Hi, any advice would be welcome,
i run a small building company and due to some advice from a previous accountant i beleived i would be informed by hmrc during my self assesed tax return online if i needed to be vat registered, however i have been informed i should have been registered for vat for the past 6 years and that they can collect backdated vat for this period.
is this correct and are criminal proceedings likely?
Also for how far back can i reclaim vat on materials purchased?
Replies (4)
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Please get advice from a local firm of accountants
General answers to your general questions:
No accountant would have told you that, it has always been your personal responsibility to monitor your turnover.
You need to establish for yourself exactly when you should have been registered - this is critical. HMRC are often wrong about all sorts of things.
HMRC will expect you to prepare one monster return from the date you should have registered, so you can recover inputs against your outputs for the whole period.
If your customers are VAT registered then they may accept an extra invoice for the VAT on top of the old invoice as they could reclaim it straight away.
This is (almost certainly) a civil matter at the moment and will only go criminal if they decide you set out to defraud them.
ALL THE ABOVE IS NOT SPECIFIC ADVICE AND WE WILL NOT BE HELD LIABLE IF YOU ACT WITHOUT OBTAINING RELEVANT SPECIFIC PROFESSIONAL GUIDANCE PLEASE FIND YOURSELF A LOCAL ACCOUNTANT WHO YOU CAN WORK WITH
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Sorry not meant like that
Only if HMRC decided that there was intent - and I see no reason that they would - would this get criminal.
Otherwise they will 'almost certainly' just persue the VAT in a 'civil' way.
Seek advice first, but consider these matters...
You certainly need to engage with an Accountant to help you with this.
You need to determine at which month your turnover exceeded the VAT regsitrations threshold at that time, historical VAT thresholds are here :-
You may also need to keep an eye on the de-registration thresholds (use same link as above) as if turnover dropped below a certain level in a twelve month period, you could de-register, if only for a period, to limit your exposure overall.
As a builder, some of your work MAY be zero rated if it is in relation to the construction of a dwelling, but if you mainly do repair/maint work then most likely all your turnover will be standard rated.
Depending upon your type of work, you may also wish to consider the Flat Rate Scheme which means you don;t pay over to HMRC 17.5% of yoru turnover, instead a lower % of your turnover is due to HMRC.
Whatever your output tax (sales) liability, this should be off-set by some degree by reclaiming input tax (purchases), especially things like vans, tools, assets, stock, etc. Any late registration penalty is calculated on the overall liability to HMRC, that is output tax less input tax = liability owed to HMRC, so you can reduce the penalty by reclaiming as much input tax possible (based on how good your records are).