Our client registered for VAT a number of years ago, however, unfortunately due to issues with their book keeping system and a misunderstanding on how they should account for VAT no returns were filed. Instead the client paid VAT on central assessments issued by HMRC. This led to a growing VAT liability that was identified when the client changed accountants and their new accountant asked for our firm to act on behalf of the client. During a meeting with Tamara Habberley at our firm it was identified that the client paid suppliers as a disclosed agent on the behalf of their customers, meaning that the payments from the customer to the client to pay the supplier did not form part of their turnover, and the client had little by way of VAT on costs to claim. This meant that if HMRC accepted the client could use the flat rate from the date of registration to correct the arrears in VAT it would create a substantial reduction in their VAT exposure. Although the client had not applied to use the flat rate scheme when they registered for VAT, the fact that they had omitted to file the returns meant that there was a strong argument for them to be allowed retrospective permission to use the scheme. Following a lengthy period of negotiation with HMRC the client was finally allowed to use the flat rate scheme and HMRC accepted that services paid as an agent on the behalf of the client's customers did not form part of their turnover. This action by The VAT People has resulted in the VAT arrears owed by the client to HMRC being reduced from over £80,000 VAT to £49,000 VAT, a saving of £31,000 VAT for the client. If you or your client face a potential liability for VAT it is always worth contacting our free VAT helpline where one of our VAT consultants will be happy to have an initial free of charge discussion. A simple call could save you or your client substantial amounts of VAT and time in dealing with HMRC and we would only charge a fee if we have agreed a way forward and the fee to act in advance of the work.
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