Hi, we are in some bother with the Inland revenue VAT, they have been on our case for years, dont know why perhaps we are the unlucky ones that they stick too.
Here is our problem...our client released a £100k payment to us 3 years ago, this payment was sent to a different account (don't ask why because i cant remember) we issued the invoice for the 100k to our client but we never put it in our return. Meaning, this money never came into our business bank but the invoice was issued.
Inland revenue are asking about this...."We have reason to believe that you've issued this invoice but have not submitted it, please explain"
Are we in deep ****??
I really need advice on the next step to take as we dont want to show our other account. Many thanks in advance.
Inland revenue are asking about this...."We have reason to believe that you've issued this invoice but have not submitted it, please explain"
Are we in deep ****??
I really need advice on the next step to take as we dont want to show our other account. Many thanks in advance.
Doesn't sound good.
It will probably be best to consult a VAT expert but if this is a genuine error it will probably be less painful biting the bullet and coming clean. Even if it is not, they are aware of the understated amount, so again probably best to put your hands up to it.
I think if you fess up now it will be classed as self disclosure, which incur lower penalties.
Pretty sure that if HMRC investigate, they can request any documents that relate to the business, which will include the receiving account.
Any idea how they became aware the the 100K was not declared? Are they already investigating your business
You obviously have your reasons but it troubles me a little that you would rather they didn't see the other account.
Without knowing the full details, like I said, it is probably best to take expert advise, from a specialist.
Sorry to say it but yes, this sounds as though you are in deep ****.
this sounds like the sort of question that you really need to ask on Accountingweb. You will get some quite aggressive responses over there but amongst them you will get some absolutely spot on advice.
The overriding factor here is that the amount involved is material. It's not excatly like misposting of a fuel receipt. HMRC is not going to believe that this sort of money was subject to the perfect storm scenario of being put in the wrong account and not put through the books.
To prepare you to go over to accountingweb to post your questions, from the description that you've given it does seem that (please forgive me if I have misunderstood your post).
An invoice was raised but not put through the books
Money associated with the invoice was received but not put into the business account.
You make a worrying statement that you don't want them (assume HMRC) to look at your other account!
Considering the above there seems to be a serious case (potential fraud) to be answered and as such I would say that after getting some general advice from accountants over on accounting web rather than predominantly bookkeepers on this site you really, really need to speak with your companies accountant as a matter of urgency.
regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
had to rewrite my response a couple of times as at first attempt it came accross too negative... Not sure that the follow up was much better.
You ask about how HMRC will have known about the 100k?
HMRC will have been informed of any iregularities by the bank who are subject to MLR regulations the same as ourselves. If such results in an investigation, where there are linked accounts these will also have been disclosed to HMRC.
If HMRC consider the case a serious fraud case then they will already know the answers before they ask the questions.
As you suggest self disclosure has to be the best option but at the sort of money we're talking here the client needs hand holding by their accountant through the process or HMRC will definitely go for the juggular with penalties, surcharges and interest.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Guys, thank you for your prompt and useful replies.
You see, we had a very bad accountant back in 2008, most of his advice was non-sense and was only really picked up when we started getting huge penalties from Inland Revenue, so we changed accountant. It was from the time of the old accountant that this payment went through and he advised to put it into another account, not the business one.
Thereon, we forgot about it as we heard nothing from the years of submitting our return and thought everything was ok.
Our company has been under inspection for years, and all the previous years expect this one payment we have been spot on so i don't know why they have a problem with us with all of these inspections. I think they located this payment when they gave our client a VAT inspection also, they simply looked through their books and ours and this didn't match up, we issued the invoice to our client of that amount.
Could this be put down to a human error in anyway? perhaps we can say on this occasion the wrong acc number was given and was simply forgot about?? I know it sounds stupid but its either that or we would have to make our self bankrupt as they are already on our case for outstanding VAT payments of over 100k.
As Bill and Shamus have already said... HMRC will already have a certain amount of information prior to inspection (as you've already said, they have the "other side" of the invoice from your client, for instance.)
The penalties for VAT errors can be harsh, depending on whether it was deliberate and/or concealed and whether it was a prompted or unprompted disclosure.
