Hi all, hope everyone's enjoying a sunny start to June!
Just wondering if anyone else has been contacted by HMRC in regards to recent VAT applications they've made?
We've applied for VAT for a one man Limited company in construction on a voluntary basis, and HMRC have come back with the below:
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You may be aware from media publicity that there have been may false applications for VAT registration, designed to commit fraud. To protect the Exchequer and honest taxpayers, we have introduced more rigorous and extensive checks on businesses applying for VAT registration.
In order for me to progress with your VAT registration application could you please forward the following information.
Copies of Contracts for both work undertaken and to be undertaken.
Copy of Public Liability Insurance
Business Bank Account Details and name of account.
Copy of contracts for both permanent and contracted staff.
Copies of any receipts/invoices
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My main query was whether this is a common thing/one off, and also about point number 4.
As our client is the sole employee of his own Limited company, does he legally need to have an employment contract for himself, or can we get away with telling HMRC nothing is in place?
Many thanks! Hope I've provided enough information.
I did a VAT application last September on exactly the same type of client and no issue at all. First time I've seen anything like what you've posted. Only time I had a query was about 4 years ago when there was approx 2k refund on the first VAT return. VAT office queried it and asked me to send 6 highest invoices to them, which they checked and accepted. 2, 3 and 4 don't even affect VAT so no idea why they need that info (bank account I can partly understand)
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Jason, the issue may be because the client is in the construction sector. This is one of those higher risk sectors that HMRC have been targeting. John's comments probably apply to other business sectors.
(No sunshine here in Cambs!)
We've applied for many VAT returns recently for similar clients with no issues at all. Seems like it's either a complete one off or we've just been lucky that this is the first.
Oh well! Will send what we have here and see what they come back with!
Infairness there are have a fair few VAT scams, running into the millions. Some are, dare I dare say it? Fascinating to read about. The system is very easy to manipulate. Aside from the obvious lose to the treasury, it must cost an absolute fortune in legal fees.
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Hi,
I had a similar one about 18 months ago. I think it was because the registration was for flat rate scheme and the query seemed to be regarding the rate of vat paid i.e. 9.5% or 14.5%, regarding whether they were supplying materials or labour only. They asked for the same information you have been asked for, but a quick chat on the phone between the vat office and my client soon solved the problem. Apparently they randomly do this sort of check. Must say it's the only one I've had.
I agree that its probably because he's in the construction industry. There is a thing at the moment that 'one man band' sub-contractors are setting up limited companies & registering for VAT then working for just one or two main contractors, often on a labour only basis whereas they should really be employees of the main contractor.
How do you determine whether someone should be on CIS or wages? Most of the construction industry is CIS, which was set up to stop tax evasion. In my opinion it works. Subby is stopped CIS at 20% which is usually enough to pay any tax liability at the end of the year, and more often than not, results in a refund. Surely that is to the tax mans advantage?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi, I had a similar one about 18 months ago. I think it was because the registration was for flat rate scheme and the query seemed to be regarding the rate of vat paid i.e. 9.5% or 14.5%, regarding whether they were supplying materials or labour only. They asked for the same information you have been asked for, but a quick chat on the phone between the vat office and my client soon solved the problem. Apparently they randomly do this sort of check. Must say it's the only one I've had.
I've got a feeling this is the way it's likely to go. HMRC is looking to meet the client, but might push for a quick phone call as you mentioned.
Beginning of May I registered a construction company for Vat and was asked to upload some information including a declaration from me on letter headed paper to state that I had done all the necessary MLR checks.
Still not had a Vat Registration certificate and heard nothing to date!
I know of a business who were asked a raft of questions, covered an A4 page. Not one that I was involved in, their Accountant registered on their behalf but they showed me the letter. Not in construction either. Their Accountant had worked in HMRC some years before and told them that HMRC randomly do this.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
How do you determine whether someone should be on CIS or wages? Most of the construction industry is CIS, which was set up to stop tax evasion. In my opinion it works. Subby is stopped CIS at 20% which is usually enough to pay any tax liability at the end of the year, and more often than not, results in a refund. Surely that is to the tax mans advantage?
The current position is that everyone should be on payroll unless they are genuinely self employed. Every time I submit a CIS declaration I have to tick the box to say I have checked the employment status of all sub-contractors. This means that they fulfil a checklist including quoting for work so taking financial risk rather than being hourly paid regardless, providing own materials & equipment, having their own insurances and free to send someone else in their place (not an exhaustive list just off the top of my head)
HMRC want us all to be paying employer & employee National Insurance contributions wheras self employed subbies pay a different class of NI or if they have set up their own limited company often take a basic salary below the Lower Earning Level & the rest in dividends.
