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VAT Inspection

Avoiding VAT inspection

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My client is a professional legal practice and they are in a process of winding down. In the second last return we are intending to claim bad debt relief against the bad debts. This will result in to a refund. Since last 8 year the client was paying the liability, however I believe claiming a refund will trigger a VAT inspection. With all other different things going on with the client business he is not willing to entertain the VAT inspector. Generally the VAT inspector like to have atleast one sitting with the owner. 

My question is that is there any way we can avoid a potential inspection proactively e.g. immediaty after filing a return we could send them a letter explaining the reason of the refund and list of bad debts claim etc. 

 

Any sugesstions?

 

Replies (12)

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By johngroganjga
05th Sep 2016 14:59

Why has the relief not been claimed previously?

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Replying to johngroganjga:
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By Hamiltoncoopers
05th Sep 2016 15:13

Wasnt claimed previously because client was hopeful that the debt will be paid, now firstly the client is closing the practice and secondly the debtor do not have assets against which our client can recoup the debt.

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Replying to Hamiltoncoopers:
By johngroganjga
05th Sep 2016 17:10

Being hopeful as to recovery does not come in to the question of VAT recovery. It's just about how old the debt is. Someone needs to brush up on the rules I think.

Also I am not sure how closing the practice affects the likelihood of the debtor being able to pay - not that it matters if the debt is over 6 months old anyway.

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chips_at_mattersey
By Les Howard
05th Sep 2016 15:01

Actually, more HMRC work is now done remotely. So, as you suggest, a good covering letter, with a schedule of Bad Debt adjustments, with copy invoices, to pre-empt obvious questions, should do the job.

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By pacta
05th Sep 2016 15:11

You want to avoid an inspection by not claiming bad debt relief for your client? (which, by the way, you possibly could have already claimed). Come off it. Do the job properly.

I can't see the inspector demanding to meet the proprietor.

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paddle steamer
By DJKL
05th Sep 2016 16:22

Even when they say they wish to visit premises/owner they do not always follow through.

One of my clients had routine visit earlier this year (Sort of routine, small refund earlier quarter possibly prompted visit as slightly unusual)

It was agreed Inspector would come to my office, inspect books/ till rolls/ invoices etc, then I would run him up to visit premises. After checking books said quite happy ,did not now need to see premises/owners etc and departed; so even when premises visit agreed may not actually take place.

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By shaun king
05th Sep 2016 20:07

Goodness me - a visit. What is one of those things? You will have an anonomous individual contact you to ask a few questions, require some evidence to substantiate the claim. They will misunderstand what you say, so then you go into lengthy correspondence for another anonomous individual on review to agree with you.

Yes there is a large amount of sarcasm but I seem to spend more time training HMRC officers than actually advising clients. Progress!!

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By rememberscarborough
07th Sep 2016 11:39

Not sure I like some of the snooty responses here. Accountancy professionals may not mind VAT visits but that's probably because they're being paid by their clients. As a client we have enough to do without encouraging the VAT man to spend a day or two disrupting the business especially when there's little or nothing to find.

Possible solutions include partial claims across different VAT periods to ensure a small payment rather than a reclaim. However, if a reclaim is inevitable then I suspect contacting the VAT man first is best. If they know you're upfront with them they're less likely to want to visit because they have targets and if your client's company isn't going to help them hit these they're likely to move on elsewhere.

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Replying to rememberscarborough:
By cheekychappy
07th Sep 2016 11:50

rememberscarborough wrote:

Not sure I like some of the snooty responses here. Accountancy professionals may not mind VAT visits but that's probably because they're being paid by their clients. As a client we have enough to do without encouraging the VAT man to spend a day or two disrupting the business especially when there's little or nothing to find.

Possible solutions include partial claims across different VAT periods to ensure a small payment rather than a reclaim. However, if a reclaim is inevitable then I suspect contacting the VAT man first is best. If they know you're upfront with them they're less likely to want to visit because they have targets and if your client's company isn't going to help them hit these they're likely to move on elsewhere.

What snooty responses?
You've just made yourself look like a complete [***].

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By Aprid
07th Sep 2016 12:12

If the debts are really old (4 1/2 years I think) you may have missed the boat to claim the relief anyway and solved your own problem in a roundabout way.

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By crofte
07th Sep 2016 12:46

I have found they are less likely to visit on a cessation (there's no guarantee the person still has a premise to visit...) and a first return/final return refund doesn't always trigger a visit.

I wouldn't pre-empt anything because 1) it might actually instigate and inquiry 2) There's no guarantee it will get to the operative who makes the initial phone-call to arrange appointments.

Just be prepared if the phone -call comes with the explanation and offer to send them any supporting documentation they require.

Had a VAT inspection last week for a new business that had a first reclaim due to fit-out costs and no income. Obviously they wanted to see the premises, but he spent 15 mins looking at the return (he even tried to find things we might not have claimed for) and then we spent the rest of the hour drinking coffee and having a nice chat about VAT investigations and how expensive it is to fit out a building!

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Replying to crofte:
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By pacta
07th Sep 2016 12:56

crofte wrote:

.... then we spent the rest of the hour drinking coffee and having a nice chat about VAT investigations and how expensive it is to fit out a building!

Great to see our taxes put to good work! :)

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