- No reverse charge entries at all, in businesses with obvious overseas software, advertising or consultancy costs
- Input tax recovered on entertainment or other blocked items
- Zero-rated exports with no retained evidence to support the treatment
- Partial exemption ignored entirely after an exempt income stream was added to a previously fully taxable business
- Bad debt relief never claimed — the one finding that usually goes in the client’s favour
- Returns that do not reconcile to the accounting records, in either direction
Not every finding is a liability. Unclaimed bad debt relief and under-recovered input tax are real money in the other direction, and in several reviews they have exceeded the exposure found.
Deciding whether to disclose
Finding an error does not automatically mean making a voluntary disclosure. The decision depends on the size of the error, the periods affected, whether it is recurring or isolated, and whether it can be corrected prospectively instead.
What we will not do is find an error and leave you to sit on it without a recommendation. Where disclosure is the right route we say so and explain why; where a prospective correction is adequate we say that instead. The judgement is documented either way, which matters if the question comes up later.
What is never the right answer is knowing and doing nothing. That converts an error into a decision, and decisions are judged differently.
Where this goes wrong
The same problems recur, and every one of them was cheaper to prevent:
- Assuming filed means correct. A return that submitted successfully has been accepted, not verified.
- Reviewing only the current period. Recurring errors are defined by their duration, and a single quarter tells you almost nothing.
- Checking the return without checking the records. The return is a summary; the exposure lives underneath it.
- Waiting for a query. The route available to fix an error narrows considerably once someone else has found it.
- Ignoring findings in your favour. Under-recovered input tax and unclaimed bad debt relief are recoverable, and businesses routinely leave them.
- Disclosing reflexively without assessing whether prospective correction would be adequate.
Timing and deadlines
Best done before an FTA query rather than after one, and before a transaction rather than during it. Practically, a business filing its own returns should have this done every couple of years, and immediately on any significant change — a new revenue stream, a new market, a new exempt activity.
The review itself is a matter of days once records are available. Where it leads to a voluntary disclosure, that is prepared separately and promptly, because delay between discovery and disclosure is itself unhelpful.
What you get
- A written report of findings by period, with the exposure quantified
- Findings in your favour identified alongside those against
- A recommended route for each finding, with reasoning
- A corrected treatment specification to apply going forward
- Where relevant, a voluntary disclosure prepared for your approval
Documents we will ask for
What we ask for up front:
- Filed VAT returns for the periods under review
- Sales and purchase ledgers for the same periods
- Bank statements and reconciliations
- A sample of sales invoices covering each supply type
- Export documentation, where zero-rating has been applied
- Details of overseas purchases and subscriptions
- Any FTA correspondence received
Fees
Fixed fee, scoped on the number of periods reviewed and the transaction volume in them.
A voluntary disclosure, where one is recommended, is quoted separately. We do not price this work as a percentage of anything recovered, because that would give us an interest in the size of the finding rather than in its accuracy.
Related
Frequently Asked Questions
What does a VAT health check involve?
A sample review of supply classification, input tax recovery, reverse charge treatment and export evidence across filed periods, reconciled back to your accounting records — with any exposure quantified period by period and a recommended route for each finding.
How many periods should be reviewed?
Enough to establish whether an error is recurring or isolated, which usually means at least four quarters. Recurring errors are defined by their duration, so a single period tells you very little.
Will you find things in my favour?
Frequently. Unclaimed bad debt relief and under-recovered input tax come up regularly, and in several reviews they have exceeded the exposure found. The review is not one-directional.
Do I have to make a voluntary disclosure if you find an error?
Not automatically. It depends on size, the periods affected, whether it recurs, and whether prospective correction is adequate. We give you a recommendation with reasoning either way. What is never right is knowing and doing nothing — that converts an error into a decision.
Is this the same as an FTA audit?
No. It is a private review you commission, and the findings are yours. The point of doing it is precisely that the routes available to correct an error are wider before the authority has raised a query.
What triggers an FTA query in the first place?
Moving into a refund position without an obvious cause, sustained high input tax relative to output tax, zero-rated supplies without export evidence, no reverse charge entries in a business with obvious overseas costs, and repeated voluntary disclosures suggesting a process problem.
How often should we do this?
Every couple of years for a business filing its own returns, and immediately after any significant change — a new revenue stream, a new market, or a new exempt activity that changes the partial exemption position.
Can you review a business we are about to acquire?
Yes, and it is a sensible thing to do before signing rather than after. Historic VAT exposure follows the entity, and a recurring classification error across several years can be a material number. We run the same review and report it in a form that can sit alongside the rest of the financial due diligence.
We use an accounting system with automatic tax codes. Does that not handle it?
It handles consistency, not correctness. If a supply type was coded wrongly when it was set up, the system will apply that treatment faithfully to every transaction thereafter — which is exactly how a small error becomes a large one. Automation makes a review more useful, not less.
Send us the last four returns and the ledgers behind them. Fixed fee, and findings in your favour count too.
Check my compliance status 058 101 9570
Last reviewed 27 July 2026. Rates, thresholds and deadlines change — the e-invoicing provider deadline has already moved once. Confirm current requirements with the Federal Tax Authority before acting, or ask us to check your position.