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Flat rate allowed but not used.

Flat rate allowed but not used.

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I have a client whose business is going to close as they now have a job.

The client has always done their own vat return and now on closing their is a vat liability. On questioning the client further back in 2007 they applied for flat rate which was accepted.

Obviously the vat returns have been submitted on the standard rate basis.

What would be the best way to tackle this? Work out what they should have paid and what they have paid on standard rate and just put the difference on the next return then close it?

Many thanks

Replies (4)

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By carnmores
01st Aug 2014 10:26

depends on how much the difference is

you also need to check that he wasnt taken off it as he accounted 'normally' . calulate the difference and if less than £10k stick it on the last return otherwise send a letter , which might be worth doing anyway . do his SA or company accounts reflect the correct figures for IT or CT ?

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Replying to Roland195:
By stehaggan
03rd Aug 2014 14:30

Thanks I am going to do the calculation on tuesday.

I would presume that as the 20% has been used then the profits would have been less and therefore CT less.

If an adjustment is done this year then the profits would therefore be higher as it will add back to sales (no expenses to reclaim vat on at all) so this will balance out.


Think i best give HMRC a call tomorrow to confirm the process :-/

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Nigel Harris
By Nigel Harris
03rd Aug 2014 22:12

Surprised HMRC haven't spotted it

I had a client who registered for Flat Rate VAT in mid-2013 but didn't tell us. We submitted 2 or 3 three returns I think and then has HMRC write to query them. We had to provide Flat Rate calculations from Day 1 and the client had to pay an assessment because they had zero rated sales which became liable to Flat Rate VAT, while losing all the Input Tax claims.

I got the impression HMRC's software would generate an alert for their staff to follow up if you put figures in the Inputs and Input Tax boxes while registered for the Flat Rate. The fact that they haven't might indicate that they took your client off the scheme, but that doesn't seem to be normal practice in my experience.

Thanks (1)
By BananaMan
04th Aug 2014 15:29

I dare say that they did notice, but as there is no input to reclaim and the 'error' was in their favour they just chose not to notify them

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