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vat. Client is getting threatening

Stroppy client

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My client took a business and after a few weeks his t/over was £35k. He said had plans for a big t/over quickly and I told him he could make a voluntary reg, especially as he was l likely to reach the £85k b4 long. 
it turned out that his t/over did not reach the threshold as quickly as he thought after I registered him and only 2 weeks of the return was over the threshold. I did his vat return on sage and inadvertently pressed the key which put all sales and purchases on the return, albeit vat was only shown for transactions after the registration date, so whilst not strictly correct, Hmrc can easily see what has been subject to vat and what hasn't.he has attacked me on a number of fronts, the main one being I registered too early and that I must alter the return. On reflection, perhaps he was registered too early but I really don't know what to do. HELP!!!!

 

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By Matrix
02nd Jan 2020 20:03

1) Are you happy that the VAT showing as due per the VAT return is the correct amount of VAT for that registration date?

2) Do you have correspondence from your client confirming that you should register his business for VAT from that date?

I assume that the prices are VAT inclusive and that is why it is a problem but check all the emails and advice given, especially as to why a voluntary registration was recommended.

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By Jfg
02nd Jan 2020 20:11

1. Yes I am happy with the vat declared.
2. This is where I at fault, the initial conversation was by phone but I have the e mail where I told what the quarter return period was and the date vat was payable.
He wanted to be vat registered as he didn’t want to fall foul. He has subsequently told me phoned the vat helpline and was told that HIS threshold for registration was £100k. I asked him for the name and ref no of the call but funnily enough, he didn’t reply. He also asserts that, if even if registered, he doesn’t pay until after he reaches the vat threshold.

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By Jfg
02nd Jan 2020 20:11

1. Yes I am happy with the vat declared.
2. This is where I at fault, the initial conversation was by phone but I have the e mail where I told what the quarter return period was and the date vat was payable.
He wanted to be vat registered as he didn’t want to fall foul. He has subsequently told me phoned the vat helpline and was told that HIS threshold for registration was £100k. I asked him for the name and ref no of the call but funnily enough, he didn’t reply. He also asserts that, if even if registered, he doesn’t pay until after he reaches the vat threshold.

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Replying to Jfg:
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By Matrix
02nd Jan 2020 20:42

It sounds like the client didn’t really understand the voluntary registration but if you acted on their advice then you have correctly registered them and the VAT falls due.

I know a user on here has successfully changed the date of a voluntary registration (atleastisoundknowledgeable) so do a search. I would call the VAT registration team but it probably doesn’t help that you have submitted the return.

Refrain from calls/emails until the client calms down and you have researched the position and let your PII provider know if necessary. Edited to say that they have admitted that they acted on HMRC’s misleading advice and failed to get you to clarify the position in writing.

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Replying to Matrix:
ALISK
By atleastisoundknowledgable...
03rd Jan 2020 06:54

Matrix wrote:

I know a user on here has successfully changed the date of a voluntary registration (atleastisoundknowledgeable) so do a search. I would call the VAT registration team but it probably doesn’t help that you have submitted the return.

(Good memory Matrix)

The fact that you’ve already filed the return means that you won’t be able to change the effective date of registration as HMRC would take that as you (the trader) accepting to VAT registration. TBH, even if you hadn’t, from my experience of the process I very much doubt you would have managed to convince HMRC to change it anyway. You would’ve had to convince them it was an admin error (no easy task) - I only managed it because there was a specific event to tie the registration to.

Did the client approve the vat return before you submitted it? This could be taken as him approving the EDoR even if you don’t have anything pre-registration by email.

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By lesley.barnes
02nd Jan 2020 20:36

Take a deep breath!
What is your clients issue with his VAT? Is it that you've done his return wrong? In which case you will need to grovel and sort it out.
If not are his prices inclusive of VAT as Matrix says or why does the client think he is losing out? His registration date is whatever it is you can't alter his return to suit whatever date he wants. Dust off any correspondence you have agreeing to this registration to protect yourself. You don't say what his other issues with you are but I would prepare to disengage this client he sounds nothing but trouble.

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By Jfg
02nd Jan 2020 21:07

He seems to keep changing his position about why he is upset with me. First it was that I had registered him too early and I had Ill-advised him and then that I had cost him money. He can’t seem to comprehend the way vat works. I have already dis engaged him and he now says his new accountant says that I registered him too early and that I must change the return. Client is not renowned for his “frankness”.

