Charging Backdated VAT

chrismac1

Fair enough to some extent, hence my suggestion that the OP goes for the goodwill option rather than pressing ahead. Where the process becomes ridiculous is where HMRC takes months - 4 months is the longest in my own client base - then comes up with a registration date of 4 to 6 months ago.

Now the business has potentially a very large problem not of its own making.

pleasedelete

Why did you chose to backdate your VAT?

chrismac1

I'm going to guess it was to claim back some input tax. This can be a tricky area of advice for clients who paid a large bill say 7 or 8 months ago when they come to you for advice. It's "rock and hard place time". You'd like to backdate the VAT for them to claim the VAT on that bill, but can only do so if the tax date on the bill was 6 months or less from the registration date.

So you then need to advise the client of all the hassle they might have - as this post indicates - in telling customers you plan to issue credit notes and re-invoice.

[Deleted User]

I had a dormant company and decided to activate it. I requested my EDR to be that of the date of incorporation, and yes indeed, primarily for the purposes of claiming the VAT. Also partly just because I wanted to do things 'properly' from the beginning, with nice neat records.

I'm waiting to see if I can get some proof he'll accept that's specific to this case, as a response from HMRC that quoted the relevant rule, was unfortunately not understood. If/when I get that, I'll go to him and ask as politely as possible, and explain it won't cost, while trying my best not to patronise him. I think that's part of the problem; he doesn't like being told he's wrong by someone he considers young and naive.

If he still doesn't understand, I'll just have to accept it, as pushing the issue is stress I don't need. I'm just glad it's not a big client!

[Deleted User]

longforgotten wrote: »

An invoice that is up to 4 years old can be included on a vat return...............

I don't suppose you could direct me to the HMRC link that confirms that please?

JasonLVC

Power_Kitten wrote: »

I don't suppose you could direct me to the HMRC link that confirms that please?

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&id=HMCE_CL_000077

Para 4.6 is an intro and 4.6.1 states it is four years for amending an invoice or dealing with an invoice less than 4 years old. So your VAT only invoice backdated to May 11 is well within the time limits.

JasonLVC

OP. It is quite common for taxpayers to under appreciate the importance of the EDR (effective Date of Registration). Any sales from that date are subject to VAT, so when you backdate your EDR you can create more problems by accident.

For any VAT registered business who can reclaim their VAT in full, there is absolutely no reason why they cannot accept a VAT only invoice from you, from a current date. I normally advise a client to just raise a VAT only invoice stating "VAT not previously charged on Invoice 123 dated xx/xx/xx" and that should be sufficient for the supplier to enter onto their system and pay you the VAT (and for them to reclaim it).

Your supplier is being unusually difficult it seems. Supplier seems to be foprgetting the fact that as you are VAT registrered you have to charge VAT by law, its not his decision to make.

Suggest you raise the VAT only invoice to him anyway and then chase it like any other debt. At the same time, make sure you are using the cash accounting scheme (not the normal accruals scheme) as under the cash accounting scheme you only pay VAT over to HMRC when you get paid so if your supplier doesn;t pay you, you don't pay HMRC.

Cash accounting requires no approval from HMRC, just do it. Infact any trader (who is eligible to use it) should use it. basically, you issue your invoice as normal but you only declare the output tax (VAT) to HMRC in the VAT period your receive payment, not the VAT period you raise the invoice....so if you raise invoice in Jan 12 under accrual rules you declare the VAT on your Jan VAT return, but under cash accounting you declare it when that invoice is paid, so if that is in Apr 12, then it goes on your Apr 12 VAT return....and if supplier never pays, you never pay it to HMRC.

chrismac1

I'm going to say something really controversial for an accountant right now. I will never sue a client for an unpaid bill. Sure I send out letters asking for them to contact me if they are late paying - and down the bottom there is a note about County Court - but:

I am bluffing!

Firstly 70% of sales are on standing orders, and I only have 2 large clients where a really big bill can arise, both AAA credit rated. If someone does not want to pay me I can't be bothered with the hassle of chasing them, Court fees and all that. Let them go. Of course if they try to find another accountant the handover letter is going to mention this, and if they come back to me they'll need to pay up with interest and then some in advance.

I've been going 2 and a half years, 120 clients. Total lifetime bad debts = zero.

Life's too short. Sure, try raising the invoice but weigh up the goodwill angle if you don't get it paid.

[Deleted User]

Cheers for all input folks.