Getting VAT Wrong
When VAT was introduced into the UK in 1973, it was said to be an “easy tax” to administer. Since then, there have been over 20,000 test cases in Court where people are either Getting VAT Wrong or HM Revenue and Customs are Getting VAT Wrong! So, if this is an easy tax, why are we Getting VAT Wrong?
Why Are We Getting VAT Wrong?
There are several answers to why are we getting VAT wrong but the main answer must be “interpretation”. The VAT rules are interpreted differently but accountants, HMRC and the Courts so judgements have to made – and this is usually done through tribunals. As said above, there have been over 20,000 cases which is considerably more than any other tax in the UK.
To make sure you get it right, you can start by reading HMRC’s Introduction to VAT and apply those concepts to your own business. If you would like to read this in more “understandable” terminology, why not visit the Governments new gov.uk web site? But let’s back to the question.
Accountants Getting It Wrong
I have a newly qualified lady working for me on a sub-contract basis, she also works for another accountant who shall remain nameless (but if she is your accountant, give me a call before it’s too late). My new assistant asked one day, whilst preparing bookkeeping for a client, about claiming back VAT on expenses – my reply was “If there is a valid VAT receipt/invoice, then the VAT can be claimed back.” To me, this is in line with HMRC’s guidance found here. My assistant said “Oh, the other accountant claims back all VAT regardless of receipts stating that she can get the receipt later if she needs to!”
To me, this is dangerous – if HMRC decided to make a compliance visit, not only would there be so much work involved in trying to get receipts, but I suspect the majority of the receipts would not be available. How could you get a duplicate receipt from Tesco 4 months after the transaction? What if the business is no longer trading? This is accountants getting it wrong!
Off With Their Head
So who is to blame? When HMRC says “Off with their head”, who’s head is going to roll? Actually, it is the clients’ head because they are the ones who are solely liable for a submitted VAT return, even though the accountant may be prepared and filed it. So assuming that your head has rolled and you are now facing fines and additional tax, the accountant is also in trouble – and this has an effect on all of their other clients. Why? Well, if HMRC have spotted that the accountant is getting VAT wrong for 1 client, chances are they are getting VAT wrong for ALL of their clients and this is going be penalties for a lot of people.
The rule is, get a VAT receipt/invoice for every transaction – without a receipt, you have no valid claim to the VAT paid.
If you are in this position, then please give me a call – I am an accountant who is not into getting VAT wrong. Telephone 01794 521300 or use my Contact Us Page.