My client company should have received income last year circa 120k. This is the turnover recorded in their books. But their main customer went into receivership. They advised therefore that their true turnover was 50k. There is a bad debt recorded which of course does not come off the turnover. So the accounts will reflect the 120k and will probably ring alarm bells at hmrc as the business was not registered for vat.
The company did its bookkeeping very late and this has only recently been picked up as the company accounts are due this month.
The company say they contacted a HMRC vat specialist who said they could apply the cash basis and not register despite being temporaily over the 85k threshold for several months, but there is nothing in writing.
I can find nothing to confirm that the turnover can be based on the cash basis.
I am nervous about continuing to act for the company in these circumstances.
Can anyone shed any light on whether their position is correct please?