Hi, just about to year end for a client and he went VAT registered in December. My problem is that it wasn't spotted until February. I applied for exemption on the grounds of it being one contract that took the Company over the threshold, otherwise it would have been about 50k turnover.
HMRC have declined, saying they feel the turnover won't be sufficiently reduced in the meantime. An appeal has been lodged with the tribunal but they only got their VAT number in May
Should I treat all sales and purchases as nett and account for VAT from 1st December in light of the appeal? I feel that's the right way to do it but what happens if the appeal is successful (probable due to turnover since)
Year end is 31st January, so it's not a biggie for me to adjust the last two months (Bookkeeping not done by me)
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi John
Problem as I see it, plus sort of surprised that HMRC didnt mention this, is that the VAT registration shouldve been applied for when the contract was won, not on the rolling past 12months historical basis. So when did it drop back to being within range?
That aside - prudence would suggest you account for the VAT until de-registration or the appeal, but my answer is mid rush (sorry I need headspace to ponder it and have none just now) so I think its worth having a look round for some of their own guidance (perhaps if there was an undue delay in them getting the VAT number.....or was that down to the exemption request) to maybe use against them or even some case studies. Sorry if Im not making sense!
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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
Sorry John
Head all over (family issues!) - just to clarify....this one is now going to Tribunal, so not at appeal any more? What about fines/penalties - anything on that score?
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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
Pretty certain that the delay was due to exemption. Original contract has extra work added so it was not known at the start that it would go over VAT threshold, although they should have realised afterwards to be fair. Thanks for advice, my main concern is doing the accounts on the right basis and just wanted clarification, which you've indicated as prudent. Have had a google but nothing coming up.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Do you know when their first return from December is meant to be? Did they get an extended period and has it now been filed? Just wondering what they have done thus far?
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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
Sorry for delay, got on with doing the rest of the year end, leaving the VAT problem until the end
Just literally seen the Certificate 5 mins ago. Effective date 1st Dec 16 cert issued 12 June!!! 1st return to period 31st July. eek
No penalty or surcharges, in fact no comment made about not informing them at the right time, so they may have swerved a bullet there. Fortunately there's only a couple of months VAT to do on this years accounts as it ends 31st January and nothing much has been entered so if I've got time I'll correct that as well.
As a rough estimate I think they will be back under the threshold August or September, but won't know for sure until they've brought the books up to date for this year.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Just in reply to your comment there about HMRC not mentioning anything regarding the late registration - in my experience they always seem to write to the client about this separately with the "Failure to Notify" questionnaire several weeks after the actual registration has been approved, which seems daft as like you said it makes you think there's no issues but then a horrible letter comes through the door!!
Having said that, and although they threaten it constantly, I've never actually seen HMRC charge a penalty for registering late. Even in one dreadful case where a new client should have registered for VAT over 12 months before they did... no penalty...!
-- Edited by fin6y on Monday 10th of July 2017 02:45:57 PM
Thanks for the heads up Faye. Yes, I dealt with one of those failure to notify letters a few years ago with regards to another client. A grovelling letter and an apology resulted in no penalty being charged.
The registration certificate was issued in early June so there's still time for them to issue a failure to notify I guess.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
For any business owners reading this - well firstly you shouldnt be here, but secondly dont rely on the fact as the country is littered with those who have had penalties.
__________________
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
Sorry for delay, got on with doing the rest of the year end, leaving the VAT problem until the end
Just literally seen the Certificate 5 mins ago. Effective date 1st Dec 16 cert issued 12 June!!! 1st return to period 31st July. eek
No penalty or surcharges, in fact no comment made about not informing them at the right time, so they may have swerved a bullet there. Fortunately there's only a couple of months VAT to do on this years accounts as it ends 31st January and nothing much has been entered so if I've got time I'll correct that as well.
As a rough estimate I think they will be back under the threshold August or September, but won't know for sure until they've brought the books up to date for this year.
Hi John
Its ok - I had forgotten to read this one again and have a few to catch up with I reckon. Just remembered another one I asked a question of someone and didnt then go back to it!
Just a couple of suggestions (hope you dont mind!)
- before you do any adjustments - make sure they have done the VAT return and included what you will be doing in the accounts?
- perhaps approach them in August and see where they are up to?
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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 needed to do the VAT adjustments to complete the year end. It was only a couple of months adjustments so not too bad. The first return is from 1st December 2016 to 31st July 2017!!! I have told him to get the accounts up to date to the end of July as quick as he can so I can get the VAT return done and sent in.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
