I'm in dispute with a client who should have registered for VAT but I didnt register until I received the year end accounts data.
I'd been chasing him for up to date sales since 2016 but he was saying that he was well under the registration limit and he also said that his supplies were not VATable. I have emails to him asking for the information but he never provided any information until he provided the data for the yearly accounts. I'd been asking him to total his sales for the previous 12 months every month to see if he goes over the limit. He didnt inform me of going over the limit. When I got the accounts data I worked out that he'd gone over the limit and it wasn't temporary. He is a personal trainer and I had told him that my view is that his sales would be subject to VAT but he always said it wasn't because of medical/educational reasons. I told him I didnt recognise those reasons as being relevant but asked him to talk to HMRC and explain exactly what he did so they can make a decision. When I informed him he had gone of the limit he said he shouldn't be subject to VAT because of the reasons stated. I asked him what evidence he had. He said he'd looked for evidence but couldn't find any. He said when he looked into it a year previously he was 100% certain he wasn't VATable. He asked me to calculate how much VAT was due and it came to about £25k. I informed HMRC and also registered for VAT. He asked what was needed. I said he could either increase his prices or accept that his prices included VAT. I got him setup on on Xero and explained what he needed to do. He continued to include VAT in his prices and didnt change them. I also prepared his latest yearly accounts. I sent him an invoice for the work done. At this stage he had not made any complaint. Last week he sent me an email and said it was my fault he had to pay VAT! He also said he didnt want to pay for the extra work required. He said he also wanted me to pay the VAT that was due!
My argument is that I was regularly chasing him for up to date sales and also asking him to keep checking to see if he'd gone over the limit. I'd asked him to contact HMRC to check his VAT situation but I feel he will have just looked online and jumped on the medical/educational excuse. I also think that even if I hadn't chased him he wouldn't have incurred any extra expense (HMRC want a first VAT return ending September 2020 so there may not even be a penalty) because he had not increased his prices either after I told him about needing to be VAT registered or before. He also never complained about me being responsible for late registration until after I'd done a lot of work for him and sent him an invoice.
My opinion is that he doesn't want to pay the VAT and is trying to get me to pay.
He said he's got a "legal team" working on the case and they say it's a clear cut win for him! I don't think he's told them the facts.
If it does go to court I was thinking of asking another client to be a witness who could testify that I am very eager to chase them to find out whether they need to register for VAT.
I'd had a professional letter from his new accountant asking for handover details. Am I within my rights to withold the details until any case is settled?