Re: HMRC and a voluntary but late VAT registration. The subsequent changes to ‘potential’ VAT registration dates and time taken by HMRC is leaving this client feeling like he is going 'insane' - here’s why:
On 4th October 2012 HMRC were advised (by letter) that client had gone over the VAT threshold during Feb2012. (He is a builder who set up in 2010 and did not have accounts prepared up to that point in time- he's been PAYE all his working life and this is all new.) At that time it was genuinely thought to have been a one-off and an exception was requested.
On 29th October 2012 the VAT registration service sent a questionnaire. By 'collating' actuals for the new year (thus far) and preparing estimates it was clear that this was no exception.
On 25 November 2012, questionnaire was sent to HMRC Vat by email stating that client would send in the VAT1 form for registration.
On 26th November VAT1 (reg form) was completed and a date of 18.11.2012 was requested for VAT registration.
On 27th November 2012, a letter was received from the VAT registration service enclosing a VAT1 form, requesting that this be completed and sent in. This letter said the date of registration was 1st September 2011. Letter also said if client does not agree with this somebody else at same office can review.
5th December, 2012 this (second) VAT 1 form was sent to HMRC (as instructed in the 27.11.12 letter) this time the date of registration was left blank as the client did not want to accept the date of 1st September 2011. Some notes were annotated on the VAT1 form.
18th December 2012 a call was made to HMRC asking for a VAT registration number and it was mentioned the client was ‘in a state of limbo’ as they now know that they have to be registered for VAT but had not vat number and business didn’t stop because HMRC had not issued the VAT number. What should the client do with the current billing to his clients?
HMRC said they will only register (issue a vat number) if client accepts it will be registration from 1.9.2011. This felt like being pushed into a corner. During another call, HMRC asked for the appeal to be put in writing. By this time the client is ‘frantic’ with worry and was conveyed to HMRC whom didn’t seem to bat an eyelid. I put to HMRC that this may deter people from voluntarily registering if they know this is the way things are handled.
20th December 2012 an appeal against the registration date of 1st September 2011 was sent to HMRC asking for leniency. At the same time the flat rate vat scheme form was completed.
It was pointed out that the client had been ‘up front’, volunteered information and maintained effective and swift contact as soon as things were discovered. It was also pointed out that to make this young business work the client had to work excessively long hours to find work, competitively quote and re-quote for work as well as undertake the work, also that previously he had been PAYE with no knowledge of this. It was pointed out the stress that this process was causing him and it was a genuine mistake that this had happened. It was also pointed out that the future of his business was uncertain especially as his customers were domestic and there was no way of asking them for any back-vat.
Further calls made to ask for the VAT registration number.
22nd December 2012 letter (dated 20th) received from HMRC stating the case has been passed to Local compliance and appeals team.
On 24th December a fax was received from HMRC - after jumping through further hoops to have the VAT number released - stating:
a) The VAT registration number
b) Confirmed VAT registration date was effective from 1st April 2012.
31st January had a call from client to say letter dated 30th January 2013 from HMRC sent to him (only) and states that the exception has been refused.
4th February rang HMRC who said Vat registration was from September 2011.
It was pointed out that the fax received from HMRC 24.12.12 said April 2012 was the registration date I asked for clarification. HMRC asked for a copy of this fax (from 24.12.12) and referred to a mix up.
4th February, copy of the application for flat rate VAT scheme (sent in December) was also re-sent to HMRC.
Letter dated 1st February 2012 received from HMRC (Grimsby) by client. HMRC quote the VAT act, threaten of a possible fine for failing to notify and request net vat turnover from 1st April 2012 to 3rd December 2012 within 30 days.
As stated, my client is now quote ‘going insane’. As well as the very high degree of confusion amongst the various VAT departments, the instruction to complete a second VAT form, the ‘gun to the head’ approach before releasing a VAT number, the different registration dates and a request for more information without any closure - this is now over 4 months old. My client even rang HMRC Grimsby in December to pay start to pay off this debt this is definitively unquantifiable debt - he’s worried sick. He was told they could not identify him without a VAT number.
To make matters worse, with the whole HMRC experience, the cheques paid for back-tax (self-assessment) were lost in the HMRC system. The cheques were both cashed and the client had to ring his bank several times to ask for copies of the cheque. The reason for this was because HMRC had lost the cheques. Eventually HMRC found the cheques in their system. You can imagine the impression this client has of HMRC and the experiences he will no doubt share with others as his worry escalates over this four month period. Do they have any idea of this turmoil they cause but have the power to do this??
