I have just taken on a client who to cut a very long story short hit the VAT threshold within the 09-10 fiscal year, but is still waiting to be registered due to lost forms, mix ups with the VAT office, forms he didn't send etc etc. He hasn't submitted his 08-09 SA return yet (I know - sigh) and I am writing it up now.
There are doubts about whether he is making exempt supplies or not, I personally think he is and he filled in his forms wrong during the initial application, so I have resubmitted his VAT application with more accurate information.
Since taking this account on, I have retrospectively accounted for the VAT from the time he hit the threshold, ready for filing when the HMRC gets round to sorting their end out and confirming whether or not he can be registered and giving us an official date. I can put in an estimated SA return for 09-10 in the meantime which is no problem.
My query is about the 08-09 SA - I will be using the AIA for equipment that was purchased in 2008 during his start up. I know I can claim the VAT back on this equipment as part of the initial VAT return as the machinery is still in service, so my question is, how I account for this VAT in the next year's SA?
If the HMRC allows my client to register okay, the registration date will fall in the 09-10 SA year, so, in case the HMRC does not allow my client to register, not likely but I am erring on the side of caution here and I am preparing SA for 08-09 as it would have been prepared if it were filed on time, ie as if he was not registered, and will claim the AIA on the equipment inclusive of VAT.
Providing the HMRC send out the registration details and allow him to account for VAT, I will have to amend the estimated 09-10 SA, but how do I account for the £5000 claimed back on the previous year on the machinery?
My client has taken advice from an armchair expert down the pub that has told him he can just claim this equipment VAT back, which amounts to about £5000, bring down his VAT balance, and that's it. But surely there must be some other adjustment made as in theory, by claiming the AIA inclusive of VAT in the 08-09 return, he will have claimed an extra £5000, bring his profits down and saving on taxes, and them claiming it back again in the 09-10 VAT return, bringing down the VAT owed, he is taking advantage of this amount twice - surely this extra VAT amount of £5000 would have to be accounted for as some form of extra income that is subject to income tax?
This is doing my head in, I cannot find any guides on this at all. Thanks
-- Edited by mushroom on Tuesday 25th of January 2011 08:07:34 PM
-- Edited by mushroom on Tuesday 25th of January 2011 08:10:19 PM
I agree that if he claimed the full AIA on assets inclusive of VAT he will need to post the VAT reclaimed back to the asset pool and submit a balancing charge on the return. Basically the same as if had partly sold the asset.
The VAT refund will reduce the value of the fixed assets. As he hasn't been refunded that VAT yet, it would need to be entered as an accrual
