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Tribunal rules on partnership services VAT

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13th Dec 2012
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Partnerships can only recover a small amount of VAT on fees for accountancy services to partnerships under guidelines by HMRC, a first-tier tribunal has ruled.

In the case Mundays LLP v HMRC TC02374, law firm Mundays disputed with HMRC the amount of VAT it could recover on fees paid to Menzies.

The court heard that Menzies did not deliver a single invoice to the appellant covering all its services. 

To help the then chief executive of Mundays relate each invoice to the services provided and to agree a fee, it was agreed that dealing with individual partners’ tax returns and calculating their tax reserves would be dealt with on a single invoice headed “partners’ personal tax returns” and billed at £900 per partner per year. 

Mundays argued that £785 of the £955 per partner costings was input tax of the partnership and the remaining £170 was “de minimis” and should not have been disallowed as it was in accordance with HMRC guidance.

Under the law, businesses can only recover VAT if it is input tax, i.e. VAT on the supply to of any goods or services to the business.

In her latest AccountingWEB podcast, Anne Fairpo said the tribunal’s decision was a reminder that VAT rebates for accountancy services are only meant for fairly small amounts. 

"It looks as if the larger the firm, the harder it is to fall within this concession. There's also a subsidiary role for accountants to get the wording on their invoices right," she said.

The tribunal ruled that only part of Mundays’ VAT reclaim was valid, for example, for advice to ensure that partners paid the right tax from a tax reserve account.

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By David Gordon FCCA
17th Dec 2012 16:08

personal tax returns fees

How may clever persons be so daft.

For decades HMRC as a matter of principle have always refused to allow fees for preparing personal tax returns. There is a whole Wagnerian Opera of moans and groans regarding this injustice.

To do so would be to admit that professional help may be needed, but it is a fundamental (Political) plank of the SA system, that taxpayers are able to prepare their own "Personal tax returns". and

"Would cost HMRC too much money" This direct from the mouth of Dave Hartnett, previous boss of HMRC.

So, sensible accountants bill their clients for accountancy services rendered, and throw in the Tax return as an almost-freebie.

Remember the old Whyte & Mackay whisky advert?

"Buy the cap and the bottle comes free".

 

 

 

 

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