Good afternoon all.
The problem we are having at the moment is we have a group company which had invoiced to its 4 sister companies back in May 2007. The VAT liability on all the invoices would have been at around £200k. Unfortunately (from what I have been told) a genuine mistake was made and the VAT was not included in the VAT returns. The VAT element was instead posted to a VAT suspense account and had been kept there since.
3 of the sister companies did not claim the VAt and posted the Input VAT to a VAT suspense account and this has been brought forward and carried forward in the accounts since.
On the other hand, the other company had claimed its £50 worth of input VAT and actually got the refund.
We now have a situation where one company owes £200k to HMRC and 3 other companies are owed £150k, giving us a net liability (from a Group Perspective) of £50K.
Now we know that all this happened more than 4 years ago and HMRC would not go back 4 years unless they can prove there was Dishonest Conduct and fines can be pretty hefty if they can prove that this is the case.
Could any one please advise as to how we should go about clearing this mess?
And would HMRC agree to settling of the net amount of £50k or will each company be assessed separately.
Thank you all.
Aaron
Replies (7)
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If they are not registered as a VAT group
my guess is that they will be assessed seperately; 4 x the penalties!
Hang on a minute
If, as you say, the errors are more than 4 years old and there is no dishonesty involved then HMRC will struggle to issue a civil penalty. They may be a bit miffed at being £50K down on the deal and want to interview various company officers to see if they can prove any evidence of dishonesty. They could also ask questions about why the auditors did not pick up a large figure.
Malcolm McFarlin
Disclosure
I agree. I suggest you make a 'voluntary disclosure' and prepare the client for a civil fraud interview. HMRC will inevitably ask the question why the error was not disclosed when it was discovered.
The penalty commences at 100% and can be mitigated downwards. The penalty is recoverable against the 'director' or 'managing officer' personally.
The penalty rules changed for VAT periods commencing after 1 April 2008 this matter will fall under the old penalty rules. It may be possible to reduce the penalty to as low as 20%. I think the penalty could be negotiated as to whether it should apply to all the companies in the Group
Malcolm McFarlin
Happy to assist
Aaron
I would be happy to assist you or your client. Have a look at our website and if you think we can assist -give me a call
Malcolm McFarlin