Sole trader - BR due to VAT help

Pobby

Really do sympathise Taxinfo. Tigerfeets suggestion seems very positive. I take your point regarding the government wanting you to go BR. Trading problems come in various shades of grey. It is a pity that HMRC cannot respond to that.

As I say, I did come to an arrangement but it seems possibly unlikely that you do not owe that money. Really wish you well in this.

JasonLVC

Taxinfo wrote: »

To the 2 questions above, I run a small food buisness and due to turnovers below 77k per annum I am exempt from paying vat, was visited by hmrc and from purchase records and they're buisness plans they have miss calculated my turnover by a huge margin and are arguing I am over the vat threshold. I have provided answers to all they're queries but most of their counter arguments are they in their 'opinion' it doesn't hold water. I feel like its a complete waste of money paying my accountant £k just to play ping pong with hmrc. Which is why knowing it is likely going to a tribunal with little success rate I would be better off declaring bankruptcy which is ashame as I enjoy working for myself and for a living of course.

HMRC are more often wrong when assessing. You really should not be so defeatist. You should also see an accountant who specialises or has some expertise in VAT cases.

Worse case scenario, you clock up a few hundred pounds cost which might be easier than having to bankrupt yourself, et case scenario is you don't have to go down the bankrupcty route.

You state in your 1st post that HMC want you to repay VAT since 2009, so I presume HMRC believe you went over the VAT threshold in 2009 and never went below the de-registration threshold (ie, business sales were high and stayed high).

In other words, HMRC believe you've been trading and should have been registered/charging VAT when you have neither registered not charged VAT to your customers.

First, if your sales are food, if these are ZERO rated foods items then you shouldn't owe HMRC any money at all and so I presume the food you are selling is standard rated food such as crisps, cans of coke and other foods which are not fruit/veg or meat.

Second, if your turnover dips below the deregistation limit, which is usually £2k-3k less than the VAT registration limit, then you may only need to register for the period your sales were over the threshold and soon as your sales go below the limit you can then deregister - HMRC will not tell you any of this, they will just say you have gone over the limit and demand you register.

Third, if all your sales are standard rated (ie, no zero rated sales), then you can consider the flat rate scheme which can be applied back to 2009.

Fourth, don't forget that if you are forced to register for VAT, you can also reclaim VAT back on purchases and this is netted off what you owe, so if you owe HMRC say £10k but since 2009 you incurred VAT on your purchases of say £8k, then you only owe HMRC £2k - again HMRC will not tell you this, they're only interested in the debt you owe them. Also, you can reclaim VAT on purchases upto 4 years prior to registration, so if you are forced to register from 2009, you may be able to reclaim VAT on business purchases back to 2005/06 which will further reduce your overall burdern.

Fifth, did I say already you need to go see someone who knows what they're talking about as a few quid might actually save you loads of hassle.

Sixth, any penalties HMRC may seek to impose can be mitigated and even suspended, never take their first offer or their first decision. The process is HMRC give you their assessment, you can then seek a REVIEW by a different officer, after you get that response then you can seek a formal APPEAL to the tribunals. Both are 'free' to apply for and of course delays the debt being paid whilst you are disputing the qauntum/value of th debt.

Good luck with your quest.

antonic

Please answer the following questions :

1) Have you ever failed to file your VAT returns ?

2) Is the debt based on an Officers Assessment BECAUSE you failed to file the returns ? (If it is then if you were to file the returns now AND they are less then the value of the Assessment, they can be rejected).

3) Has the Assessment been raised because you failed to register for VAT when you started trading over the limits and has been raised by one of the Hidden Economy Teams ?

4) Did this come to light because your Self Assessment returns were investigated ?

5) You can appeal the Assessment to the Officer who raised it and if not satisfied (as JasonLVC has said) ask for an independent review.

