VAT inspection
Discussion
Going on as I type: I can hear a bit of sighing from the room next door where he is working!
Already picked me up for claiming back VAT on postage and bank charges, for not accounting for paymnets in the last few days of the month and for not having the records in the legal format, but generally seems a reasonable guy.
I wil pass on my lesons later, if I am not locked away.
It is stil going on. He cannot get get the basic numbers to work and is talking about not bothering with the invoicing side.
I have learned that:
Cofee is a food stuff and not VATable.
Public transport has no VAT element
You have to get VAT receipts in £, not $ or you can't claim it back
NEVER mention the word entertaining
I haven't claim shed loads of VAT on mileage.
More sighs from next room.
I have learned that:
Cofee is a food stuff and not VATable.
Public transport has no VAT element
You have to get VAT receipts in £, not $ or you can't claim it back
NEVER mention the word entertaining
I haven't claim shed loads of VAT on mileage.
More sighs from next room.
leftie said:
Already picked me up for . . . not having the records in the legal format,
Is there such a thing? If so, can someone shed light on this format? I have only ever had a VAT inspection once (holdstightlyontodeskandprays) but the inspector had no criticisms of my system, which basically involved several foolscap folders and the cheque books.
The Londoner said:
Already picked me up for . . . not having the records in the legal format,
Is there such a thing? If so, can someone shed light on this format? I have only ever had a VAT inspection once (holdstightlyontodeskandprays) but the inspector had no criticisms of my system, which basically involved several foolscap folders and the cheque books.
He tells me that I am obliged to have the records in a fomat where they can see how the input and output figres have been arrived at. I had a spread sheet with the VAT quarters each invoice was accounted in, so I sorted them by quarter and quickly added each quarter. Shoud be the same with suplies, again I had to do a totting up. He seemed happier.
Net result: I owe him £2000 from a 3 year period on a turnover of about £600,000 but the general balancing of inoputs/outputs/declared and recorded was OK, except I overpaid one quarter by £1800 and he won't take that into account until I can show WHY I overpaid.
BIG lesson; don't send in your VAT return early. I always do mine the day it arrives and send it in and then account for what comes in in the last 2 weeks in the next quarter. He did not like this one bit and made veiled threats to remove my right to cash accounting if I kept doing it. It made things very complex, and this was made more confusing by switching to LTD Co and not telling them (more stern words), and having VAT quarters, and company financial years out of synch.
He spent 3 hours just reconciling the declared and recorded input and outputs, and 15 minutes checking a few random invoices from this last quarter and queried one receipt for the M6 Toll Road (YES it is Vatable).
I have now batted this back to my accountant as he was the one who told me I had underpaid in 2003 leading to me overpaying £1800. Hopefully he will have reconciled that and forgot to tell me and Mr VAT and I will be all square.
Davel said:
I didn't know about the postage thingy - Ooops!
Why do they show the VAT number on the official receipts?
Anyway, lesson learnt here too!
My problsm is I spend £2-3000 a year on postage and have reclaimed the VAT for the past 3 years. Bank let me down,. I had called these pecifically to ask if bank charges had a VAT element and they asured me it had, so I have reclaimed £120 in VAT I shouldn't have .
One of the things he found was almost a whole pound.
leftie
In your shoes I would have stern words with your accountant. Regardless of how much he was paid, he should have advised you:-
1) That you had to wait until the end of the quarter and include all transactions in that quarter
2) That postage (Royal Mail) was zero-rated (along with bank charges)
3) That VAT registration belongs to an Entity, and that individuals/partnerships are different entities to a limited company - this one is actually quite serious as you can't claim VAT back (and more importantly charge it to your clients) if you re not VAT registered and it sounds like your Ltd company is not technically VAT regstered
He would know all this from the annual audit of the accounts and from the conversion to Ltd Co.
Also if you are turning over £600K (over 3 years), I would have thought that its time to move on from spreadsheets (I've never seen a large one without a mistake in it yet!) to something like Quickbooks or Sage Instant Accounting which will calculate your VAT liability at the touch of a button.
Personally in your shoes I would sort out the £1800 using your existing accountant and then go and look for another one. Remember you often get what you pay for.
I have always avoid cash accounting in all my businesses, I've grown three from startup and one merged company, as I have always assumed that I will grow the business beyond the cash accounting limits, which to date has been true. I also always have had full audited account done even though we have submitted the legal requirement to companies house, I've done this for the same reason and for the fact that everything is clearly auditied and its easy to see where you are. Its also easier to raise funds against audited and management accounts (easily available from Sage and Quickbooks) rather than a pile of loose spreadsheets!
Hope you get it all sorted, best of luck in the future
davidy
>> Edited by davidy on Wednesday 3rd May 21:08
In your shoes I would have stern words with your accountant. Regardless of how much he was paid, he should have advised you:-
1) That you had to wait until the end of the quarter and include all transactions in that quarter
2) That postage (Royal Mail) was zero-rated (along with bank charges)
3) That VAT registration belongs to an Entity, and that individuals/partnerships are different entities to a limited company - this one is actually quite serious as you can't claim VAT back (and more importantly charge it to your clients) if you re not VAT registered and it sounds like your Ltd company is not technically VAT regstered
He would know all this from the annual audit of the accounts and from the conversion to Ltd Co.
Also if you are turning over £600K (over 3 years), I would have thought that its time to move on from spreadsheets (I've never seen a large one without a mistake in it yet!) to something like Quickbooks or Sage Instant Accounting which will calculate your VAT liability at the touch of a button.
Personally in your shoes I would sort out the £1800 using your existing accountant and then go and look for another one. Remember you often get what you pay for.