If it is decided that the error is deliberate and concealed you're looking at a minimum penalty of a 30% of the undeclared VAT, if it's an unprompted disclosure. If it's a prompted disclosure, the penalties start at 50% of the undeclared VAT. And the maximum penalty for a deliberate and concealed error is 100% of the undeclared VAT.
On top of the penalty, you'll also have to pay the actual VAT amount that was due plus interest.
You don't say if the other bank account is a business account, but if it is, HMRC can request the bank statements.
You would be advised to get the affairs in order asap and have an accountant present at the inspection, too. (Preferably, have that accountant go through the company's affairs prior to the inspection so they can advise in advance)
(edit: my post crossed with the previous one)
-- Edited by Figurate on Monday 25th of July 2011 04:38:46 PM
-- Edited by Figurate on Monday 25th of July 2011 04:43:59 PM
To see what can happen you should think with the HMRC's head...So 100k went to another account - not the business account. Was that never been spotted there and if it had was anything done to correct the mistake? If it was not spotted and well I would spot an extra 100k in my bank account was it not missing from the business account? You could not pay the VAT in time but you have 100k lying around..does not sound good thinking with the inspectors head. Also I am fairly sure if it was deliberate they are allowed to see this other account mentioned,too - probably they are allowed to see it either way... And the why did it go to a different account, hmm I think can't remember is not really an acceptable answer.
Obviously only those directly involved know the full facts but..
Personally, I'd be worrying about accusations of money laundering. To my mind the fact that a second bank account was opened, suggests it was an unusually high sale and a conscious (sp?) decision was made to treat the transaction differently.
Doesn't look good to me.
-- Edited by ADAS on Tuesday 26th of July 2011 05:54:15 PM
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
You need to volunteer as much information as possible to HMRC. That in itself will help reduce the penalties. It will also give you more leverage if it gets nasty.
The HMRC have lost a few cases lately because they did not give "people" the oportunity to negotiate or explain. But you need to get in there first - not let them discover it without your assistance.
Hi, thanks for your replies - where i would love to give you more info i still cannot.
I have one more question, which is very important that relates to the accounts.
There are a few payment from our client that came from his personal account and was not under his company, now - looking through the files i can see that we have issued invoices but under invoiced to his company not his personal. which also means his accounts have declared this payment as being sent via the company and they have claimed the VAT on it (i know they had a few problems with these payments but they didnt say anymore)....
My question - if the client has paid 100k from his personal account and its gone into another one of our accounts & we have issued an invoice thinking that payment would have been made from his company & which is why we never declared it as received from his company then what happens, we will just state we never received it? as its from his personal acc. Can they relate his personal payment with the invoice we invoiced to his company?
I really you should be seeking independent professional advice as you seem only to be giving part of the story here and without all the facts no one can really give you any advice.
If you are unwilling to give all the facts to any independent advisor then i think you are on a sticky wicket.
I'm sure that you don't know all of the facts of the other company. Yes, it may have been from their private account but this may have been sorted out through their own books.
The situation has no bearing on the facts given in the previous posts.
Your company did receieve the money and it was not invoiced and it was put into a different bank account and you are trying to hide accounts from HMRC (which they will already know about because the bank will have revealed all linked accounts... With one bank that I worked with we had one that had over 250 linked accounts on the assumption that they made their affairs so complex that nobody would understand where the money was!).
If there is anything amiss with the accounts of the other company then they may get caught in the fallout from this but using any shortfall in their procedures as a defence will have no impact on HMRC viewing your situation seperately on it's own merrit.
Worst case scenario here we are looking at the domino effect. The first falls and then takes everyone else with it.
Sorry, as detailed by almost everyone above. Your best defence remains to be open and make sure that you have your company accountant there with you at every meeting with HMRC to attempt to keep the penalties as low as possible.
I really do wish you the best in this but cannot help but feel this last post is grabbing for a defence.
Always put yourself in the shoes of HMRC and try to see things through their eye's. They are looking at what your company has done. Then they will look at what the companies associated with this have done... And so on.
Get your accountant on board now and tell them absolutely everything without any attempt to gloss it over.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
