VAT change

RayWolfe

I give up.
Just don't be around when the VAT inspector next calls. I know that credits are the first thing they will look at. But hey, so what, it's no skin off JasonLVC's nose. Talk is cheap.
I've tried to advise, take it or leave it.

MrChips

Ray, I appreciate your input. Seems some people are going to disagree over this particular issue.

However, given I need to return the ring anyway because of the credit card problem, can you please explain how I can buy it back and avoid the issues you have raised? My number one priority is to avoid any future problems for my friend's family!

JasonLVC

Ray Wolfe - I'm not entirely sure why you are taking such an aggressive stance towards the OP and my post, but with regard to advice, the OP has a choice of taking advice from either :-

1. A qualified Tax accountant, ex-VAT Officer and indirect tax investigation expert (ie, me) - and talk with me isn't cheap, it costs £350 per hour at my practice. Have a look back at all my posts - I think you'll find I've got quite a lot to say about VAT and accounting in general and I do international VAT work in the UK and Geneva for a number of large companies.

or

2. Everyone else (including RayWolfe) on this thread who doesn't quite understand the specific act of fraud, money laundering regulations, the VAT Act 1994 and the ICEAW's code of ethics and practice.

Don't 'give up' Ray, simply justify your responses to the OP so that they can understand. An ordinary audit generally doesn't cover VAT and a VAT inspection by HMRC would simply be looking at non-compliance and where VAT is not charged on a sale - if VAT is being charged at the correct rate and credit notes reflect the correct rate, then the business is compliant.

So if you believe the act of returning an unwanted product to a shop and then purchasing the same article again is illegal and fraudulent, can you please post here as to why that is the case in order to justify your negative posts?

You also say that you KNOW that the VATman will first inspect 'credits'. So what?. They'll inspect all transactions of the business and there is nothing illegal with giving a refund and then making a sale again. Remember, The Treasury reduced VAT, not the shop. Can you give examples of where you KNOW the VATman will find issue with a credit note?.

Otherwise, 90% of the population who will be returning their Christmas presents in the New Year to M&S, Debenhams, et al will all be breaking the law accoridng to you as all these shops charge VAT and have to account for it correctly too.

JasonLVC

MrChips wrote: »

Ray, I appreciate your input. Seems some people are going to disagree over this particular issue.

However, given I need to return the ring anyway because of the credit card problem, can you please explain how I can buy it back and avoid the issues you have raised? My number one priority is to avoid any future problems for my friend's family!

MrChips - This isn't a subject that is grey or borderline.

Provided the shop is willing to accept the ring back into stock and then re-sell it to you at a lower price then there is no 'crime' being commtted here.

I've asked Ray to justify some of his comments because he just keeps saying it is fraud but not really explaining WHY it is fraud. Fraud is a very specific offence that is incredibly difficult to prove at a judicial level.

A VAT inspection (assuming the inspection isn't carried out by myriad of idiots that HMRC employ) will see some items being returned and resold at the lower rate of VAT and provided the credit notes are correctly issued and the actual or basic tax points are respected, there is no non-compliance.

There is specific legislation introduced the day after the PBR called "anti-forestalling" which comes into affect nearer the time the VAT rate changes again and this is really about service contracts and pre-payment of services in advance to avoid the VAT increase - but is not relevant to your situation. There is an argument that if a business routinely did a lot of refunds and repurchases that it may draw some attention from HMRC but if there are fair and reasonable justifications for the transactions then no prolem.

I've seen businesses issue credit notes (issued for proper reasons) in order to reduce their VAT libility to HMRC in a given period only to re-invoice again in the next VAT period. It's naughty and if done every period would cause for questions to be asked, but fraud?. Not really, just some poor VAT planning. A one off or a few tranactions in a given period - not a problem at all.

RayWolfe

JasonLVC wrote: »

There is an argument that if a business routinely did a lot of refunds and repurchases that it may draw some attention from HMRC but if there are fair and reasonable justifications for the transactions then no problem.

