Client Snapshot
Key Highlights
Client Background
The client is a private investment firm managing a diversified global real estate portfolio. The London portfolio comprises multiple income-generating assets with varied VAT treatments, including standard-rated, exempt, partially exempt, and reverse charge transactions.
Given the complexity of property-related VAT regulations in the United Kingdom, precise invoice classification and accurate input tax recovery were critical to maintaining compliance with HM Revenue & Customs (HMRC) requirements. However, VAT coding inconsistencies at the invoice-booking stage were creating downstream inefficiencies during quarterly return preparation and financial review.
Business Challenge
As transaction volumes increased across properties and vendors, the VAT accounting process lacked structural discipline at source. This resulted in recurring inefficiencies and elevated compliance risk.
VAT Coding Framework Gaps
Absence of a standardized VAT coding framework during invoice entry, leading to inconsistent application of VAT treatments and incorrect input tax categorization.
Quarterly Filing Rework
Frequent reclassification adjustments during quarterly VAT return preparation with heavy reliance on corrections at filing stage rather than prevention at source.
Reconciliation Delays
Delays in VAT control account reconciliation with inconsistent supporting schedules and limited audit trail for validating tax positions.
Compliance Risk Exposure
Increased exposure to HMRC scrutiny due to reporting inconsistencies, particularly in complex categories like reverse charge, exempt, and partially exempt cases.
Need for Embedded Governance
The client required a structured VAT governance model embedded within the Accounts Payable workflow to eliminate rework and strengthen compliance integrity.
OHI's Approach & Solution
OHI conducted a comprehensive diagnostic review of the client's VAT lifecycle, from invoice booking through return submission.
Diagnostic Review Activities
- — Review of VAT codes configured within Yardi
- — Analysis of historical VAT adjustments and recurring correction patterns
- — Evaluation of input tax recovery logic and partial exemption considerations
- — Identification of high-risk VAT categories including reverse charge, zero-rated, exempt, partially exempt, and out-of-scope transactions
- — Assessment of VAT control account reconciliation methodology
Framework Objectives
- — Align VAT codes strictly with UK VAT legislation
- — Establish a standardized VAT coding matrix with transaction-level guidance
- — Introduce a maker–checker validation mechanism at the invoice-booking stage
- — Implement a standardized VAT control account reconciliation template
VAT Code Structuring
- • Reconfigured VAT codes within Yardi to eliminate ambiguity
- • Mapped tax codes accurately to designated General Ledger accounts
- • Segregated standard-rated, reduced-rated, zero-rated, exempt, reverse charge, and out-of-scope transactions
- • Embedded logic to support partial exemption tracking
Impact: Stronger consistency and clearer tax treatment across property transactions.
Invoice Processing Controls
- • Integrated VAT code validation controls at the invoice-entry stage
- • Introduced mandatory tax code selection protocols
- • Established vendor VAT registration verification procedures
- • Reduced manual override risk through system-driven controls
Impact: Reduced downstream rework and improved coding accuracy at source.
Training & Process Alignment
- • Conducted structured training sessions for Accounts Payable and finance teams
- • Circulated a comprehensive VAT coding matrix with practical property-based scenarios
- • Introduced an exception-tracking mechanism for non-standard transactions
- • Defined escalation protocols for complex VAT treatment cases
Impact: VAT accuracy became embedded in daily operations rather than corrected during filing.
Results and Impact
| KPI | Before OHI | After OHI | Impact |
|---|---|---|---|
| VAT Rework During Filing | High | Reduced | 30–40% Reduction |
| Input Tax Accuracy | Inconsistent | Structured & Validated | Improved Recovery |
| VAT Return Timelines | Extended | Accelerated | Faster Filing |
| VAT Control Reconciliation | Delayed | Standardized & Timely | Improved Governance |
| Compliance Risk Exposure | Elevated | Controlled | Strengthened HMRC Compliance |
OHI's structured VAT governance framework transformed the client's tax reporting process from reactive correction to proactive compliance. By embedding control at the invoice-booking stage, the engagement eliminated recurring reclassification work, improved the reliability of input tax recovery, and significantly strengthened audit defensibility. The client now benefits from faster quarterly VAT filings, cleaner reconciliations, and enhanced confidence in regulatory compliance.
“OHI brought structure and technical rigor to our VAT processes. Their ability to embed controls at the source significantly reduced rework during quarterly filings and improved our confidence in VAT reporting accuracy. The engagement has strengthened both our compliance framework and operational efficiency.”