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Client doesn't want to submit VAT return!

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My client doesn't want to submit their VAT return this quarter and wants to submit everything in the next quarter. I told him it's not as simple as that as HMRC will send an estimated bill if no return submitted.

My client has told me that they don't have time to bring the paperwork to me let alone update Xero with invoicing.

Truth is, they know they are going to get a VAT bill this quarter (this is the second quarter of being VAT registered) but want to hang on for another quarter as there will be more costs to claim VAT back, thus reducing their VAT liability.

Anyone else experienced this with clients and how did you deal with it?

Replies (33)

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By CJaneH
17th Mar 2020 13:02

I think you will have to get shot of this client. They obviously have not grasped how the tax system works. What ever words HMRC uses they are not customers of HMRC but tax payers.

Thanks (5)
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By memyself-eye
17th Mar 2020 13:25

Point out that paying VAT is usually the result of more sales:
More sales = more income = money in the bank to pay the VAT

(unless they've spent it of course..)

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Replying to memyself-eye:
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By Sharon W
17th Mar 2020 14:53

I'm taking an educated guess they've spent it.

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RLI
By lionofludesch
17th Mar 2020 13:42

It's not your problem.

Just say so in your disengagement letter.

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By whitevanman
17th Mar 2020 13:43

Why is it that some clients simply will not understand that VAT is not "theirs"?
If they provide a service they charge £x for it. The government has decreed that the business should also charge an extra 20% which they should pay to HMRC. The client is just an unpaid tax collector. As a separate matter businesses are allowed to re-claim (some of) the VAT they pay on goods and services they use. To make their life a little easier (!!) they are allowed to set off what they are "owed" against what they have collected and pay over only the net amount. Simple.

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Replying to whitevanman:
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By philaccountant
18th Mar 2020 14:54

I'd like to be a fly on the wall when you explain that to them in that patronising tone...

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By Roland195
17th Mar 2020 15:50

Just checking to see that this isn't some zombie thread but has actually been posted on 17/03/2020.

How many businesses do you suppose are planning on filing let alone paying their next VAT return?

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Replying to Roland195:
RLI
By lionofludesch
18th Mar 2020 10:41

Roland195 wrote:

Just checking to see that this isn't some zombie thread but has actually been posted on 17/03/2020.

How many businesses do you suppose are planning on filing let alone paying their next VAT return?

Dunno - exactly how many pasta and toilet roll businesses are there in the UK ?

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Replying to lionofludesch:
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By InterimAccountant
18th Mar 2020 11:01

Pasta would be zero rated!

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Replying to InterimAccountant:
RLI
By lionofludesch
18th Mar 2020 14:56

InterimAccountant wrote:

Pasta would be zero rated!

Should encourage them to file on time, then.

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By slipknot08
18th Mar 2020 08:25

If incorrect VAT returns are submitted to help with cash flow HMRC will view this as a deliberate error and penalties would be charged accordingly, potentially up to 100% of the underdeclared VAT. Always submit a true and accurate return even if payment cannot be made (and do your best to get a TTP arramgement, under the new relaxed availability)

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By Sharon W
18th Mar 2020 09:13

Thank you everyone, I have written to my client advising if they do not adhere to HMRC regulations than I would have to disengage my services. They are a PITA anyway so a good escape!

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Replying to Sharon W:
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By Roland195
18th Mar 2020 09:25

If you are taking that attitude, be prepared to write a lot of these letters.

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By Francesca Parker
18th Mar 2020 10:09

I would advise them against this and then probably look to not work with them any longer.

They can not pick and choose when they submit VAT returns based on the amount is sales Vs purchases.

I imagine you have already made them aware of this?

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Replying to Francesca Parker:
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By Sharon W
18th Mar 2020 11:45

Francesca Parker wrote:

I would advise them against this and then probably look to not work with them any longer.

They can not pick and choose when they submit VAT returns based on the amount is sales Vs purchases.

I imagine you have already made them aware of this?

Absolutley!! Strangely now they are getting their paperwork ready!

