Client company has gone into administration.
Some of our fee invoices are unpaid.
Administrator has sent us form 4.25 "Proof of debt - general form".
Question 3 asks us to state our total claim specifically including VAT.
Question 5 asks us to split our total claim between the net and VAT elements.
Question 7 asks us to state whether we are claiming the full amount, as stated in our reply to question 3, or the net amount only without VAT.
Why would we only claim the net instead of the whole sum including VAT?
What am I not understanding?
Any help much appreciated before we answer the form.
Replies (6)
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Not sure
Sorry - was typing something and changed my mind - I am not sure. Needs somebody else with more knowledge than me to answer.
VAT scheme
Is your business operating VAT cash accounting or a normal VAT basis?
If cash accounting then claim the full £12k on the PoD form, if normal VAT basis then surely it's better to reclaim the VAT (as bad debt relief) you've already paid over on the original sale, and when or if you get a dividend from the liquidation a couple of years later then pay the VAT element over to HMRC on what you receive. It's a cash flow timing thing.
But, Sheepy
The point being made is that if only the net amount is claimed, what happens to the VAT that would have been accounted for? If full bad debt relief is claimed then the rules are that if any of the debt is subsequently paid, the corresponding VAT needs to be accounted for to HMRC. There must be a reason, but I can't figure out why anyone would put in a claim for only the net amount.