How on earth do I deal with this???

stefanboro

I run my practise in my own time and am employed full-time by a company as their sole accountant. I have only just started my current role recently.

The VAT returns have been estimated by the MD for sometime. Why? No idea. He's German.

I had no records of previously submitted VAT returns. None. I could not give an accurate picture of any overall VAT liability.

Therefore I sent a letter to HMRC as a cheeky request for former VAT returns. They complied but, as I expected, want to do a routine visit to make sure we have been keeping records. The woman who I have been speaking to wants to come in in September. Fine, got nothing to hide.

Or so I thought.

The fact that the VAT returns have been estimated has resulted in, according to my calculations, an overall underestimated VAT liability of £113,615.

Quite weiredly we have overpaid on the actual VAT returns - by around £17k.

So now we have an actual overall VAT liability of around £97k !!

However, this is not on the cash accounting scheme which we would qualify for.

I have not done the calculations for this however we have a massive amount of debtors (which is in part, I think, down to invoices being entered twice etc - I have audited the system as far as I can but there are thousands of transcations going back quite far).

So, could I just "switch" to the scheme and recalculate? Reading HMRC's website there seems to be little reason why not but it doesn't feel right.

Mess central HQ - and my current employers paid HAYS temps a fortune before I came. FOR WHAT???

ademoore

Toothcomb!

If you have identified that there are duplicate invoices in the debtors account, have you gone through and looked to see the impact that has on your vat amount?

PGM

Oh that sounds a mess;

You have to assume if there's nothing to back up the estimated vat returns then they are fairly fraudulant?!

How sure are you on the £113k?

Have you contacted the auditors to see if its anything they know more about?

stefanboro

No auditors - just a consultancy company in London that appears to have done very little. The company is quite big but does not yet qualify for an stautory audit.

I am assuming ignorance and the MD being lazy rather than fraud but who cares what I assume?

I am confident on the £113k assuming that sage is more or less right which I am not entirely confident on but, after I have give it a good audit up to today, feel like it is accuurate enough.

Re: Duplicate invoices - I have gone through the debtors as far as I can and stipped them all out.

I am thinking, set up a new sage file, go back, TO THE START, click the VAT cash accounting box, enter all bank payments / receipts up to current date and then calculate and hope like hell it comes to a modest figure. Otherwise, does anyone know a good IP??

PGM

I'd be getting pretty worried at this point if I was the ED. Would it be worth your ED getting auditors in to check over vat returns. Might look better from the HMRC's point of view that he's trying to fix the work done by temps now that you've highlighted it?

Newbie

What a mess, its a shame its a prompted disclosure as the penalties (if arising) are double, re cash accounting I would read HMRC VAT notice 731. I would raise the issues you have encountered with your superior formally, you need to get the records in order and corrected liability calculated before the visit

stefanboro

Many thanks for the responses. It is genuinely comforting that I am able to share this so openly and to get good advice.

Providing I am able to do so, I believe accounting for VAT on cash accounting terms might save the company from either a CVA or complete insolvency as it has a debtor balance of around £480k - A LOT of VAT that hasn't been recieved.

ademoore

Years?

Is there just the current years accounts, or do you need to look further back? Has anything been filed as yet?

Just a scarey thought! Sorry!

stefanboro

Previous year too - Estimated VAT returns have been submitted. Very scarey but very insightful. I've had a lot of bad situations come my way but have learnt so much from them.

That being said I hope I am still in a job this time in a few months!

I just can't understand why, WHY anyone would just keep on submitting estimated VAT returns without any permission and without finding out the true liability.

Monsoon

I've not replied yet because I don't really know what to say.

I'm basically gobsmacked that estimates have been sent when there is an accounting system in place (Sage). How were they estimated and is the VAT account reconciled in Sage?

Having established the VAT liability, and adding on penalties, my next task wouldn't be to go through the accounts with a toothcomb - it would be to assess the solvency of the company and the impact such a bill would have on it. To me, that's the most urgent issue. No point in getting the nitty gritty sorted out if the company is going to have serious issues with this situation.

Stefan, you need to get a grasp on the overall picture and talk to your boss asap.

I don't see a problem with putting it on cash accounting.

stefanboro

Thanks Jenni.

The only thing that has been accounted for on sage are VAT payments - so the actual VAT liability account is a rather large debit, making it look as though we have overpaid HMRC by a huge sum.

The sales / purchase tax control accounts haven't been touched as no VAT returns have been done on sage.

What's even worst - the estimated VAT returns have only had a box 5 figure filled in with the rest being left blank.

I will take all the advice on board and, if anyone is interested, will post an update in September to what HMRC say when they come in.

If this means anything, you have all been wonderful in your responses.

Monsoon

stefanboro wrote: »

The sales / purchase tax control accounts haven't been touched as no VAT returns have been done on sage.

What's even worst - the estimated VAT returns have only had a box 5 figure filled in with the rest being left blank.

.....

.....

.....

I'm speechless.

Sounds like you are on the right lines. Make sure the bank is reconciled ok, check control accounts, then just run all those VAT returns.

Wow...

deanshepherd

Agreed. Definitely hit that cash accounting button!

mc25

Just read this thread. What a mess!! I hope you will have it all sorted by sept. Like most pple have said, cash accounting will def be the route. Good luck.