Complicated VAT position.....

[Martin at NixonWilliams]

I haven't been able to submit my last three VAT returns (Aug 12 - Nov 12; Dec 12 - Mar 13; Apr 13 - Jul 13)

Are you sure these periods are correct? The returns should be for three month periods.

I am now planning to submit the VAT returns, if required. Do you know if there is any penalty on this, please? The easiest option for me is to
return the VAT received to my client and file nil VAT returns. Anyone know if this is possible?

The only way you could possibly do this is if HMRC allowed you to deregister from the date of registration. It is very rare that they allow this, but you may have a valid case on the basis that you itended to exceed the threshold but never did.

I hope this helps.

[craig1]

The only way you could possibly do this is if HMRC allowed you to deregister from the date of registration. It is very rare that they allow this, but you may have a valid case on the basis that you itended to exceed the threshold but never did.

I hope this helps.

Can you clarify that point? I always believed that if you're charging VAT to customers/clients then that money become legally and ethically HMRC's at the point of invoice. In effect, you're just an intermediary in recovering tax for HMRC. Is that right or is it just how I've managed it, mentally separating the money so it's never mine to spend.

I can't see how HMRC would allow a deregistration as there's unlikely to be any net gain or loss in the system, if the money gets paid back then the clients will have to fork out that to HMRC anyway as they'll have reduced their VAT balance to account for the money paid out. Then there's trust in the system, HMRC would have to completely trust that you'll refund the money to the client just for them to be paid it again later by the client. If I were them I wouldn't even consider allowing a deregistration, I'd be just after the money as he should be holding it separately for them anyway.

[Martin at NixonWilliams]

Can you clarify that point? I always believed that if you're charging VAT to customers/clients then that money become legally and ethically HMRC's at the point of invoice. In effect, you're just an intermediary in recovering tax for HMRC. Is that right or is it just how I've managed it, mentally separating the money so it's never mine to spend.

I can't see how HMRC would allow a deregistration as there's unlikely to be any net gain or loss in the system, if the money gets paid back then the clients will have to fork out that to HMRC anyway as they'll have reduced their VAT balance to account for the money paid out. Then there's trust in the system, HMRC would have to completely trust that you'll refund the money to the client just for them to be paid it again later by the client. If I were them I wouldn't even consider allowing a deregistration, I'd be just after the money as he should be holding it separately for them anyway.

You're right and your understanding is correct, the money is legally HMRC's at the point of invoice. However, if a deregistration is allowed then this would no longer be the case as the VAT would have been charged wrongly, and so the invoice would be amended and any VAT paid would be returned.

I was simply answering the OP's question, i.e. that this was the only plausible way of them returning the VAT money to their client. I agree it is unlikely a deregistration would be allowed but it can happen, although probably not in these circumstances.