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By flightdeck
18th Mar 2020 10:29

Not being facetious and this is a genuine question: why do you care? If you have explained the laws and the likely consequences then you have done all you can do. You do not run their business and you a not responsible for it. You can advise but do no more. Up to them if they take your advice or not. The liabilities fall to the company not to you.

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Replying to flightdeck:
RLI
By lionofludesch
18th Mar 2020 10:33

flightdeck wrote:

Not being facetious and this is a genuine question: why do you care? If you have explained the laws and the likely consequences then you have done all you can do. You do not run their business and you a not responsible for it. You can advise but do no more. Up to them if they take your advice or not. The liabilities fall to the company not to you.

For me, it would be an indicator that this is a client I don't need.

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Replying to lionofludesch:
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By flightdeck
18th Mar 2020 11:38

True, and I get that and I think the poster does describe them as a PITA and so for that reason you might not want them but what if, say:

- they pay your accountancy bills on time
- they are, to you, a profitable client
- they accept they are acting contrary to your good advice
- there is no liability on you the accountant for the not following your good advice

Thanks (1)
Replying to lionofludesch:
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By flightdeck
18th Mar 2020 11:38

True, and I get that and I think the poster does describe them as a PITA and so for that reason you might not want them but what if, say:

- they pay your accountancy bills on time
- they are, to you, a profitable client
- they accept they are acting contrary to your good advice
- there is no liability on you the accountant for the not following your good advice

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Replying to flightdeck:
By northernmonkey
18th Mar 2020 12:14

Erm, Corporate Facilitation of Tax Evasion anyone? Prosecution? You can't turn a blind eye!

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Replying to lionofludesch:
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By flightdeck
18th Mar 2020 11:38

True, and I get that and I think the poster does describe them as a PITA and so for that reason you might not want them but what if, say:

- they pay your accountancy bills on time
- they are, to you, a profitable client
- they accept they are acting contrary to your good advice
- there is no liability on you the accountant for the not following your good advice

Thanks (0)
Replying to flightdeck:
RLI
By lionofludesch
18th Mar 2020 11:44

flightdeck wrote:

True, and I get that and I think the poster does describe them as a PITA and so for that reason you might not want them but what if, say:

- they pay your accountancy bills on time
- they are, to you, a profitable client
- they accept they are acting contrary to your good advice
- there is no liability on you the accountant for the not following your good advice

I'd pass them to you.

It's no coincidence that a PITA client doesn't want to send his VAT return in.

I just say this from experience, like. Yours could be different.

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By pauljohnston
18th Mar 2020 10:42

Did you need to submit a SAR?

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By Izabela Raaths
18th Mar 2020 10:45

As accountantswe are obliged to follow the ethical principles. Your client wants to deliberately break the rules therefore it is not worth having him in your portfolio of clients. Write to him an official letter informing what the right approach is and if he still declines providing the documents, disengage.

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By Nippy
18th Mar 2020 10:46

Would this clients' behaviour not fall foul of the money launderying regulations and the accountant is assisting with that behaviour too?

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By sallyrichardson
18th Mar 2020 11:02

We always advise that they need to submit the correct return, then contact the HMRC if they need time to pay. In light of the announcement yesterday they should be able to take advantage of the new extra time to pay, even if this was obviously not caused by the corona virus.
They may say that this is a "one off" but we view most clients like small children - they test your boundaries on a regular basis to see what they can get away with. Today's delayed VAT return may be tomorrow's made-up expense claim...! Trust your gut, and if you're not happy stand firm!

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By Roland195
18th Mar 2020 11:10

Sorry, but I am I missing something here?

Even if this was a post from 17/03/2019, we are hardly talking about the crime of the century. So a client can't afford to pay his VAT bill and wants to wait until he can file the subsequent return that may be a repayment to offset the bill? It's obviously not ideal, and against "The Rules" (gasp!) but if he were to do this then it would likely have sorted itself out before HMRC got round to any action.

I don't see anywhere that says he would be attempting to misreport of claim anything not entitled or even not file at all.

