Had a text message from an old client yesterday to say that she has been investigated by HMRC re VAT and has been told that she has to pay back a sizeable amount of money as she didn't go VAT registered in 2006!
She was a client of mine then and it was the 1st year of me doing her accounts. she had previously been VAT registered but had decided to de register in 2005 as she was off on Maternity leave. This was against her previous accountants advice!
When I did her accounts she had gone over the VAT threshold by £1500.00 and I advised her that she needed to go VAT registerd but she didn't. Then in her nxt year she went slightly over again and once again told her that she needed to go VAT registered but she said was there anyway to get round it. At the time she was running a hair salon which incorporated a beauty salon, I suggested that maybe we could split the businesses and she was happy to put the other business in her husbands name, again nothing came of it!
The year after she was over again and again I gave her the same info as above but wasn't listened to, I did her last set of accounts in 2009 and then she moved accountants. They did her accounts in 2010 and she finally registered for VAT in 2011!
She has decided that I am to blame and I was wondering if anyone else had come across this sort of thing and what the outcome was?
I feel very sorry for her but I did my job in advising her I feel theobly thing I wish I had done was insist that she went VAT registered when I first brought it up!
I have also learnt that she has a 2nd house that she rents out which I didn't know about. Her business has always shown a loss or a very small profit, not enough to pay tax on anyway! I just wonder how she manages to afford her life style. I do wonder if maybe I should do a SOCA report but I don't want to add insult to injury.
I sometimes wonder if I should be my own boss as I don't feel I have the balls for it sometime!
Just needed to sound out a bit, but would like to know if anyone else has come across this sort of thing?
-- Edited by Moobag on Thursday 11th of April 2013 08:57:01 PM
They will probably delve deeper into her Tax and life style. Did she not think that she had to tell you about the additional income on the rental, and was the rental mortgage free or did she have a mortgage on it, and was it rented out on a permanent basis so she could have potentially earnt alot of money from it?
Hindsight is a wonderful thing, but I suppose maybe you should have registered her for it, and if she didn't like it then she would have just had to lump it! Did you send her letters/emails telling her to register, have you got proof that you told her she was over the threshold?
I personally haven't experienced it, although I did have a client once who never paid anyone and never paid his VAT bills, this was when it was paper. Eventually he owed thousands to them, I had got shot of him along time before this point, but I heard through another tradesman that they took his van away in the end as payment, and he was doing alot of cash jobs so he didn't have to charge VAT. So if she can not pay her debt they will be after her, is she a LTD company? It took HMRC about 2 years to catch up with him.
If you have evidence that you have advised her to become VAT registered eg emails and/or letters then you shouldnt have anything to worry about as she can hardly take any action against you if you have advised her to do something, she has ignored it, and it has come back to bite her on the proverbial.
If you only advised her verbally then is more of an issue as it will be your word against hers as she was probably say that you never advised her to give her someone to go against in order to underwrite her VAT penalties/interest/payments.
Hopefully you have some PII in place if you only advised her verbally as could get messy.