Well that says it all. Once, no problem. Twice, oh I'll have to do an investigation. A bit like me getting away with robbing the bank once but the authorities getting a bit miffed if I do it twice.
As I see it, this ring proposition is as deliberate an act as someone giving back their March salary and asking for it to be repaid in April after an income tax reduction. That OK too? So suddenly tax evasion is no longer a problem?
Let me be a bit far fetched here. If a business decided that it would issue credit notes for all it's sales in, say November, and re invoice in December in order to evade the correct payment of Corporation Tax, would that be OK?
Remember the purpose of the action that the OP was questioning ... if you have forgotten, it was to evade tax, not to take back a ring and change it for another. If you think that is OK, then I'm glad I have not just paid £350 for your advice.

MrChips

Trying to play devil's advocate...what if I took the ring back and bought an identical ring (but not the same one)?

Surely that would be above board, otherwise the store would be in breach of their 30 day return policy.

How could the store be taken to task for this? I can't see much difference between this and buying the actual same ring again.

Just to be clear, I'm not trying to pull a fast one here. My main priority is to get a ring for as good as value as possible and without causing any problems for my friend. From my layman point of view, I can't see any fraud here, and this seems to be backed up by Jason. Ray if you can explain how the two situations above are different, and, given I need to return it anyway for credit card reasons, how I could buy it back without committing fraud from your point of view, i'd be very interested.

Richard019

MrChips wrote: »

Trying to play devil's advocate...what if I took the ring back and bought an identical ring (but not the same one)?

Surely that would be above board, otherwise the store would be in breach of their 30 day return policy.

How could the store be taken to task for this? I can't see much difference between this and buying the actual same ring again.

Just to be clear, I'm not trying to pull a fast one here. My main priority is to get a ring for as good as value as possible and without causing any problems for my friend. From my layman point of view, I can't see any fraud here, and this seems to be backed up by Jason. Ray if you can explain how the two situations above are different, and, given I need to return it anyway for credit card reasons, how I could buy it back without committing fraud from your point of view, i'd be very interested.

Similar theme, entirely hypothetical, names for illustration:

Currys and PC World have the same PC at the same price. In November I buy it in Currys. In December the VAT changes and both stores adjust accordingly. I'm outside of my 7 day pricematch time but within my returns period.

Is it fraud for me to return it to Currys for a full refund and then go to PC World to buy it at the new lower price just because the reason is VAT being changed?

If that's perfectly legal, what about returning it to one branch of Currys and rebuying it at another?

Now lets try returning it to Currys and then buying another one exactly the same from the same store?

At what point in this ever narrowing sequence would it become classed as fraud?

JasonLVC

RayWolfe wrote: »

Well that says it all. Once, no problem. Twice, oh I'll have to do an investigation. A bit like me getting away with robbing the bank once but the authorities getting a bit miffed if I do it twice.
As I see it, this ring proposition is as deliberate an act as someone giving back their March salary and asking for it to be repaid in April after an income tax reduction. That OK too? So suddenly tax evasion is no longer a problem?
Let me be a bit far fetched here. If a business decided that it would issue credit notes for all it's sales in, say November, and re invoice in December in order to evade the correct payment of Corporation Tax, would that be OK?
Remember the purpose of the action that the OP was questioning ... if you have forgotten, it was to evade tax, not to take back a ring and change it for another. If you think that is OK, then I'm glad I have not just paid £350 for your advice.

Nice long post....didn't actually answer the questions I asked though;)

How you can compare an income tax deduction with VAT, which is a transactional tax, simply exposes your lack of understanding of the subject.....

Which is a shame, as I wanted to understand what you angle was/is.

It is not evasion of tax, he is paying it, just a lower amount and it is legal. Perhaps if you go visit www.hmrc.gov.uk and look up the PBR guidance for business you'll see that HMRC actually allow businesses to do this and leaves the business to decide if the business should pass the 2.5% cut on or not.

You save yourself £350 and miss out on learning something. But hopefully other MSE's can take the advice and benefit - after all that is the purpose of this site.

It'd still be good to have answers to my questions as to where the crime of fraud is being committed and what are these 'credits' check you know so much about? or maybe just stop digging.