Assuming the client is happy to pay the interest & any late surcharge that may apply then I can't see what the major issue is.

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By [email protected]
18th Mar 2020 11:18

Your client want you to act against HMRC rules. I met couple of clients who want me to do something similar but our professional ethics doesn't allow that.
We have to explain the rules to client in a way that he understand. You must have ability to make them understand the rules of HMRC. Make them understand and try to retain the client if you can.

Thanks (1)
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By john hextall
18th Mar 2020 11:57

They have to do a return even if they make minor adjustments later. If they are going to struggle to make the payment, they may get some help from HMRC with delaying this, but they will be in bigger trouble if they don't return any figures. More worryingly, if this is only the second return, things will likely get even worse unless they get their act together now.

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By fawltybasil2575
18th Mar 2020 12:43

@ Sharon W (OP).

Noting your indicating that this is a “PITA” client, then the first question to ask yourself is whether (IF you were to persuade your client to act correctly re the VAT Return at issue) you wish to continue acting: if the answer to that question is “NO”, then (i) immediately disengage, and self-evidently (ii) give no further thought to the VAT Return matter at issue.

If however the answer to that question is “YES”, then we need to firstly consider more carefully the words in your initial question, that your client wants “to hang on for another quarter as there will be more costs to claim VAT back, thus reducing their VAT liability”.

Those words (the first factor at issue) imply that they believe that the Input Tax to be recovered on the NEXT quarter’s VAT Return (ie the quarter to 30 June 2020) will affect the VAT payable for the quarter to 31 March 2020 and indeed that it will postpone the required payment of the VAT due for the quarter to 31 March 2020 – this tends to indicate (supported by a second factor, namely the client’s also advising you that they have insufficient time to bring their records up to date) that they believe that a Return for the 6 months to 30 June 2020 can be made – clearly this is not so, hence the client should be disabused of that belief.

You should therefore notify your client (firmly) which of the two factors (ie their two possible misunderstandings) is/are incorrect; and you should then clarify especially which of the two above factors is their major concern.

If the major factor is lack of funds, then the advice by eminent posters above re contacting the relevant Helpline for Time to Pay is very sound, and you should insist that they do so and thereafter comply with the payment terms agreed with HMRC. If you are happy that they will comply with those payment terms (for which purpose the client would need to provide to HMRC a reasoned estimate of the VAT payable for the quarter to 31 March 2020), you should encourage the early updating of their accounting records to enable the 31 March 2020 Return to be submitted.

Impress on them the fact that, if they are unable to supply the records to you in time for timeous submission of the VAT Return, then Penalties could arise at a later date (forward to them a copy of the HMRC guidance in that regard).

As mentioned at the start of my post above, if you do not WISH to act for this client in any event, your disengaging resolves your dilemma at a stroke.

Basil.

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Morph
By kevinringer
18th Mar 2020 13:54

I've not had this problem. Yet. If it does I will make it clear to the client their legal obligation to make a return and that if payment is a problem they should phone the dedicated helpline that has been setup for businesses and self-employed who are in financial distress and have tax liabilities 0800 0159 559.

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Giraffe
By Luke
18th Mar 2020 15:23

I am waiting for this to be an issue here. Have a builder client who is not the most organised, 29 Feb VAT return not done and CT due to be paid on 1/4. Accounts done but CT600 not yet filed as waiting to see if dividends can be declared to reduce the s455 tax.

Radio silence from client who I said I needed figures from by last week so I could look into dividends.

I think there is a significant case of head in the sand. Not sure how helpful the COVID-19 time to pay helpline will be as these are debts known about for a long time already.

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By Montrose
20th Mar 2020 15:41

What are the terms of your letter of engagement? Do you undertake to prepare the client's VAT returns?
If you have no obligation to do so under you LoE, you could set out in writing to the client what the position is, and emphasise that you have no obligation to advise him or negotiate with HMRC under the existing financial arrangements you may have arranged under your LoE,.

Probably easier to just ditch the client!

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