6) If your not happy with the independent review you can then ask to take it to an independent tribunal http://www.justice.gov.uk/about/hmcts/

7) If you take it to Tribunal you can ask for payment to be withheld on grounds of hardship

8) You need to bear in mind, that in law an Assessment can be raised on the Officers best judgement : http://www.bailii.org/uk/cases/UKFTT/TC/2012/TC02391.html


Hope this helps.

Taxinfo wrote: »

Thanks pobby, I feel ashamed to even suggest br, I have never had any dept in my life, I work hard and earn enough money to live on the breadline which I am proud of. I would never think of living off the taxpayer. The hmrc is in my opinion not being reasonable as there counter arguments suggest I'm not undertaking my buisness efficiently? They are telling me how I should run my buisness which I have been doing for way in excess of 30 years, times are tough and I want to just make it through the storm. Them suggesting I pay back 3 years worth of vat is ludacris, I'm barely staying afloat now. I don't know what they want??? Also my partner has a house in her name. I have no assets to mine both personal or buisness, is she at risk from this mess?

Thanks again

laurel7172

From your initial post, what they will have done is compare your declared turnover with your purchases.

For instance, if Mr A N Other sells burgers at £2 each and has purchase invoices for 50,000 frozen burgers a year, his turnover could be estimated at £100kpa.

It's actually not a bad system for catching out the dimmer brand of tax fraudsters, who often do put through all their purchases while failing to declare their full income.

The difficulty is that if you are innocent and still fall foul of this type of analysis (it happens), you find yourself having to prove a negative....

What does the assessment say in detail?

ILW

How can there be any doubt about your turnover?

Mouse1812

Reads to me that the OP was not registered for VAT because his declared turnover was below the VAT registration limit (£77,000).

I am assuming this “food” business is similar to a hot snack stand. As such this would be a cash only business - no cheques or card sales. It is likely that there was no till and the only record of daily takings would be what ever figure the OP wrote down. High risk from HMRC’s point of view.

The sales would be standard rated (hot take away food) but the purchases (uncooked food) would be zero rated.

HMRC have visited and do not believe the turnover figure. They have taken the quantities of burgers, eggs etc bought and multiplied them by the selling price. The result is a theoretical turnover figure much higher than that disclosed.

The problem is HMRC make assumptions and mistakes. First assumption is that all food bought is sold; what allowance have they made for waste? Second assumption will be the sales price; have they used the correct prices allowing for inflation?

You do need an accountant who can handle this, one with “auditing” skills to check and challenge the figures prepared by HMRC.

My first question for the OP would be; did you accurately record all sales? And I would push that line of questioning quite hard - it is very easy to “pocket” some of the cash each day and this would be very obvious from the gross profit margin. HMRC know what gross profit you should be making, and so should your accountant. Indeed I would bet that is why you were selected for a visit in the first place.

Now is the time for 100% honesty. If you have never “pocketed” any of the takings, then find another accountant and fight back. If you have skimmed a bit off, fess up and try and agree the correct figures.

Taxinfo_2

1) Have you ever failed to file your VAT returns ?

2) Is the debt based on an Officers Assessment BECAUSE you failed to file the returns ? (If it is then if you were to file the returns now AND they are less then the value of the Assessment, they can be rejected).

3) Has the Assessment been raised because you failed to register for VAT when you started trading over the limits and has been raised by one of the Hidden Economy Teams ?

4) Did this come to light because your Self Assessment returns were investigated ?

5) You can appeal the Assessment to the Officer who raised it and if not satisfied (as JasonLVC has said) ask for an independent review.

6) If your not happy with the independent review you can then ask to take it to an independent tribunal

7) If you take it to Tribunal you can ask for payment to be withheld on grounds of hardship

8) You need to bear in mind, that in law an Assessment can be raised on the Officers best judgement


Ok trying to play catchup to answer all these questions

1) never failed to file tax returns, I was vat registered prior to the credit crutch, however times have changed and buisness has reallytaken a hit, since my turnover is < than the threshold I deregistered. I still complete my self assessments via accountant

2) assessment came about via random visit

3) assessments been raised surly because they want to claw some cash back regardless?