I have always avoid cash accounting in all my businesses, I've grown three from startup and one merged company, as I have always assumed that I will grow the business beyond the cash accounting limits, which to date has been true. I also always have had full audited account done even though we have submitted the legal requirement to companies house, I've done this for the same reason and for the fact that everything is clearly auditied and its easy to see where you are. Its also easier to raise funds against audited and management accounts (easily available from Sage and Quickbooks) rather than a pile of loose spreadsheets!
Hope you get it all sorted, best of luck in the future
davidy
>> Edited by davidy on Wednesday 3rd May 21:08
More or less agree with the last post.
I HATE cash accounting on the basis that it means that the annual accounts for the business are prepared on a different basis to the figures submitted for the VAT returns.
The VAT has no right to mention ANYTHING to you about financial year ends not being co-terminus with a VAT quarter. Although it is handy for the likes of him (and me, as an accountant) it is not a legal requirement.
The basic legal requirement is that all the summaries and extractions of VAT totals which provided the figures for the VAT returns should be clearly identifiable.
Preparing your VAT returns BEFORE the end of the relevant VAT quarter is just plain dumb - to be honest. How can you know your trading figures up to a particular date when you haven't actually reached that date yet?
I HATE cash accounting on the basis that it means that the annual accounts for the business are prepared on a different basis to the figures submitted for the VAT returns.
The VAT has no right to mention ANYTHING to you about financial year ends not being co-terminus with a VAT quarter. Although it is handy for the likes of him (and me, as an accountant) it is not a legal requirement.
The basic legal requirement is that all the summaries and extractions of VAT totals which provided the figures for the VAT returns should be clearly identifiable.
Preparing your VAT returns BEFORE the end of the relevant VAT quarter is just plain dumb - to be honest. How can you know your trading figures up to a particular date when you haven't actually reached that date yet?
Eric Mc said:
More or less agree with the last post.
Preparing your VAT returns BEFORE the end of the relevant VAT quarter is just plain dumb - to be honest. How can you know your trading figures up to a particular date when you haven't actually reached that date yet?
That's me. Conscientious to the point of stupidity.
leftie said:I'm really sorry if I cause offence, but how the hell can you run a business and not know any of this?
I have learned that:
Coffee is a food stuff and not VATable.
Public transport has no VAT element
You have to get VAT receipts in £, not $ or you can't claim it back
NEVER mention the word entertaining
How can you expect to claim VAT back on a dollar purchase when the USA is outside the EU and therefore doesn't have a concept of VAT, for example?
Presumably you'll argue that is what you pay your accountant for, in which case I'd fire your accountant and use someone competent like Eric.
JonRB said:
I have learned that:
Coffee is a food stuff and not VATable.
Public transport has no VAT element
You have to get VAT receipts in £, not $ or you can't claim it back
NEVER mention the word entertaining
How can you expect to claim VAT back on a dollar purchase when the USA is outside the EU and therefore doesn't have a concept of VAT, for example?
Presumably you'll argue that is what you pay your accountant for, in which case I'd fire your accountant and use someone competent like Eric.
I guess because I am not an accountant (and even now am not very interested in whether cofee is vatable). I started off a 'back-bedroom' business whilst in another job that grew rather more quickly than I had thought. Systems , knowledge and accounting skills never kept pace with the change. I am geting some accounting software (an=bout 2 years too late). I have had an apology from the accountant this morning for not picking up the postage thing.
The $ purchase as a UK company but the billing came from the US.
Thanks for the compliment
If you are billed from the US then it is highly likely that there should be no VAT. The VAT authorities can be a bit suspicious of businesses with UK operations generating their bills from their overseas HQ. They could very well come down on the UK subsidiary of the US company for not raising UK Sterling VAT invoices for providing UK based businesses with services supplied in the UK.
However, that is not YOUR problem. If you receive an invoice which does not show a VALID UK VAT NUMBER, you must assume that there is no VAT contained in the figures shown and therefore that there is no VAT to be claimed back. Even if a valid VAT number is shown, you may need to check whether any Standard Rated VAT was imcluded in the bill because of the various Zero Rated and Exempt supplies that are possible under VAT regulations.
I dread to think how you might have dealth with invoices from EU based suppliers.
The supply of finacial services is normally exempt for VAT purposes - this includes normal bank charges and interest charges. However, if a bank supplies goods or a service (such as software or stationery, not to mention management charges etc) then they WOULD charge VAT on those supplies which you could claim back.
>> Edited by Eric Mc on Thursday 4th May 10:09
If you are billed from the US then it is highly likely that there should be no VAT. The VAT authorities can be a bit suspicious of businesses with UK operations generating their bills from their overseas HQ. They could very well come down on the UK subsidiary of the US company for not raising UK Sterling VAT invoices for providing UK based businesses with services supplied in the UK.
However, that is not YOUR problem. If you receive an invoice which does not show a VALID UK VAT NUMBER, you must assume that there is no VAT contained in the figures shown and therefore that there is no VAT to be claimed back. Even if a valid VAT number is shown, you may need to check whether any Standard Rated VAT was imcluded in the bill because of the various Zero Rated and Exempt supplies that are possible under VAT regulations.
I dread to think how you might have dealth with invoices from EU based suppliers.
The supply of finacial services is normally exempt for VAT purposes - this includes normal bank charges and interest charges. However, if a bank supplies goods or a service (such as software or stationery, not to mention management charges etc) then they WOULD charge VAT on those supplies which you could claim back.
>> Edited by Eric Mc on Thursday 4th May 10:09
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