Flat rate backdate claim

[Utku]

Backdated FRS

Hello Nathan,

My application for FRS recently accepted by HMRC. We were 20% standard VAT rate previously(For a year) and asked HMRC to backdate our application.We have received first letter and they are rejected. Now I will send another letter however I don't know what to say to be honest. I seen your earlier post that you have done something similar and it was succesfull. Can I kindly ask for your opinion/suggestion? Thank you in advance.

[Nathan SJD Accountancy]

If HMRC are expecting a justification for backdating the application then perhaps a good reason would be to say (paraphrasing HMRC's manual) "you are applying to simplify VAT accounting and record keeping for a small businesses, so that the business is able to spend less time on VAT".

[Wanderer]

how I interpreted the link (thanks Jessica), is that it should be rejected if the saving is the reason for the retro action.

I didn't give a reason in my application, I just stated the date I wanted it to start from and it passed. Perhaps it depends on who you get - as I said to Jessica you guys have vastly more experience in this than me! Interesting to hear you have successfully appealed a rejection of a backdated application too.

If HMRC are expecting a justification for backdating the application then perhaps a good reason would be to say (paraphrasing HMRC's manual) "you are applying to simplify VAT accounting and record keeping for a small businesses, so that the business is able to spend less time on VAT".

I can't see how they could reject that reason. Nothing at all to do with saving money, of course not.

[northernladuk]

As for NLUK's soap in the shower argument, you can rest assured that I have been fully trained in how to bend at the knees when picking up a dropped object.

You da man!!!

[Nathan SJD Accountancy]

I think the OP is ok to backdate it. When you apply you are able to stipulate the date that you wanted it to be effective from.

If HMRC wish to reject it, then they will do. But so far, when I have backdated clients... it has gone through fine.

I did it recently about a month ago. HMRC rejected the application, standard return was then filed, appealed against the rejection, appeal was successful, next return was adjusted to take it into account.

Apply for it, state the date, and see what they say.

The reason I can't see any issue for the OP is because it doesn't seem the reasoning behind it being backdated is to save money, where as, how I interpreted the link (thanks Jessica), is that it should be rejected if the saving is the reason for the retro action.

[Wanderer]

Possibly you got a generous or in experienced VAT officer. Generally policy is not to back date though.

As a thought are you on annual accounting? If not, did you put corrected vat returns in?

FRS3300 - Treatment of Applications: Considering requests for retrospective use of the FRS overs HMRCs policy on this - there is discretion allowed, but its not supposed to be granted just to save the applicant money.

Nope, I'm NOT on the annual accounting scheme for VAT, I do them quarterly. but I think I see what happened. Allow me to quote something from your excellent reference you link to:

The policy is to refuse retrospection where the business has already calculated its VAT liability for the period(s) using a different accounting method.

My company was formed in July, VAT registration certificate issued in September (back dated to the company formation date in July). The VAT people told me the first VAT period ended 30 November and payment was due 7th January. The VAT return was submitted in early March (which is late) and it calculated the VAT due based on the FRS. The FRS application was submitted at the same time.

Perhaps it is significant that my company had not yet submitted it's first VAT return when the FRS application was submitted, as highlighted in HMRC's statement above?

As for the accuracy of the VAT return when I submitted, it is quite true that the VAT return based on FRS percentages would become inaccurate in the event that HMRC had refused to grant the backdated FRS application. However, the return was submitted in good faith and if HMRC did indeed refuse to backdate the registration then I would have simply added the VAT due back into the next VAT return to balance the amount owed. My understanding is that the correction wouldn't even be declared to HMRC because is was well below the £10,000 limit. To be honest, I'm sure they have much more important things to be getting on with - so long as it all balances out at the year end I don't think they really have the resources to micro manage small corrections in everyone's VAT return.

It may seem that a retrospective application is getting something for nothing from HMRC and we all know that something for nothing can't be right. However, that's what the whole purpose of the FRS, as HMRC put it:

the FRS exists to simplify VAT accounting and record keeping for small businesses, so that they are able to spend less time on VAT. If allowing retrospection will enable the business to benefit in this way, then you should consider granting the request.


As for NLUK's soap in the shower argument, you can rest assured that I have been fully trained in how to bend at the knees when picking up a dropped object.

[Jessica@WhiteFieldTax]

Jessica has a lot more experience than me with this stuff but with a deep breath, I'm going to disagree....

Debate is healthy (and ignoring NLUK)

It may be you were lucky, happens sometimes. Possibly you got a generous or in experienced VAT officer. Generally policy is not to back date though.

As a thought are you on annual accounting? If not, did you put corrected vat returns in?
Edit http://www.hmrc.gov.uk/manuals/frsmanual/FRS3300.htm overs HMRCs policy on this - there is discretion allowed, but its not supposed to be granted just to save the applicant money.

[northernladuk]

Jessica has a lot more experience than me with this stuff but with a deep breath, I'm going to disagree....

I forgot to apply for the FRS when I registered for VAT. On the advice from my accountant, I applied for VAT FRS in March and back dated the application to July the previous year! A big win for me because I could retrospectively profit from the FRS over those 9 months....

Section B says the FRS will be used "from the beginning of the VAT period after they receive the application". However, "if you prefer another date then write the date and reason below". I just wrote "Please backdate application to xx July 20xx" and didn't give any reason. HMRC duly backdated the FRS registration.

Sorted...

Just don't bend down for the soap....

[Wanderer]

You can only operate it from the date of approval by HMRC, which is normally the start of the vat quarter you applied in.

Jessica has a lot more experience than me with this stuff but with a deep breath, I'm going to disagree....

I forgot to apply for the FRS when I registered for VAT. On the advice from my accountant, I applied for VAT FRS in March and back dated the application to July the previous year! A big win for me because I could retrospectively profit from the FRS over those 9 months....

Section B says the FRS will be used "from the beginning of the VAT period after they receive the application". However, "if you prefer another date then write the date and reason below". I just wrote "Please backdate application to xx July 20xx" and didn't give any reason. HMRC duly backdated the FRS registration.

Sorted...

[Jessica@WhiteFieldTax]

No, you cannot back date flat rate.

You can only operate it from the date of approval by HMRC, which is normally the start of the vat quarter you applied in.

Check the approval letter you got from HMRC.

[toothpop]

Hello,

I am in a bit confused and I am not getting much help nether from HMRC or from my accountent.

I am self employed. I have registered my company in June and started billing in the same month.
I have registered voluntarily for VAT in August and applied for flat VAT October. Before I received the approval my accountant has filed VAT for full 20%.
Can back date Flat VAT from June + first year's 1% discount?


Many thanks.