We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Backdated VAT bill crisis
JeanGray
Posts: 4 Newbie
in Cutting tax
I'm not sure if this is the right place to post but I've been looking on the MSE forums to find some advice with regard to my situation with regard to VAT. This is situation I desperately need support with as it is severely affecting me mentally, emotionally and financially, making me very unwell and life overwhelmingly difficult.
In April last year (2013) I received an unexpected letter from the VAT office demanding a sum of £75,000, money that I don't have and I don't believe that I owe.
For several years I had owned a hair and beauty salon business involving self employed staff members renting space, rooms/chairs. I did not include their income in with the salons income as it was separate and they had all signed agreements to say they were self employed and responsible for their own national insurance, tax and VAT. For the most part the agreements mirrored the National Hairdressers Federation recommendations.
In 2007 the VAT office enquired into my business and sent in a VAT officer, he took away all the financial records and appointment books for some time yet he did not instruct me to register for VAT or enforce me to register for VAT. His enquiry continued throughout 2007 and I was still in communication with him on 30th November 2007. He seemed satisfied that the staff were self employed, he knew the financial position of the business, the manner in which the business was run (with self employed sub contractor staff) and saw the turnover figures and did not instruct VAT registration.
I continued with my business thereafter under the impression from this that the VAT office was fully satisfied with how the business was being run, they did not check again or contact me again until April 2013, almost a year and a half after I ceased trading.
In November 2011 my business was taken over as I could no longer run it due to poor health. I came away completely from the business and no longer had any involvement in it.
Apparently in 2012, a rule was brought in that meant that the turnover from self employed staff had to be counted towards the salons turnover, so despite them being self employed unique entities responsible for their own tax, national insurance and VAT, money relating to them from October 2012 was to be considered as part of the whole salons vatable income, but most shockingly was that I am informed this rule has been allowed to be backdated. As a result of this the VAT office have issued me with a huge bill.
Prior to October 2012 this rule was definitely not clear in law with regards to VAT, and besides I thought I was running the business correctly as the VAT office had enquired into my business and how it was run throughout 2007 and appeared completely satisfied. I couldn't see how they could demand this from me as I no longer had my business and my involvement with it had ended in November 2011, well before this rule actually became definite and clear in law.
Since April 2013 I have wrote numerous letters to them advising them about my life term health issues (I am registered disabled and have life term health conditions needing regular treatment for life) and my views on this matter. It has caused me so much stress that I have had several breakdowns.
I sought advice from National Debt Line, Business Debt Line, Citizens Advice Beureau, Tax Aid, Mind, StepChange, Debt Support Trust and many accountants who all felt it is a very extreme example and that from their experience the VAT office is treating me very harshly.
In particular I find it extremely wrong that the VAT office had enquired into the business for a considerable amount of time during 2007 with no concerns.
I have tried everything I can to get help with this matter but it seems the VAT office is above everything and there has been very little anyone can do to help.
I am desperately seeking advice with this matter, the VAT office intends to pursue this amount so I will almost definitely end up bankrupt and homeless. I can't cope with this as I am registered disabled, have 4 lifelong illnesses requiring regular life term treatment and I am unable to work. I am currently being monitored by my GP, counsellor, a Physiologist and other health care support workers.
Any advice would be greatly appreciated.
In April last year (2013) I received an unexpected letter from the VAT office demanding a sum of £75,000, money that I don't have and I don't believe that I owe.
For several years I had owned a hair and beauty salon business involving self employed staff members renting space, rooms/chairs. I did not include their income in with the salons income as it was separate and they had all signed agreements to say they were self employed and responsible for their own national insurance, tax and VAT. For the most part the agreements mirrored the National Hairdressers Federation recommendations.
In 2007 the VAT office enquired into my business and sent in a VAT officer, he took away all the financial records and appointment books for some time yet he did not instruct me to register for VAT or enforce me to register for VAT. His enquiry continued throughout 2007 and I was still in communication with him on 30th November 2007. He seemed satisfied that the staff were self employed, he knew the financial position of the business, the manner in which the business was run (with self employed sub contractor staff) and saw the turnover figures and did not instruct VAT registration.
