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VAT not being declared

Hi,

I am currently working in a small ish practice where there is one partner.

I have been working on a client who owns one company (X Ltd) and half of another company (Y Ltd) and they are trading with each other. We act for both of these companies. Y Ltd submitted it's final VAT return in September 2012 and is now ceased.

When completing X Ltd's accounts this year (Oct 2012) I noticed that there is about £100,000 worth of extra Purchases in X Ltd from Y Ltd, than there was in Y Ltd Sales ledger to X Ltd (I looked on their sage to compare). Therefore, X Ltd have claimed about £17k worth of Input VAT which Y Ltd has not declared as output VAT. The complitation is that Y Ltd has now ceased.

My boss is saying just to leave it for now but I think this is dreadfully wrong! I need to put my foot down but I obviously don't want to do it too much. Also, the boss is friends with this client which makes it a little more delicate!

I really just want advice on what I SHOULD do (I'm guessing that I should amend Y Ltd's FInal VAT return with the extra VAT?) and then if it is decided to not do that should I report this and to whom?

Any help is appreciated as I find myself in a very strange and unknown position.

Thanks

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08th Feb 2013 11:53

You sound like me

This is the exact same type of question I have had to post a few times in the past.  

Not that it matters too much, as regardless it is still wrong either way, but were they in a VAT group? 

Unless you have the authority to do so, I wouldn't change anything unless your boss says so.  If at all possible, get the boss' statement on some sort of record for later (I tend to email such things to the partner who then invariably calls me in to dicuss it, but if he emailed back it would be perfect..), or make a good note to refer to later.

Basically you are in a pickle, if you are correct but your boss says to leave it be, you have to leave it be.  However you need to consider your ML responsibilities (bonus points if your manager is the MLO).

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By BKD
08th Feb 2013 12:03

It is not your job to amend the client's VAT return

Unless instructed to do so.

What you have correctly done is identify an error and brought it to your employer's attention.

You say that he is a sole practitioner (you cannot have only one partner!) in which case he is likely be the practice's "Money Laundering Nominated Officer". If he isn't, you should know who is and in any event make a written report to the relevant person. That report should be acknowledged, but I'd keep a copy in any event. Job done - it's then down to your boss to decide what to do and you can get on with your work.

EDIT - composed whilst CC was posting

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By mjv1986
08th Feb 2013 12:13

Thanks for the replies.

I usually do just do what the boss says, put a note on the file to cover myself!

The only other thing is obviously X Ltd are claiming these extra expenses, which also means they are getting an extra 20% corporation tax relief as well?

I can confirm they were not in a VAT group and sorry it is a partnership, but it is him and his wife!

Just seems very wrong but from your replies there is not much I can do!

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By BKD
08th Feb 2013 12:28

Yes it does seem wrong

But you are far from being helpless. Your position is to make a report to the MLNO. Once you've done that, the onus is firmly on his shoulders to take this up with the client in order to rectify matters. If the client refuses to rectify matters, then a report to SOCA would be in order. If he fails to act on your report, then he is the one facing the music. I appreciate that a report from you may not be welcome in the eyes of your boss, but you do need to protect your own position. Clearly I know nothing about the client but from the information provided I would say that you have good reason to be suspicious that an unrectified underdeclaration of VAT has occurred. If you do not report that suspicion then you are the one facing the consequences, and any reasonable employer ought to recognise that. Once you've filed your report, it is no longer your concern.

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