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By Jfg
02nd Jan 2020 21:08

He seems to keep changing his position about why he is upset with me. First it was that I had registered him too early and I had Ill-advised him and then that I had cost him money. He can’t seem to comprehend the way vat works. I have already dis engaged him and he now says his new accountant says that I registered him too early and that I must change the return. Client is not renowned for his “frankness”.

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Replying to Jfg:
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By Matrix
02nd Jan 2020 21:17

By phone or email? Have you been paid?

I would not tolerate this, I would refer him to your firm’s complaints procedure. You may want to remind him that you acted on his instructions and he failed to confirm misleading/incorrect advice from HMRC with you, or at least put this in a file note.

Sounds like you are well rid, just put it down to experience. I just registered a client and was instructed by text but will now confirm everything by email, although he is 23 and never emails, you can’t be too careful.

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Replying to Jfg:
Locutus of Borg
By Locutus
02nd Jan 2020 22:32

Jfg wrote:

I have already dis engaged him and he now says his new accountant says that I registered him too early and that I must change the return.

If you have already disengaged him and he has a new accountant, then it is up to the new accountant to make whatever revisions are necessary. If you have not already done so, make sure that you issue a disengagement letter. He sounds like the sort of client that you are best rid of.

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Replying to Jfg:
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By lesley.barnes
02nd Jan 2020 22:37

You are no longer acting for him therefore you are not allowed to change his return. I would not respond to him further. If his new accountant thinks the return needs altering they can do it. Of course you only have the ex clients word on his new accountants views. You already know he told up you HMRC said he didn't need to register for VAT until he reached £100k. Why does he think you've cost him money? It sounds like he wants to blame anyone but himself for his business poor performance.

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By Jfg
02nd Jan 2020 21:52

You are quite correct you can’t be too careful. He has been my client for quite a few years with existing businesses, when he first mooted this company I told him to walk away but he thought he could see a pot of gold.
He has been paying me monthly but when I thought about was I doing for the money, I realised what a fool I was.
Just hope he doesn’t turn even more nasty.

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Replying to Jfg:
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By lesley.barnes
02nd Jan 2020 22:42

If he's got existing businesses along with this one have you checked he isn't caught by splitting his businesses to avoid Vat? Not that it matters to you now but it might be karma.

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Replying to lesley.barnes:
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By Jfg
03rd Jan 2020 10:11

the shareholdings of his companies are different

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By lionofludesch
03rd Jan 2020 09:52

Has it been clearly stated in the thread why he wanted to register early ? I can't find it if it has.

And what's this £100k business ? Where did that come from ?

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Replying to lionofludesch:
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By Jfg
03rd Jan 2020 10:11

With his stated intended sales, he would soon have breached the threshold.

Yes, I would like to know why the "HMRC people" told him the reg. was £100k. as well. I have asked for the name and ref no of the call but funnily enough, I didn't get a reply to that one...

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Replying to Jfg:
RLI
By lionofludesch
03rd Jan 2020 10:34

Jfg wrote:

With his stated intended sales, he would soon have breached the threshold.

Yes - but why did he go early ? Even if his turnover had matched his expectations, no need to pay more VAT for an extra month.

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Replying to lionofludesch:
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By Jfg
03rd Jan 2020 19:05

I latterly found out that he had a “history” with Hmrc and wanted to make sure he was not in contravention

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By bernard michael
03rd Jan 2020 09:57

What is his monetary loss if any by registering early ?

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Replying to bernard michael:
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By Jfg
03rd Jan 2020 10:09

he insists that the vat due is a "loss" to him.
He wasn't first in the queue...

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Replying to Jfg:
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By Matrix
03rd Jan 2020 10:14

So he has collected the VAT from his clients? I assumed the prices were VAT inclusive and that was the issue.

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By SouthCoastAcc
03rd Jan 2020 10:53

Where is the 100k threshold coming from?

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By Jfg
03rd Jan 2020 11:02

I am assuming from the bottom of a pint glass...

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By ireallyshouldknowthisbut
03rd Jan 2020 12:51

This is really odd.

Either early registration is to his benefit, in which case its a failure to explanation on your part, it ought to be pretty simple to explain "if you were not registered, then you would have cost you £3k". Most people can understand that however belligerent.