I continued with my business thereafter under the impression from this that the VAT office was fully satisfied with how the business was being run, they did not check again or contact me again until April 2013, almost a year and a half after I ceased trading.
In November 2011 my business was taken over as I could no longer run it due to poor health. I came away completely from the business and no longer had any involvement in it.
Apparently in 2012, a rule was brought in that meant that the turnover from self employed staff had to be counted towards the salons turnover, so despite them being self employed unique entities responsible for their own tax, national insurance and VAT, money relating to them from October 2012 was to be considered as part of the whole salons vatable income, but most shockingly was that I am informed this rule has been allowed to be backdated. As a result of this the VAT office have issued me with a huge bill.
Prior to October 2012 this rule was definitely not clear in law with regards to VAT, and besides I thought I was running the business correctly as the VAT office had enquired into my business and how it was run throughout 2007 and appeared completely satisfied. I couldn't see how they could demand this from me as I no longer had my business and my involvement with it had ended in November 2011, well before this rule actually became definite and clear in law.
Since April 2013 I have wrote numerous letters to them advising them about my life term health issues (I am registered disabled and have life term health conditions needing regular treatment for life) and my views on this matter. It has caused me so much stress that I have had several breakdowns.
I sought advice from National Debt Line, Business Debt Line, Citizens Advice Beureau, Tax Aid, Mind, StepChange, Debt Support Trust and many accountants who all felt it is a very extreme example and that from their experience the VAT office is treating me very harshly.
In particular I find it extremely wrong that the VAT office had enquired into the business for a considerable amount of time during 2007 with no concerns.
I have tried everything I can to get help with this matter but it seems the VAT office is above everything and there has been very little anyone can do to help.
I am desperately seeking advice with this matter, the VAT office intends to pursue this amount so I will almost definitely end up bankrupt and homeless. I can't cope with this as I am registered disabled, have 4 lifelong illnesses requiring regular life term treatment and I am unable to work. I am currently being monitored by my GP, counsellor, a Physiologist and other health care support workers.
Any advice would be greatly appreciated.
0
Comments
-
I would try your MP and getting publicity for your case. If you correspond with HMRC mark all letters "hardship case". If you had had tax investigation insurance I am pretty confident you would win this case, at the very least you would have a case to put before the VAT Tribunal.
You are not alone. They were ruthless in pursuing a long term mentally ill client of mine whose records had been mixed up by HMRC with a 40% taxpayer. His brother had given up and paid several thousand pounds in tax he did not owe. It took me over a year to sort out the mess but HMRC returned every penny.
It's also worth noting that the one VAT enquiry - £60k being demanded - I have on my books right now is utterly spurious. The officer appears not to know the wording of the VAT Act. I have no idea whether your enquiry officer is any good, but what I can say is that in my experience at least 50% of enquiries are utter tosh which HMRC has no chance whatsoever of winning.
I win a lot more than 50% of mine but all I am saying is that over 50% are just a case of getting a ball and side-footing it into an open net, in the rest of them there is at least a goalie and sometimes even a defender to deal with.
Get someone decent local to you to take your case to the VAT Tribunals. They are composed of decent folk who know from experience what a bunch of numpties HMRC employs these days. Some of the cases which end up there are an utter joke, if it was their own money the prats from HMRC were spending they'd not bring the cases.Hideous Muddles from Right Charlies0 -
I'm re-posting this as I don't think the previous title really reflected the situation.
I've been looking on the MSE forums to find some advice with regard to VAT.
In April last year (2013) I received an unexpected letter from the VAT office demanding a sum of £75,000, money that I don't have and I don't believe that I owe.
For several years I had owned a hair and beauty salon business involving self employed staff members renting space, rooms/chairs. I did not include their income in with the salons income as it was separate and they had all signed agreements to say they were self employed and responsible for their own national insurance, tax and VAT. For the most part the agreements mirrored the National Hairdressers Federation recommendations.
