Vat

mike1983

Hi everybody,

I have a new client who is a sub-contractor.

He became VAT registered in November 2007 and his previous chartered accountant has submitted
all his VAT Returns without any input VAT. My client has basically been paying output VAT at full rate
since he registered.

I have said that I will try and reclaim all his input vat for the past three years which will give him a
refund as he has just started zero rated work on new build.

Please could someone help me with the following factors which I have considered?

1. Do you think his previous accountant did this on purpose so all expenses are at gross on tax return to generate a
Larger tax refund?

2. If I was to reclaim from previous accounting years, would I need to adjust the tax returns resulting in higher profits??

3. Could I register him in flat rate scheme from nov 2007 to july 2011?

Many thanks in advance

Mike

Monsoon

1. Claiming back input VAT means you claim back 100% of that expense. Claiming VAT against income tax means you only get 20% relief on the value of the VAT. If this was his logic, it was flawed logic.

2. Who knows? You would have to at least ask the previous accountant if he included expenses gross. If he didn't, one wonders where the input VAT was posted to.

3. I don't think you can back-date the FRS.

mike1983

Thanks

Thanks Monsoon,

I think that the previous accountant just couldn't be bothered with spending the time calculating his input VAT. I asked my client to get his receipts for the past three years from him and he has only provided us with last years. He also seemed very reluctant to give them to him and was asking 1000 questions as to why we needed them.

He could have been on the FRS scheme since 2007, so he has cost my client thousands of pounds by paying over full rate VAT each quarter without any input VAT.

Thanks for your feedback, I will follow what you have said by asking the accountant whether the expenses were put through gross or net of VAT.

Kind Regards

Mike

AK002

Once you've reviewed the records and there's no reason that the input VAT wasn't claimed, I'd be inclined to speak to the Chartered Accountants professional body TBH.

AK002

Although, paying Output VAT only sounds like they've already put him on the Flat Rate Scheme?

Gem7321

AK002 wrote: »

Although, paying Output VAT only sounds like they've already put him on the Flat Rate Scheme?

This was my first thought too. Is the output VAT definitely at the full rate?

mike1983

Yes, I thought that and have spoken to HMRC and they confirmed no scheme is in place.

I'm just going to reclaim last 3 years of input VAT and leave it at that I think...

I may also contact HMRC and state what has happen as I suspect that a sudden refund may trigger a VAT inspection.

Thanks for your feedback, it is much appreciated.

Regards

Mike

Steve Collings

AK002 wrote: »

Once you've reviewed the records and there's no reason that the input VAT wasn't claimed, I'd be inclined to speak to the Chartered Accountants professional body TBH.

Realistically the professional bodies don't get involved with issues like this. They would normally deal with any weaknesses found during their own monitoring visits in accordance with their own procedures so one accountant reporting another for [what they might consider to be] a slapdash attitude to work will more than likely fall on deaf ears.

AK002

Ah, I see Steve.

I would have thought it may start a monitoring visit, but perhaps not.