At this moment in time - some 4 months after the original notification and bills racking up the client still does not know:
- what date is the VAT registration date as there are more than one?
- Has he been ‘accepted onto the flat rate scheme for builders, if so from what date?!
Would be grateful if there is any leverage or similar anybody can offer to deal with HMRC - the client desperately wants closure on this. The client is exceptionally ‘concerned’ to say the least.
Thanks in advance.
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partial answer
Not perhaps what you wanted to hear, but your client didn't need to wait to receive the VAT number in order to bill his clients. The procedure is covered here: http://www.hmrc.gov.uk/vat/start/register/waiting.htm#4
Right!
Apologies if you have already answered this, my eyes struggled to keep reading all of your post.
Did they register based on historic turnover? In what month did they note they had exceeded the limit? Or same question if for future turnover method.
Why September 2011?
HMRC must have given some explanation as to why they were looking for the VAT reg to be backdated? When you said exceeded in Feb 2012, does that mean the rolling turnover went over in that month or it was on Annual Accounts prepared to that date.
The best leverage is normally the law, but it's not good without the facts but I can't see why HMRC were trying to push for a September 2011 registration date, did they just pluck it out of thin air?
How have HMRC arrived @ a date of 1st September if you told them he exceeded the threshold in February 2012? Did he exceed £73000 in any 12 month period prior to February? If it has since been proven that he has continued to exceed the threshold continually throughout 2012, i suspect he hasnt done himself any favours by claiming it was a one off.
HMRC Said this:
Sept 2011 (in November 2012)
April 2012 (In December 2012)
Sept 2011 (In January 2013)
April 2012 (In February 2013)
The exception was initially flagged to HMRC as Feb 2012 (from memory I think there were some late receipts and/or could have been asking for some leniency connected to late receipts??).
Possibly correct about the exception; this is a factor of balancing having information to hand and wanting to alert HMRC (as soon as discovered) in case they believe it was being covered up. As mentioned the self assessment return was already late for one year (and he has been fined).
Given that there is now a fine ‘in pursuit’ thank goodness they were told quickly ... client could otherwise have been heading for the court room?? There doesn’t seem to be any room for any mistakes nor when HMRC are advised they do seem to come down hard on the persons who tell them. Doesn’t make any sense - what does this tell those who perhaps haven’t registered and should have - wait until you get caught????
At the moment cannot predict the date nor whether they will be accepted on the flat rate scheme.
Is there any leverage to get a final decision without going to a tribunal? In the meantime the client the client is stockpiling a debt…
I would say receipts aren't relevant. It depends what his invoiced turnover was on a rolling 12 month basis from commencement. I would suggest you sit down with him and determine when his turnover (not receipts) 1st exceeded the £73000 mark and his registration date is the 1st of the month in the next but one month. So if he exceeded it in Feb 2012 1st April but if he exceeded it in July 2011 then 1st September 2011. You are then in a position to advise HMRC of the correct date and make the necessary provisions. The outcome of this exercise will possibly have a knock on effect on his 2011/12 tax return unless April 2012 is the correct date.
No. Receipts ARE relevant
Until a trader is registered for VAT, he cannot issue a VAT invoice. Therefore, the only way in which his turnover can be measured is by receipts. When the total received exceeds the VAT threshold, over a 12 month rolling count, the trader has 30 days from the end of that month to notify a liability to register. He should then be registered at the start of the following month. e.g, exceed threshold in December, notify January, registered from 1 February.
Key point here - does anybody know
Is there any where I can to go to within HMRC to have this resolved:
Grimsby are the payment office
Birmingham is the exception team and registration office
Is there another point of contact who can cut through this and make a decision - expediently.
Eventually this may head towards a tribunal - 4 months in this is getting silly with one office not sending relevant information talking to another. In the meantime my client is feeling like he is ‘going insane’.
I know if I ask Wolverhampton to look at this again they will probably start another review.
Is there a point of contact anybody has that might be helpful?
Thanks in advance and thanks for responses so far.
I feel so lucky
I had a client in October who'd not mentioned to me that he should have registered for vat (he got a bit confused about the cumulative idea) - I worked out when he should have registered, filled in VAT1 online. 20 days later HMRC issued a letter asking for details re late registration which I answered. All agreed and no penalties charged before Christmas (and would have been even quicker if client had sent me their letter sooner!). It's just not that complicated.
Maybe you put too much in bold and underlined in your correspondence to them?! I struggled big style to read it.....