They are way below the registration limit and since they started trading in 2009 have always been below the threshold. The client had thought the accountant was doing everything for him but the accountant has stated that the client did not ask him to do VAT returns, this is stated also in his Letter of Engagement so I am left to pick up the pieces. We want to deregister as soon as possible the problem is the client has not kept very good records and the previous accountant has clearly struggled with this. The client is a musician and so all sales income is from gigs, no sales invoices so no VAT charged as such, there are very few purchase receipts kept. This of course means that we cannot prepare accurate returns going back. I am assuming the worst case will be that we will have to declare VAT on all income from the bank statements but as there are very few purchase receipts will not be able to claim any VAT back.
HMRC at the moment are chasing an estimate for the August quarter return of some £1,400 I have been able to put together a return for this quarter which comes to only £400 so I could file this for starters but really don't know what to do about the old returns at this point.
The client is already in debt and will not be able to pay a large sum easily. Is there any way of arguing that the client should not have been registered for VAT in the first place and trying to settle with HMRC this way - how would I go about this? Any thoughts appreciated
thanks
Debbie
Replies (3)
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first things first
Get a 64/8 in immediately if not done already.
File a deregistration form immediately assuming there is no issue based on prior turnover/assets to hand that from what you say appears the case.You should be able to tell this quite easily from the bank statements assuming all income has been banked.
Register for online services and get the May/August/November returns in ASAP.
If he was registered pre 01 04 2010 then sounds like you could submit the other returns by paper but again get those in ASAP whether paper or online.
Use online VAT services to assess where the client is in terms of estimated assessments/payments/penalties/surcharges and blame the previous advisors to try and bargain them down.
One final thought is that you do not say what sort of musician but may be some chunky input VAT recovery upfront on his gear at point of registration. Had a client once with a new £25k piano as a persuasive reason to register.
Finally but maybe first of all agree and get a fee from the client before doing all of this.
Oh and have a good Christmas !
Back-dated de-registration
It is very difficult to back-date a deregistration, or to argue that the taxpayer should never have been registered in the first place. HMRC say that the taxpayer had a choice to register, and, as long as he was entitled to do so, they will not cancel that.
As 'pembo' said, deregister quickly (subject to any output tax charge on assets).