OR, f its not to his benefit why would you have advised him to register prior to it being compulsory? Even with a rapidly increasing turnover, whilst you may plan for VAT registration, surely you want to take advantage of any non-VAT period of grace? I am assuming you understand the registration rules.

So either way it seems to be you have:

(a) giving poor advice to register early, or
(b) being unable to explain why early registration is of benefit

From here, all you can do is tell the new accountant to sort it out, and hope that dont have a pop at your PI cover if the answer was (a).

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Replying to ireallyshouldknowthisbut:
RLI
By lionofludesch
03rd Jan 2020 13:26

ireallyshouldknowthisbut wrote:

This is really odd.

OP is being economical with the facts.

Despite repeated requests for clarification.

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By Vaughan Blake1
03rd Jan 2020 14:51

Action plan:

1) Don't panic.

2) Work out whether or not the ex client has actually lost out by the early registration. If they invoiced without VAT after registration, then the VAT will be a loss of 1/6 of the turnover. They can of course issue VAT only invoices to those affected. You are then prepared for any flack.

3) On the basis that it is now an ex client do nothing more. If he queries things with you, refuse to deal with anything and refer him to his new accountant.

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Replying to Vaughan Blake1:
RLI
By lionofludesch
03rd Jan 2020 15:11

Vaughan Blake1 wrote:
You are then prepared for any flack.

Flak.

An abbreviation of the German FLugAbwehrKanone (Air Defence Guns).

Just saying.

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Replying to lionofludesch:
ALISK
By atleastisoundknowledgable...
03rd Jan 2020 15:30

Not to be confused with Flack of the Caroline variety.

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Replying to atleastisoundknowledgable...:
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By lionofludesch
03rd Jan 2020 15:49

atleastisoundknowledgable... wrote:

Not to be confused with Flack of the Caroline variety.

Exactly.

Nor her sister, Roberta.

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Replying to lionofludesch:
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By Vaughan Blake1
03rd Jan 2020 16:09

Thanks, I didn't know that! Only ever heard it said in films.

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Replying to Vaughan Blake1:
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By Jfg
03rd Jan 2020 19:02

The majority of the sales are cash sales and market forces would prevent him raising prices.
I will ignore him but he now says he will be looking to me to repay the money he has “lost”
Thanks for your reply

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Replying to Jfg:
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By Matrix
03rd Jan 2020 19:21

Jfg - so the sales price is VAT inclusive and the client has ended up paying more VAT as a result of registering voluntarily? What is the loss?

I don’t understand why you didn’t just advise him to monitor the threshold.

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Replying to Matrix:
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By Jfg
03rd Jan 2020 19:54

He didn’t want to be bothered with monitoring it and getting his sales out of him was like pulling teeth

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Replying to Jfg:
RLI
By lionofludesch
03rd Jan 2020 22:08

Jfg wrote:

He didn’t want to be bothered with monitoring it and getting his sales out of him was like pulling teeth

Then it's a problem that he's created.

But you've no evidence of that, have you ?

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Replying to lionofludesch:
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By Jfg
04th Jan 2020 02:26

Quite.

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Replying to Jfg:
By ireallyshouldknowthisbut
04th Jan 2020 13:25

So
1. You gave advice to register early, which was going to be a cost to your client, of an amount you don't know.
2. Despite the fact it was going to cost your client this money, you did not document formally, or communicate formally why you gave that advice (ie their records are poor and you thought, rightly or wrongly, it to be a better option than going over and doing it later)
3. You did not give your client the chance to reflect upon, and formally accept or reject your advice, and presumably did not spell out to them in maths terms how much it would cost them. Ie if it was "its going to cost you £5k to not bother to record your turnover", they might well change their mind and do it properly. That would have been the sort of approach I would have used.
4. You registered you client for VAT without any formal authority from them.
5. You filed the VAT return without their authority, and containing material errors.

Which ever way you look at it, you have made a long series of very amateurish mistakes here and regardless of the outcome of this case, you need to look very much at how you are working, and if you are fit to be in practice. If you worked for me, you would probably now be on Gardening Leave pending a full review of your work over the past 3 months to work out if you this level of competence is repeated through all of your work, or a bizarre amount of lightening hitting the same spot.

If your client has asked you to repay his losses, you MUST notify your PI insurer of this claim given it seems quite valid to me.