In 2007 the VAT office enquired into my business and sent in a VAT officer, he took away all the financial records and appointment books for some time yet he did not instruct me to register for VAT or enforce me to register for VAT. His enquiry continued throughout 2007 and I was still in communication with him on 30th November 2007. He seemed satisfied that the staff were self employed, he knew the financial position of the business, the manner in which the business was run (with self employed sub contractor staff) and saw the turnover figures and did not instruct VAT registration.
I continued with my business thereafter under the impression from this that the VAT office was fully satisfied with how the business was being run, they did not check again or contact me again until April 2013, almost a year and a half after I ceased trading.
In November 2011 my business was taken over as I could no longer run it due to poor health. I came away completely from the business and no longer had any involvement in it.
Apparently in 2012, a rule was brought in that meant that the turnover from self employed staff had to be counted towards the salons turnover, so despite them being self employed unique entities responsible for their own tax, national insurance and VAT, money relating to them from October 2012 was to be considered as part of the whole salons vatable income, but most shockingly was that I am informed this rule has been allowed to be backdated. As a result of this the VAT office have issued me with a huge bill.
Prior to October 2012 this rule was definitely not clear in law with regards to VAT, and besides I thought I was running the business correctly as the VAT office had enquired into my business and how it was run throughout 2007 and appeared completely satisfied. I couldn't see how they could demand this from me as I no longer had my business and my involvement with it had ended in November 2011, well before this rule actually became definite and clear in law.
Since April 2013 I have wrote numerous letters to them advising them about my life term health issues (I am registered disabled and have life term health conditions needing regular treatment for life) and my views on this matter. It has caused me so much stress that I have had several breakdowns.
I sought advice from National Debt Line, Business Debt Line, Citizens Advice Beureau, Tax Aid, Mind, StepChange, Debt Support Trust and many accountants who all felt it is a very extreme example and that from their experience the VAT office is treating me very harshly.
In particular I find it extremely wrong that the VAT office had enquired into the business for a considerable amount of time during 2007 with no concerns.
I have tried everything I can to get help with this matter but it seems the VAT office is above everything and there has been very little anyone can do to help.
I am desperately seeking advice with this matter, the VAT office intends to pursue this amount so I will almost definitely end up bankrupt and homeless. I can't cope with this as I am registered disabled, have 4 lifelong illnesses requiring regular life term treatment and I am unable to work. I am currently being monitored by my GP, counsellor, a Physiologist and other health care support workers.
Any advice would be greatly appreciated.
Is the debt on file based on any of the following
1) An Officers Assessment
2) A compulsory registration with a belated notification penalty for not registering for VAT at the right time.
If its one of the two above then you have the right to request an independent review of the Assessment , if your not happy with the review then you can take it to the (independent) HM Courts & Tribunal Service and ask for it to be reviewed by them.
As Chrismac1 has advised, as you disagree the debt you need to do this immediately and tell them WHY its wrong just saying its wrong is not sufficient, as HMRC will start to pursue the debt because it becomes collectible 30 days after the assessment is issued - has the 30 days expired yet ?.
Please post back if you need more help.0 -
Any advice would be greatly appreciated.
This is a serious issue regarding a significant amount of money and you need professional advice.In April last year (2013) I received an unexpected letter from the VAT office demanding a sum of £75,000, money that I don't have and I don't believe that I owe.
For several years I had owned a hair and beauty salon business involving self employed staff members renting space, rooms/chairs. I did not include their income in with the salons income as it was separate and they had all signed agreements to say they were self employed and responsible for their own national insurance, tax and VAT. For the most part the agreements mirrored the National Hairdressers Federation recommendations.
In 2007 the VAT office enquired into my business and sent in a VAT officer, he took away all the financial records and appointment books for some time yet he did not instruct me to register for VAT or enforce me to register for VAT. His enquiry continued throughout 2007 and I was still in communication with him on 30th November 2007. He seemed satisfied that the staff were self employed, he knew the financial position of the business, the manner in which the business was run (with self employed sub contractor staff) and saw the turnover figures and did not instruct VAT registration.
