My client worked for an agency that takes whole VAT from their clients and offers free accountancy instead. The agency was supposed to open his company and register for vat. After a month he realized that nothing of it was done. He changed his accounting company to mine and now that everything has been registered I am trying to make his agency pay him back vat for this first month.
They say - he can't claim vat before registration and my question is: Is there any way to reclaim this vat amount?
Does it matter that he was misled by the agency - they let him believed that his company was registered from day one ?
If not - what institution could help him sort it out ?
If there was an agreement between the Accountant and the client, and a breach of that contract, then he can sue them. Ask a Solicitor to do this.
On the technical point, VAT can be clamed from before registration, subject to conditions. If this was missed on the first VAT Return, then an adjustment can be made on a later Return. Keep a note of the circumstances, as per your explanation.
agree with lesh, you can claim before registration, check the condition on the hmrc website.
i would personally write the letter to the agency that your client will take a legal action if they will not co-operate however if client hasn't got any proof i would say he might not get money back from them.
My client worked for an agency that takes whole VAT from their clients and offers free accountancy instead. The agency was supposed to open his company and register for vat. After a month he realized that nothing of it was done. He changed his accounting company to mine and now that everything has been registered I am trying to make his agency pay him back vat for this first month.
They say - he can't claim vat before registration and my question is: Is there any way to reclaim this vat amount?
Does it matter that he was misled by the agency - they let him believed that his company was registered from day one ?
If not - what institution could help him sort it out ?
Is there any documentation that he has in effect paid them anything - ie the VAT for the first month you mention? Has he paid any other fees?
Also - Im not sure what you mean by your last sentence - can you expand on this please?
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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
I'm not commenting to disagree with anyone - just thought I'd throw that in there..:)
It is my assumption that all paperwork is signed and sealed by the director / owner - Therefore the only recourse is against the agency / accountants PII, if HMRC come calling.
As a side - If the accountancy is free, does this mean there has been no consideration paid in return for the contract?
I was under the assumption that for a contract to be valid there had to be consideration involved?
Thanks
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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.
In the above scenario I would be demanding the return of my "VAT" otherwise it would be a county court claim. Obviously I haven't seen the agreement between the two parties but the accountant's haven't set up the VAT, so the contract hasn't been fulfilled.
Regarding responsibility, yes, it always lies with the client, who are responsible for the figures submitted to HMRC.
You would only be able to claim against PII if there was a cost incurred due to the accountant's error. If, eg, an accountant overclaimed capital allowances and your tax bill was 2k instead of 6k, and HMRC demanded the difference, you couldn't claim the 4k because the tax bill would always have been 6k anyway. However, if there was a penalty incurred because of the mistake, I believe that would be claimable under the PII.
Not too sure if consideration needs to be involved, but in this particular case I would argue that there has been a charge, and that's the difference between the VAT actually collected by HMRC and the VAT charged on the invoices.
eg Turnover 50k + 10k VAT. Amount handed to HMRC in first year £5400.
At £4600 that's quite expensive "free" accounting.
To John L: I would check if the accountant was qualified. If they were, your client can make a complaint to the regulatory body concerned.
-- Edited by Leger on Sunday 31st of July 2016 04:40:18 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I think that some key points here have been missed. This isn't just the VAT that is at issue.
No company actually existed when the work was being done. Where is the contract between the agency and the workers company that must have been in place before the worker started working at a client site?
A company is not simply a payment engine as the agency seem to be regarding it but rather than is the entity that the contract must be with and that did not exist.
If no company existed and the person concerned was not contracted on a self employed basis then they must have been working directly for the agency and should be paid through PAYE.
If the company had existed then the invoice issued to the agency should have stated that it was a temporary invoice pending VAT number at which point a replacement invoice would be raised. If that did not happen then I cannot see that the worker is in any position to be attempting to charge the agency VAT for that initial period.
kindest regards,
Shaun.
Note : My answer comes at this from a different angle to Les's (who I would never dream to disagree with) where his is from the perspctive that a company existed but there had been an issue over the VAT registration. My response is from the perspective that there was no company to form a valid contract with.
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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.
p.s. and ultimately this is the workers / directors problem for working without a valid contract between his company and the agency being in place.
John,
welcome to the forum, this thread might end up getting quite technical and start quoting legal cases so to be prepared, you say that the (now) director transferred to your accounting practice and you set them up with a limited company and VAT registration which indicates that you are an accountant but we also get a lot of advanced bookkeepers and QBE's on here offering similar services. Can you tell us a little about yourself such as experience, qualifications, etc. so that we are able to ensure that we gear our answers at the right level.
kindest 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.
If no company existed and the person concerned was not contracted on a self employed basis then they must have been working directly for the agency and should be paid through PAYE.
If the company had existed then the invoice issued to the agency should have stated that it was a temporary invoice pending VAT number at which point a replacement invoice would be raised. If that did not happen then I cannot see that the worker is in any position to be attempting to charge the agency VAT for that initial period.
Hi Shaun. You are assuming that it was the client who issued the invoice. I very much suspect it is the accountant who issue the invoices then collect the invoice amount, deduct the VAT element, then pass the nett amount to the client. This was my experience when I had dealings with an accountants practice who had ripped off my client to the tune of several £000's. They deducted the VAT, a sum for the projected corp tax due and a £25 a week admin fee, which was supposed to cover all fees. The difference between VAT charged and VAT was supposed to be refunded to the client each quarter. When the client came to me, there was somewhere in the region of 5k due to her, which was miraculously swallowed up by additional accountancy fees.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
not as such. Not assuming but rather going on what was written in the first post.
My experience is that the umbrella company has the contract with the business wanting work done. They (as a brollie company) VAT invoice the final client for work they arranged to have performed on the end parties behalf.
The clients business has a contract with the brollie company to provide services (which may be paid on timesheet rather than invoice) but a limited company must have existed at the time that the work was done for there to be a valid contract but the question posed here indicated that no limited company existed in order to form a valid contract.
I think that your situation was somewhat different in that it is a traditional valid three way relationship that existed with your client having their own limited company in order to form a valid contract so it is quite a standard type scenario.
My whole arguement here is that if the clients company did not exist then this is a completely different set of issues that need to be considered than merely VAT registration.
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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.
Of course, not all brollie companies work that way but those that treat contractors as pseudo employees rather than those simply acting more as a (semi) traditional agency type arrangement (but as the contractor with the workers as sub contractors) are quickly disappearing.
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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.
I wondered that myself. Especially having a question about pre reg VAT....from an Accountant.
Would certainly be interested in an intro, as suggested by Shaun, from John and the answer to some of our questions as that would shed more light on the issue. Notice John has been online yesterday, but not yet posted again - so we wait with baited breathe
__________________
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
