claim fees with out without VAT?

claim fees with out without VAT?

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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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By paras007
12th Mar 2014 12:37

Not sure

Sorry - was typing something and changed my mind - I am not sure. Needs somebody else with more knowledge than me to answer.

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By User deleted
12th Mar 2014 12:39

VAT reclaimable

There is bad debt relief available - full details on the HMRC website.

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By taxinfo
12th Mar 2014 14:21

I know there's bad debt relief available but I'm not entirely sure I appreciate how that fits in.

Example -

Assume we are owed, say, £10000 + £2000 VAT.

We claim only the net figure in the Administration.

We receive a 30% payout, £3000.

Won't HMRC will want their 1/6 part of that as the proportion of the payout deemed to be VAT?

Surely, we should claim the full £12000 then, if we get a 30% payout of £3600, HMRC can have their £600 VAT and we keep the £3000.

Or have I got that wrong?

 

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By Sheepy306
12th Mar 2014 22:12

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.

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By User deleted
13th Mar 2014 08:14

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.

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By taxinfo
13th Mar 2014 12:00

Thanks for your thoughts.

Our firm accounts for VAT on the 'normal' basis, no schemes.

I'm still tending to agree with you, BKD, when you say "I can't figure out why anyone would put in a claim for only the net amount."

Our thinking is to claim the whole amount, including VAT, on the Administration form and reclaim the entire VAT as a bad debt on our next Return.

Then - IF we ever get a payout - we hand over the 1/6 'VAT fraction' of the payout to HMRC.

Or is that not the best way to approach it, do you think?

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