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VAT Payment Terms

Agreement with HMRC

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Hello

We have a new client who failed to register for VAT at the time he reached the registration threshold. 

He has £36k VAT to pay. His proposal is as follows:

1) Pay all the future quarterly VAT in time

2) £36k payment spread over 4 years.

HMRC, as I expected, said that 2 above is unacceptable. They want £36k in one year. His cash flow does not allow for £36k payment over a year.

How can I get HMRC to accept 2 above? What evidence do we need to provide HMRC? Who in HMRC has the clout to make this decision?

 

Replies (13)

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By mrme89
06th Jun 2017 09:34

I thought your questions were not going to be the typical boring ones?

There is absolutely no way HMRC will accept payment over two years. No chance at all.

Can your client obtain finance spread out over 4 years +?

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By bernard michael
06th Jun 2017 09:37

I agree 12 months is the maximum I can normally get.
Why didn't he register ? Is there a usable excuse apart from - he forget, didn't want to pay VAT over, he asked someone to do it and they didn't etc

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By 2156806
06th Jun 2017 09:53

Don't Forget that the VAT now paid will reduce his profits for prior years - he will have paid tax on turnover and this must now be reduced for the VAT paid. This should result in tax refunds which could help with the cash flow.

Also where any of his customers VAT registered - if so you could issue credit notes for the original invoices and reissue them with VAT.

The customer will then pay him the VAT and claim it on their next VAT return so they won't be out of pocket.

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Stepurhan
By stepurhan
06th Jun 2017 10:36

HMRC will only give payment terms up to 12 months, and even that they will only do reluctantly. I also can't help noting that £36,000 would require undeclared VAT-inclusive turnover of £216,000 (probably higher, as presumably there is some VAT to claim on expenses), so this is hardly a minor error on their part. That weakens your argument for special treatment even further.

Sometimes clients have to accept that there is a limit to what we can do coming in after the fact. This is why so many people on here are told to get an accountant before they get in these situations.

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Replying to stepurhan:
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By ohgoodgodno
06th Jun 2017 13:12

stepurhan wrote:

HMRC will only give payment terms up to 12 months, and even that they will only do reluctantly. I also can't help noting that £36,000 would require undeclared VAT-inclusive turnover of £216,000 (probably higher, as presumably there is some VAT to claim on expenses), so this is hardly a minor error on their part. That weakens your argument for special treatment even further.

Sometimes clients have to accept that there is a limit to what we can do coming in after the fact. This is why so many people on here are told to get an accountant before they get in these situations.

Totally agree with this comment, clearly cant be an honest mistake

the obvious question to ask your client is if they've had an extra £200k+ of income - where has the money gone?? and why cant they now pay??

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RedFive
By RedFive
06th Jun 2017 12:17

Would you take payments over 4 years?

This is taxpayers money, no matter what you think of HMRC. 12 months would be generous.

He should foxtrot down to his business bankers and borrow the money to repay them. HMRC are not lenders.

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PJ
By paulgrca.net
06th Jun 2017 13:09

No way you will get payment spread over 4 years in my experience 2 or 3 years is not that unusual but it depends on the individual circumstances which I am not privy to without meeting the clients.

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By bettybobbymeggie
06th Jun 2017 18:26

In february this year I agreed a £31k tax bill to be repaid over 39 monthly payments of £800. It took very little negotiating IIRC.

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Replying to bettybobbymeggie:
By Ruddles
06th Jun 2017 18:38

I'd wager that 'tax' wasn't VAT

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By bettybobbymeggie
06th Jun 2017 18:48

You are quite right - it was income tax. Are the VAT people not as kind as the others?

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Replying to bettybobbymeggie:
RedFive
By RedFive
06th Jun 2017 19:24

bettybobbymeggie wrote:

You are quite right - it was income tax. Are the VAT people not as kind as the others?

And why should they be?

With VAT the trader is simply an unpaid tax collector.

The money has already been collected and just has to be handed over.

If the trader decides to spend it on wine, women and song or even just putting cornflakes on the breakfast table then why should HMRC have any sympathy?

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By SteLacca
07th Jun 2017 08:45

Who in HMRC has refused the arrangement? Is it front line staff on the business payment support service, or the back office?

If the former, does he/she have any other arrears that can be lumped with it (PAYE/CT). If so, call for an arrangement to include all taxes. Front line can't handle that, and will refer to the back office. Back office may take 4 - 5 months to come back.

During this delay, client should make payments in accordance with the offer.

I've managed to get a couple of extended arrangements agreed doing it this way.

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bike
By FirstTab
11th Jun 2017 10:08

Thank you for the response.

The client did not charge VAT to his customers who are consumers. Going forwards, this has changed.

HMRC has asked for a cash flow statement to prove that the client cannot pay within a year. This will be provided. They may also be a visit from HMRC's official to review the situation. So far, from client's perspective, it is not looking good.

If HMRC insists on payment within a year the client will be forced to go into liquidation. Both parties will lose out. I have mentioned this fact to the person who is chasing the debt.

I will report back on the outcome of this case.

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