Knowingly submitting an incorrect VAT return - consequences

EB Services

Hi,
My client wants to submit an inaccurate VAT return because the funds are not available to pay what it should be. There is about £9k of old unpaid invoices that are to be written off as a bad debt, thereby giving some VAT relief, which is fine, but there is also about £5k in customer income which has not been allocated, because I do not know which invoices are being paid. I am fairly sure that if I had remittances I could match the £5k to some of the old invoices, which would reduce the bad debt and also the VAT relief. Not surprisingly, my client has instructed me to write off the £9k and leave the £5k income to a future VAT period. This seems very wrong to me, but it is their VAT return and that is what they are instructing me to do. Obviously if a VAT inspection were to happen penalties would arise against my client, but they are aware and willing to take the risk. What I would like to know is, can I get into troubel?

FAC

You need your job and your reputation. This is the kind of threads that all of us face it.

Just to clarify some points:
1. Invoices can be written off as bad debt if not paid within 6 months after due date (if there is credit agreement in place) not from invoice date.
2. Ask your client why invoices should be written off. If his customer's business is still active and they dispute invoices, there is no reason why they should not issue your client a debit note whick can given to you as evidence. I always ask for debit note before I issue a credit note or write off a sales invoice.
3. Check with your client which invoices are disputed. S/He should know that. Once you know disputted invoices then allocate the 5k to other overdue invoices starting from oldest.
3. Although it is their return, you have professional and legal duty to take care of.

I hope that help.

KoopaCooper

I've had similar problems with one of my VAT clients in the past - they kept their own books on Kashflow, and whenever they were aware that their VAT bill would be quite high, we would notice unpaid customer invoices would get mysteriously deleted. They would then be re-raised on the first day of the next VAT quarter, just as mysteriously.

We repeatedly informed them that this was an incredibly risky practice to engage in, and advised them time and again to stop doing it as they could face serious penalties, both for the company and the director.

Just a final word, they've now basically stopped responding to all email requests from us for any information whatsoever...we think they might be going under. >_>

EB Services

Cheers both.

reader

The AAT has a really good professional code of ethics that you can find here:

https://www.aat.org.uk/prod/s3fs-public/assets/AAT-Code-Professional-Ethics.pdf

According to the code of ethics, if you are an employee of someone else's practice you should report to your supervisor/money laundering officer (360.16).

If the practice/client is yours (i.e. nothing to do with your employer) then you may need to make a money laundering report and consider withdrawing from the client engagement (225.28)

Paragraph 225.33 is interesting, in that you would need to let the new accountant know about the suspected non-compliance bearing in mind the tipping off rules.

KoopaCooper

Our Money Laundering Officer is aware of the client and, as far as I am aware, is in the process of taking steps in regards to the situation. The rest of us are mostly being kept out of the loop to avoid any potential info leaks.

MarieNoelle

All good advice.
If you are still worried give the AAT helpline a call. They have been extremely helpful with me in the past.