It would appear that HMRC have concluded that at some point prior to the business being sold in November 2011 that it became liable to register for VAT as it breached the VAT registration threshold. It is of vital importance that you know and understand how this calculation was carried out.In November 2011 my business was taken over as I could no longer run it due to poor health. I came away completely from the business and no longer had any involvement in it.
Assuming that HMRC are aware you sold the business in 2011, although you have not mentioned it, your liability to register for VAT may have implications for VAT registration for the new owners of the business. I mention it, just in case you sold the business to family or friends.Apparently in 2012, a rule was brought in that meant that the turnover from self employed staff had to be counted towards the salons turnover, so despite them being self employed unique entities responsible for their own tax, national insurance and VAT, money relating to them from October 2012 was to be considered as part of the whole salons vatable income, but most shockingly was that I am informed this rule has been allowed to be backdated. As a result of this the VAT office have issued me with a huge bill.
Prior to October 2012 this rule was definitely not clear in law with regards to VAT, and besides I thought I was running the business correctly as the VAT office had enquired into my business and how it was run throughout 2007 and appeared completely satisfied. I couldn't see how they could demand this from me as I no longer had my business and my involvement with it had ended in November 2011, well before this rule actually became definite and clear in law.
There are two separate issues here that have an impact on whether you breached the VAT registration threshold.
- Whether the self-employed people supplied their services direct to the customer, or they supplied them to you, so you could provide a hairdressing service to all the customers coming into the salon.
- The VAT liability of the chair/space you rented to the self-employed people.
On the first point, as you are aware, if the self-employed people are supplying their services direct to the customer, then the money they receive from the customer is not your turnover. If they are supplying their services to you, then all the money received from customers is your turnover.
On the second point, if the chair/space rent is exempt from VAT, it is not taxable turnover to count towards the VAT registration threshold. You have not mentioned in your post how you were treating the chair/space rental, whether you were treating as exempt or taxable.
Although your post mentions the change to the law in 2012, and you believed that it changed the rules regarding who a self-employed stylist is supplying their services to, it did not. It only had an impact on the second point, the liability of chair/space rental.
Prior to 2012 hairdressers often treated chair/space rent as exempt from VAT, on the basis that it was a grant of a licence to occupy land. Although HMRC accepted that this might be the situation in certain specific cases, their view was that where services were provided with the rental of a chair/space, chair/space rental was a taxable supply of services rather than an exempt supply of land.
Although HMRC won a High Court case in November 2007 on this point, arguments continued, and in 2012 the law was changed to put matters beyond doubt. At that point all chair rental became liable to VAT regardless of the previous treatment, as did rental of space, unless it was dedicated space without any services related to hairdressing (cashier, booking, cleaning, etc) which remained exempt (subject to some anti-avoidance measures).
So it would seem that although you have linked the liability to register with the activities of the self-employed staff, it would actually seem that the issue may be the chair/space rental provided to the self-employed staff, and that addition of the chair/space rental income has pushed you above the VAT registration threshold.
If you sold the business in 2011, the change in legislation in 2012 is irrelevant to you (although not to the new owners of the business).
The question for you is was your business operating in a way between 2007 and 2011 that the chair/space rental was exempt or not, and if it was taxable, did the addition of the chair/space rental income put you over the VAT registration limit, and if so, when.
Since HMRC examined the business in 2007 you need to know what HMRC's view on the liability of the chair/space rental was for *your* business. If they accepted on the facts at the time in 2007 that *your* chair/space rental was exempt, what do they believe has changed in *your* business between then and 2011 to alter it from an exempt supply to taxable.
Do a google search for "accountingweb hairdresser chair rental" and the accountingweb site that is the top hit will give you more information and links to further details.
I repeat, this is a serious issue regarding a significant amount of money and you need professional advice, particularly since HMRC examined the business in 2007.0 -
I sought advice from National Debt Line, Business Debt Line, Citizens Advice Beureau, Tax Aid, Mind, StepChange, Debt Support Trust and many accountants who all felt it is a very extreme example and that from their experience the VAT office is treating me very harshly.
