VAt

Vat

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My client business was struck off, he charged VAT to a client for a construction fit out to ensure completion and handover, all subcontractors and suppliers were paid including VAT payment to each, no debts for the project. The project was for a friend of a friend (loosly) He took an employed job 3 weeks into the 18 week project because he knew he wasnt going to earn anything out of it and serviced the project outwith his usual employed working hours. His client almost 3 years later has tried to reclaim the VAT on the project and has sent a solicitors letter what should he do as the company no longer exists, can the VAT man pursue him for the VAT, can his client hold him personally responsible?

Replies (11)

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By johngroganjga
05th May 2016 07:40

If you re-read your question I think you will realise that you have not actually said what the problem is. Your client receiving a letter from solicitors is probably not a good thing, but what does it say? Is it right?

You will get more useful answers if you don't leave readers to guess what the problem is.

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By spidersong
05th May 2016 08:39

Why would the VAT man pursue him for the VAT? He's presumably paid the VAT he owed the VAT man, or are you saying he wasn't registered and charged VAT. Did he charge VAT and /or trade whilst the business was 'struck off'?

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RLI
By lionofludesch
05th May 2016 08:54

Completely fogged. Who did the work ? The company or the ex-director ? Was he registered for VAT or did he charge it fraudulently ? Was this invoice of which you speak before or after the business was struck off ?

Come come, state your query unequivocally.

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RLI
By lionofludesch
05th May 2016 09:15

Just guessing, but has this ex-company charged VAT on something that should have been zero-rated ?

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By TonyRFC
05th May 2016 11:38

Client has been sent solicitors letter to be held responsible for paying back vat at £22.3k. He claimed vat but was not registered. Fit our budget was very tight, vat was used to pay suppliers and subcontractors to ensure completion. His client advised through project no more money available. Project was completed and is doing well for his client. My clients business was struck off, no accounts had been filed at CH. can the vat man pursue him, can his client pursue him for personal liability to recover the value above?

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Replying to TonyRFC:
By johngroganjga
05th May 2016 14:02

You mean solicitors are acting for the clients whom the client defrauded? If they are already on his case and he can't make them go away by paying what they want you should send him to see a good criminal lawyer experienced in financial crime with further delay.

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By Melody
05th May 2016 17:43

My understanding from your posts (correct me if I'm wrong) is that
(1) your client invoiced VAT, so that
(2) his client claimed the VAT back from HMRC as input tax (or tried to) but
(3) your client was not VAT registered so
(4) your client did not pay this VAT over to HMRC as output tax but instead "pocketed" it.
This is classified as fraud by HMRC. https://www.gov.uk/report-vat-fraud

Although liabilities of a Ltd company (if your client's business was in fact a Ltd Co.) are in general not personal debts enforceable on the directors or managers, there are exceptions to this. These include including fraudulent evasion of VAT and also wrongful trading (continuing to trade once they knew there was no reasonable prospect of avoiding insolvent liquidation). http://www.hmrc.gov.uk/MANUALS/dmbmanual/dmbm530170.htm

So I agree that your client needs to a see a good lawyer, or perhaps an insolvency practitioner who deals with small businesses (it may be a bit late for an insolvency practitioner, but some of them give initial free advice which will at least help to establish whether they can help further).

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By Melody
05th May 2016 17:44

My understanding from your posts (correct me if I'm wrong) is that
(1) your client invoiced VAT, so that
(2) his client claimed the VAT back from HMRC as input tax (or tried to) but
(3) your client was not VAT registered so
(4) your client did not pay this VAT over to HMRC as output tax but instead "pocketed" it.
This is classified as fraud by HMRC. https://www.gov.uk/report-vat-fraud

Although liabilities of a Ltd company (if your client's business was in fact a Ltd Co.) are in general not personal debts enforceable on the directors or managers, there are exceptions to this. These include fraudulent evasion of VAT and also wrongful trading (continuing to trade once they knew there was no reasonable prospect of avoiding insolvent liquidation). http://www.hmrc.gov.uk/MANUALS/dmbmanual/dmbm530170.htm

So I agree that your client needs to a see a good lawyer, or perhaps an insolvency practitioner who deals with small businesses (it may be a bit late for an insolvency practitioner, but some of them give initial free advice which will at least help to establish whether they can help further).

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By Melody
05th May 2016 17:48

Aaarghhh!
Tried to correct a typo and it ended up posting twice! Someone please tell me, how do I delete the (first) wrong one on this new look website?

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By TonyRFC
05th May 2016 18:47

Thing is he hasn't pocketed the vat. I've seen invoices paid to subcontractors and suppliers. Paid out more than he got in, and paid each their vat, made no money, had to take on an employed job.

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