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Are Kingscrest Vat proceeds taxable

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We have a client who used to run a nursing home.  They have just received a six figure sum in respect of a VAT claim made under the Kingscrest judgement.  They are adamant that no further tax is due as all tax had been deducted before payment was made to them.  Unable to contact specialsit firm that handled claim at the moment, but cannot believe tax would have been accounted for.  Has anyone else had any dealings with this.

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Portia profile image
By Portia Nina Levin
10th Nov 2016 14:45

The point of the Kingscrest claim is that had they charged VAT on the residential non-care element of their fees to the local authorities, they would have been able to have recovered more input VAT.

Had they recovered more input VAT, the expenses in their accounts on which they received income tax relief would have been reduced.

They are now receiving that input VAT back, which is a taxable post-cessation receipt, meaning that it all gets taxed as income for the tax-year of receipt. They can deduct the fees of the specialist firm for handling the claim.

No tax will have been deducted at source in this respect.

Did the business have any unused losses when it ceased?

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Glenn Martin
By Glenn Martin
10th Nov 2016 14:50

Yes they are.

some of it will relate to capex so will need to be a credit to your asset pool.

The amount that relates to expenses will also increase profits for the year so in turn be taxable.

Its a while since I saw these as thought they had all been done years ago.

Its simply a VAT refund so how can it be net of CT?

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Portia profile image
By Portia Nina Levin
10th Nov 2016 14:57

I missed, and can confirm, the previos point about the input VAT on capital expenditure.

However, since it would have impacted on the balancing adjustments (to the extent that the capital expenditure qualified for CAs), this will still lead to it being taxable now.

Only any input VAT that relates to capital expenditure not qualifying for CAs can be excluded.

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By annec
10th Nov 2016 16:30

Thanks very much, is exactly as I thought. Specialist is being very unhelpful, he has offered to get tax back after return has been submitted with declared income but wants 25% of tax refund. Obviously, only he knows how the VAT refund was calculated with split between revenue and capital expenditure.

I assume he must have knowledge of unused losses carried forward to enable him to do this.

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Replying to annec:
Glenn Martin
By Glenn Martin
10th Nov 2016 16:44

A nice touch if you can get it, he probably already has been paid 25% to 30% of the Vat benefit of the original claim.

If the business has ceased did you do a VAT 427 form to claim the Vat back on the fees as that is chance to be a decent amount, if not maybe look at that.

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