VAT-Caught between a rock and a hard place.

**malvolio** · 26 October 2011, 11:50

If your UK turnover is over £73k you have to register for VAT. It doesn't mean you have to pay it if your supplies and/or services are not liable for it of course, so you may not actually owe any. Equally, on the plus side, if you're registered you can reclaim the VAT you paid out elsewhere in the line of business.

Sounds to me like you need to get a qualified opinion on your VAT liability and stick you hand up if you owe something (and Google Vince Cable and VAT for an illustration of how to get away with it...).

If it's owed you have to pay it. Worst case would be an additional penalty and interest on the unpaid VAT but you may have some room to recover that from the original accountant if he was really that incompetent.

**Craig@Clarity** · 26 October 2011, 12:10

Generally, if you're a UK company and providing services to a UK client, then you charge VAT (assuming you're VAT registered).

If you're a UK company and providing services to a Non UK business then its outside the scope of VAT otherwise if it is a non UK "individual" then if could be subject to VAT. It's to do with place of supply HM Revenue & Customs: How to work out your place of supply of services for VAT

Closing your company down and starting "afresh" isn't going to help things. In order to close down a company you need to get your affairs in order and for all taxes to be settled, otherwise HMRC will simply object to the striking off of the company.

**ASB** · 26 October 2011, 12:11

Originally posted by malvolio View Post

If your UK turnover is over £73k you have to register for VAT.

Not at all. Though you are welcome to redefine what you meant by "UK turnover".

HM Revenue & Customs: VAT rates, thresholds, fuel scale charges, exchange rates

"VAT registration threshold
If you're in business, you must register for VAT if your VAT taxable turnover for the previous 12 months is more than £73,000. This figure is known as the VAT registration threshold. The threshold changes - usually once a year announced in the Budget - so you should regularly check your turnover against the current threshold.
You must also register for VAT if either of the following applies:
you think your VAT taxable turnover may go over the threshold in the next 30 days alone
you take over a VAT-registered business as a going concern"

and later

"Remember that your VAT taxable turnover includes only the goods and services you sell that you have to charge VAT on, even those that are zero-rated. It doesn't include sales that are exempt or outside the scope of VAT."

From the OPs description it appears likely that a large part of his turnover may well be outside the scope of VAT - but that is by no means certain; his original accountant may well have been correct in their advice.

**malvolio** · 26 October 2011, 13:01

OK, I understand that, but the sensible low-risk approach is to register for VAT if you're in sniffing distance of the threshold and work out what you actually need to pay afterwards. As I said, even if your entire income is from sources that are not VATtable, you still have input VAT to cover off. You can always de-register if it turns out you're never going to be in scope. Or your income stream may change to put it in scope of VAT again. Who knows..

The OP may easily not have a problem to resolve, but his advisor has put him in a very difficult position by not offerring clear, precise guidance.

**Zeke** · 26 October 2011, 14:14

Ok, thanks for the replies. Firstly, say i had been due to charge VAT and my original accountant and VAT specialist were wrong, i have all the emails and paperwork from them, can i claim any liability from them?
Secondly, the other couple of accountants seem to think that closing down the company, settling the taxes and such, and starting up afresh would be the simplest option.
Also, how would the VAT due, be calculated, say i was eligible for a flat rate scheme, would that take the final VAT bill down? The amount would be quite sizeable, probably so much so that it would realistically take me a few years to pay

**malvolio** · 26 October 2011, 14:45

Originally posted by Zeke View Post

Ok, thanks for the replies. Firstly, say i had been due to charge VAT and my original accountant and VAT specialist were wrong, i have all the emails and paperwork from them, can i claim any liability from them?
Secondly, the other couple of accountants seem to think that closing down the company, settling the taxes and such, and starting up afresh would be the simplest option.
Also, how would the VAT due, be calculated, say i was eligible for a flat rate scheme, would that take the final VAT bill down? The amount would be quite sizeable, probably so much so that it would realistically take me a few years to pay

Don't understand closing down the cmpany, tbh. You can't close it until HMRC agree that all outstanding debts - including your VAT lilability - is cleared off, at which point there's no longer any point in closing it... Perhaps I'm missing something.

