A client has recently had a VAT visit that has discovered that he incorrectly charged £40.75 MOT fee to customers as exempt when he was only paying £28.00 to the MOT centre.
The HMC&E have raised an assessment for VAT on the basis of the MOT being VAT inclusive and therefore on the full sale price of £40.75, not just the service charge of £12.75.
We acknowledge that the client should have shown £28 MOT fee as exempt with the remaining £12.75 as VATable to properly adhere to VAT disbursements rules.
We have suggested to the HMC&E that if our client was to raise credit notes and reissue invoices showing the MOT fee and service charge separately that he would only have to account for the VAT on the £12.75.
HMC&E have stated this is not allowed, does anyone have any views on whether or not raising credit notes and reissuing invoices should be allowed?