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Replying to ireallyshouldknowthisbut:
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By Jfg
04th Jan 2020 13:34

thank you for your comforting words

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Replying to Jfg:
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By lionofludesch
04th Jan 2020 14:20

Comforting or not, I have to agree with ireally.

I would have written to him saying "I'll do this if you want, but it'll cost you. Are you sure ?"

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Replying to lionofludesch:
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By Matrix
04th Jan 2020 16:32

I don’t think the OP realised there was a cost at the time and I’m not sure they realise even now that there has been a cost, they have said there was no loss.

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Replying to Matrix:
RLI
By lionofludesch
04th Jan 2020 16:55

Matrix wrote:

I don’t think the OP realised there was a cost at the time and I’m not sure they realise even now that there has been a cost, they have said there was no loss.

OK.

That sounds unbelievably naïve for a practising accountant at any level.

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Replying to Jfg:
By ireallyshouldknowthisbut
05th Jan 2020 10:12

@JFG, I appreciate you dont like what I have to say, but based on your posts (and we can only base it on that) this seems to be the situation.

My key point quite frankly is if (as it would appear, and I hope I am wrong in this) you are acting well beyond your competency, or if you used to be competent, but, whether it be age, health or general apathy you running a very loose practice. If so you need to address those points or you will continually trip up on really basic stuff such as this, and leave you and your business wide open to these types of errors and claims. Its much easier to spend a few minutes on basic minute taking and confirmatory emails, than hours and weeks on a PI claim.

If you are a member of a professional body, see if you can get some help. Ditto if you have some friends in practice, see if you can do some sort of peer review on their systems and procedures which seem to be sorely lacking here. I fear this goes far deeper than only silly mistake.

This should be a big wake up call. if you are offering your services to the public, you need to do it properly.

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By bernard michael
04th Jan 2020 13:35

Ouch !!!

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Replying to bernard michael:
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By Jfg
05th Jan 2020 11:17

I have considered what you have said and on some things you are quite correct. In hindsight, there was a perfect storm building up and I was stupid enough to get suckered in, mainly because I had known the client for quite a few years and was stupid enough to think there was mutual trust.
It has taught me to not go the extra mile, especially working in the evenings and weekends to help people and to make sure I do everything by the book and charge them all,accordingly, which I haven’t been doing.
It has also helped me to see that the majority of people will turn on you when it suits them and not remember when you have dug them out of all sorts of their self inflicted trouble.
It has also made me resolve not to take on any new clients and dump those that cause me more trouble than they are worth.
Thank you for helping me to clarify where I have gone wrong

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Replying to Jfg:
By ireallyshouldknowthisbut
06th Jan 2020 15:17

@JFG, its good to know my posting has helped. Whilst I think I can come across as a rather rude and often saractic at times, I genuinely want to help people. Whilst its a cliche, sometimes you have to fall down hard, in order to get back up stronger. A near miss can prevent a big accident so long as you are willing to reflect and learn.
Most of my risk adverse procedures are borne out of earlier 4cups!

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By SXGuy
06th Jan 2020 10:20

I can somewhat sympathise with your situation, as I had a similar case last year, very long standing client, wished to cease self employment and open a ltd company.

I advised at the time to seek agreements from their suppliers first as I believed they would treat him as a new business and not offer the amount of running credit he gets now, I also advised that he speak to the bank as he had a large overdraft and wasn't sure they would be happy to transfer it over. he assured me he had spoken to everyone concerned and there would be no issue.

I documented all of it by email, gave him 2 weeks grace after he agreed to proceed, set the company up, and low and behold a month later, wanted to close the company down, because his suppliers wouldn't give him credit and the bank wanted him to repay the overdraft first.

Now all of this should have been sorted before the company was set up, and I advised him of such, he agreed it was all done buy clearly he was lying, I believe he had the "it will be fine" attitude and didn't actually speak to anyone prior to confirming the go ahead.

Anyway needless to say, it was all my fault, blamed me for poor advice and decided to seek a new accountant.

There wasn't any more I could have done, and luckily for me I had it all documented so I am quite confident that I could defend myself pretty easily should he had decided to take it further.

My point is, never do anything without having it agreed first, in writing, and always document your explanations of any process involved and the outcomes of such process before doing anything.

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Replying to SXGuy:
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By Jfg
06th Jan 2020 10:23

Yes you are quite correct. Amazing how quickly people forget you have gone the extra few miles for them and turn on you and blame you for their own mistakes.

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