None of whom were probably qualified/experienced in tax enquiry and VAT law which is a VERY specialist area. I'd suggest you engage a specialist immediately to get to the bottom of it.
With tax, and enquiries and VAT in particular, the devil is in the detail. You have to know HOW to appeal using the correct procedure, not just a general "I don't think it's right" letter or phone call which they'll ignore. The tax tribunals and ultimately the adjudicator have been put in place to deal with this kind of thing.
I don't think you appreciate the difference between the VAT officers themselves and the HMRC debt collection departments. It is no doubt their debt collectors who are chasing you for this money - they know nothing about VAT and are just chasing what their computer tells them is due. You are wasting your time with their debt collectors as they have no power and no ability to deal with the fundamental question of whether you owe it or not. You have to deal with the VAT officers who raised the assessment. It sounds like a lot of the "advice" you have received was from debt counselling services which likewise wouldn't know anywhere near enough about VAT to help you argue whether the amount is due or not.
Please get proper specialist advice quickly.0 -
Pennywise is quite correct.
HMRC`s Debt Management Unit exist only to pursue the debt and they will.
Any technical queries with regard to the Officers Assessment raised (if its based on an OA) OR an Assessment raised by the Hidden Economy Team (HET) with a Belated Notification Penalty because you failed to register for VAT when your turnover exceeded the VAT Registration threshold, MUST be directed to whoever raised the debt.
If the debt is based on an Officers Assessment you would have been sent a form V655 (which has the Officers name who raised it).
If the debt is based on an Assessment, you would have received a letter and calculation showing how the Assessment was calculated - the Belated Notification Penalty letter and calculation will have been issued separately.
Can you please confirm on what basis the debt has arisen, so we can help you further.0 -
they did not check again or contact me again until April 2013, almost a year and a half after I ceased trading.
...
Since April 2013 I have wrote numerous letters to them advising them about my life term health issuesHMRC will start to pursue the debt because it becomes collectible 30 days after the assessment is issued - has the 30 days expired yet ?.
It would appear that the decision was made a year ago.
If this is the case and no appeal was submitted within the statutory deadlines, then professional advice is certainly needed.0 -
Thanks for everyone's postings.
The OP PM'd me originally and I've had some correspondence with them already, but I suggested they post on the forum because that way we get more than just my view of things and different ideas plus it stays on the forums for others in similar situations.
I think the assessment is wrong, either in terms of procedural or in terms of the quantum involved.
The Debt mgmt. team should be easily told to hold back pending a review of the assessment and even if deadlines have been passed, the HRA indicates HMRC cannot take a tax from a citizen unless it has been correctly assessed so a review of the assessment should still be possible....its clearly in dispute if it hasn't been paid by the OP yet.Anger ruins joy, it steals the goodness of my mind. Forces me to say terrible things. Overcoming anger brings peace of mind, a mind without regret. If I overcome anger, I will be delightful and loved by everyone.0 -
Hi Jason,
The options open to the OP (as far as can see) are
1) Ask the Assessing Officer to review the OA and provide evidence as to WHY they the think the OA is wrong.
If they are lucky the Officer will realise their mistake (if their is one) and amend the OA to the correct figures.
If the Officer refuses to amend the OA then
2) They can ask for an independent review of the OA , and do the same as point 1.
3) If the review upholds the OA then they can apply to take the matter to HMCTS and ask for it to be reviewed there BUT the problem I can see there is that they should have appealed tthe OA immediately if they thought it was wrong.
HMRC Debt Management will NOT pursue the debt IF the Officer who raised the OA advises them not to and suspends the debt, if the debt is not suspended its collectible
(I am sure you know this already !).0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.7K Banking & Borrowing
- 253.4K Reduce Debt & Boost Income
- 454K Spending & Discounts
- 244.7K Work, Benefits & Business
- 600.1K Mortgages, Homes & Bills
- 177.3K Life & Family
- 258.4K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards