I was just reading a VAT tribunal case from earlier this year that should be a salutory lesson to us all.
In the JMB Wilmington case the appellant tried to persuade the Tribunal that HMRC should allow her to retrospectively apply the VAT Flat rate Scheme - even though Returns had already been submitted using the normal basis.
I am sure most of us would have foreseen an easy win for HMRC in these circumstances. However, of note is that her argument was largely based on her allegations of the "apparent ignorance or incompetence" of the former accountants. Not that it did her any good, but it made me wonder.
How many clients have you reviewed to ensure that they wouldn't be better off using the Flat Rate Scheme?
- All of them (really?)?
- Most of them?
- A few of them?
- Or only those who have asked?
As with most things, it comes down to having a system - you need a system to make sure that you check, and to record that you did it. And that you review it on a regular basis in case circumstances change. Of course the same applies to those clients who are in the Flat Rate Scheme - it may not apply for the entire life of their business, so are you sure it's not time to pull out?
We unfortunately have an account production system that holds each client's data in a separate file so we can't interrogate the entire database and get a list of clients with turnover under or over a given level. If you do, it should be an easy job to run a report once a year and check for potential Flat Rate candidates. Otherwise, like me, you'll have to do it the hard way, and make sure your accounts team make checking for Flat Rate eligibility a standard task every year.
What we don't know from this Tribunal case is whether the trader - having lost - then made a negligence claim against the accountant. Sounds to me like she might have had a reasonable case. This is an easy area to cover off, so make sure you're not the next firm to be caught on this issue.