As for years to pay - perhaps not. You can ask, but I don't think VAT is worked the same way as income taxes, you may not be able to get terms. They'd prefer to bankrupt you instead.

Hence, get advice - qualified advice with someone's name on the bottom - so you understand exactly what the position is, what you owe and what yuo need to do now. Non-payment is a criminal offence and the VAT man has teeth, so make sure you aren't relying on us amateurs.

**craig1** · 26 October 2011, 14:49

Originally posted by Zeke View Post

Ok, thanks for the replies. Firstly, say i had been due to charge VAT and my original accountant and VAT specialist were wrong, i have all the emails and paperwork from them, can i claim any liability from them?
Secondly, the other couple of accountants seem to think that closing down the company, settling the taxes and such, and starting up afresh would be the simplest option.
Also, how would the VAT due, be calculated, say i was eligible for a flat rate scheme, would that take the final VAT bill down? The amount would be quite sizeable, probably so much so that it would realistically take me a few years to pay

Start here (official guidance), especially section 4.

**ASB** · 26 October 2011, 15:02

Ok, thanks for the replies. Firstly, say i had been due to charge VAT and my original accountant and VAT specialist were wrong, i have all the emails and paperwork from them, can i claim any liability from them?

Possibly, but it depends on the standard of the work they did etc. Ok, let us assume they were wrong but were they negligent? Certainly it wouldn't be an easy ride. You'll be fighting their PI insurers etc.

Secondly, the other couple of accountants seem to think that closing down the company, settling the taxes and such, and starting up afresh would be the simplest option.

I fail to understand this advice. If you sort out the mess properly paying anything that is due then what is the point in dissolution and reestablishment of a new company (also you can't strictly just dissolve and restart anyway without going through a members liquidation which is a comparatively expensive operation).

I guess there might be an optimistic hope that you could go through the motions, request to be struck off and hope HMRC don't object thus hopefully getting out of any liability and then phoenixing into another company.

Also, how would the VAT due, be calculated, say i was eligible for a flat rate scheme, would that take the final VAT bill down? The amount would be quite sizeable, probably so much so that it would realistically take me a few years to pay

You are required to account for vat from the date you should have registered.

You may be able to issue VAT only invoices depending upon the timing etc. Some limited info here:

VAT late registration - is there anyway to help my client? | AccountingWEB

In my view the thing you have to establish is whether or not you really should have been VAT registered and should have been charging VAT. I realise your initial advice was no = presumably being based on being out of scope due to your specific place of supply.

Your current advice is yes: but based on what exactly? You now use the wording "the company I am currently working through". It is possible this does make a difference. You give no information as to what you are CURRENTLY supplying through that company.

If you separate your supplied to those which are exempt/out of scope and those which are potentially vatable (i.e not exempt and in scope) is the total of the latter greater than 73,000.

It is possible that you don't need to be registered, or the damage of being non registered is small. It is also possible that the current person you are invoicing is not saying "you must be vat registered and charging vat". They may simply be saying that they will only do business with vat registered suppliers (not unusual). It is also possible that they believe the sort of supply they are receiving is vatable and in fact they are simply wrong (also not uncommon).

Good luck with sorting it out.

**geoff from contracta IOM** · 26 October 2011, 15:06

Originally posted by Zeke View Post

Ok, thanks for the replies. Firstly, say i had been due to charge VAT and my original accountant and VAT specialist were wrong, i have all the emails and paperwork from them, can i claim any liability from them?
Secondly, the other couple of accountants seem to think that closing down the company, settling the taxes and such, and starting up afresh would be the simplest option.
Also, how would the VAT due, be calculated, say i was eligible for a flat rate scheme, would that take the final VAT bill down? The amount would be quite sizeable, probably so much so that it would realistically take me a few years to pay

It might be helpful for me to point out at this stage that any VAT debt will "the company's" not yours, insolvency may be the best option for the company which could be where your accountants are going with the closing down chat

VAT-Caught between a rock and a hard place.