4) as per 2)

5 -8) I really appreciate the idea but as explained in earlier posts I truly believe the tribunal path is a dead end with little success rate <20% from speaking to people and Internet research. Trying to defend yourself is never going to be easy. They are trying to find a needle in a haystack and they have found plenty to my surprise! It's their rules and their game

thanks for your response

Taxinfo_2

laurel7172 wrote: »

From your initial post, what they will have done is compare your declared turnover with your purchases.

For instance, if Mr A N Other sells burgers at £2 each and has purchase invoices for 50,000 frozen burgers a year, his turnover could be estimated at £100kpa.

It's actually not a bad system for catching out the dimmer brand of tax fraudsters, who often do put through all their purchases while failing to declare their full income.

The difficulty is that if you are innocent and still fall foul of this type of analysis (it happens), you find yourself having to prove a negative....

What does the assessment say in detail?

Laurel

You Re quite right and this is where they have me, the trouble is its my argument against theirs, they won't consider my response as being reasonable and they base their measurements based on guidelines. Ie certain quantities per portion. Perhaps they could run my buisness better than me I've only been doing it for three decades. Based on the alleged turnover and profit I would of been a millionaire by now! (ah I wish!)

Thanks

Taxinfo_2

Mouse1812 wrote: »

Reads to me that the OP was not registered for VAT because his declared turnover was below the VAT registration limit (£77,000).

I am assuming this “food” business is similar to a hot snack stand. As such this would be a cash only business - no cheques or card sales. It is likely that there was no till and the only record of daily takings would be what ever figure the OP wrote down. High risk from HMRC’s point of view.

The sales would be standard rated (hot take away food) but the purchases (uncooked food) would be zero rated.

HMRC have visited and do not believe the turnover figure. They have taken the quantities of burgers, eggs etc bought and multiplied them by the selling price. The result is a theoretical turnover figure much higher than that disclosed.

The problem is HMRC make assumptions and mistakes. First assumption is that all food bought is sold; what allowance have they made for waste? Second assumption will be the sales price; have they used the correct prices allowing for inflation?

You do need an accountant who can handle this, one with “auditing” skills to check and challenge the figures prepared by HMRC.

My first question for the OP would be; did you accurately record all sales? And I would push that line of questioning quite hard - it is very easy to “pocket” some of the cash each day and this would be very obvious from the gross profit margin. HMRC know what gross profit you should be making, and so should your accountant. Indeed I would bet that is why you were selected for a visit in the first place.

Now is the time for 100% honesty. If you have never “pocketed” any of the takings, then find another accountant and fight back. If you have skimmed a bit off, fess up and try and agree the correct figures.

Hi mouse

Again your quite right and have sussed out my buisness scenario. I do have to admit they do account for wastage albeit extremely small quantities of it. My accounts are true the only way is if the accountant is fiddling with the numbers without me knowing which I'm sure no accountant would do. As explained never stepped outside the law in my life and never will just for a few hundred or even £ks) Too much risk for so little in my opinion. If I ever was going to rob somewhere it would be a bank not a pound shop (which does happen! Lol)

I am wondering also to myself if there are any specialist vat solicitors out their who could help. But then again it's so much easier it seems to me just to go br and not expend and further cash.

Sometimes I think to myself the amount of resource and taxpayers money they are spending on cases like mine which I must admit the vat bill isn't enormous. Is it even worth they're while? You could get millions more off companies like Starbucks or amazon or eBay? Surely my small buisness is not worthy of such investigations because even if they win they would get much from me anyways. (which I don't actually have hence the br question in the first place). What a waste of publics money no wonder this country is in such a state.

Think they should concentrate on sed companies and politicians expenses instead.

Thanks

laurel7172

When you refer to a partner-do you mean life partner? Is she a partner in the business? ( I know you said you were a sole trader, as opposed to a ltd co, but it's VERY important to be clear about this).