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Post Info TOPIC: Reclaiming VAT on invoices that are not in the client's name.


Master Book-keeper

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Reclaiming VAT on invoices that are not in the client's name.


Told a client that she wouldn't be able to reclaim VAT on some invoices because they were made out to a different company.

The husband spoke to me today and said that he had spoken to another accountant and VAT can be claimed on an invoice not in the name of the client providing that they things purchased for use in the clients business, providing no other party had claimed VAT on the invoices.

 

A bit of background.  Client is sole trader but the invoices were made out to the husbands previous company which had ceased trading, but had previous history with the suppliers.  I am satisfied that the invoices were for my client, and that they haven't been claimed by the husband, as he hadn't traded for a good few months prior.

 

These invoices are for materials used in fitting out the client's shop, and would have formed part of a pre reg assessment.  Is it just finished goods that are eligible under the four year rule, or can materials used in fitting out a shop also be claimed for eg wood, boarding, ceiling materials etc.



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Guru

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Morning John,

Not saying this other accountant is wrong but it would be nice if they could back that information up with some sort of evidence as proof, if you look at

http://www.legislation.gov.uk/uksi/1995/2518/regulation/14/made

this clearly says that the VAT Invoice should show the name and address of the person to whom the goods or services are supplied

I know you can prove that the Invoices are for your client and paid for by them

BUT

A year or so ago one of my clients had an enquiry carried out into their purchases claimed on their SA Tax Return, they were not VAT registered but they also had some Invoices that were in a different name adding up to about 3k, we explained to HMRC that this was because my client had used his friends account as he got a better discount than him, we also supplied HMRC with a copy of the delivery address that showed a job my client worked on, a copy of the original cheque that my client wrote (thanks Joanne) as well as proof of the cheque clearing on the bank statement, HMRC did accept this but did then say in their closure notice

"Please note that all your purchases need to be in your name, so although we have allowed the whole deduction in this instance based on your explanation, we would not do so in case of a future compliance check on later years"

This would seem to mean that not only would they not allow the VAT element in your case but would actually disallow the whole Invoice.

If you do allow the Invoices, my opinion would be that the materials would come under the 4 year rule, but if they were supplied and fitted by a Builder then this would come under services.

As you know I am not an expert on VAT so hopefully someone with a bit more knowledge will be along to offer you more advice.

 



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Guru

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Hi John

How did you get on with this in the end?



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Master Book-keeper

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Hi Doug

I'm going to look at it in more depth on Friday.  I'm at the client's from Monday tp get the VAT return and pre-reg done but I spotted these invoices when I was doing the year end, which prompted the question.



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Is/was the 'other Accountant' doing the the husband's books?

You say the 'husbands previous company which had ceased trading'......so to clarify - was that a Limited Co? Has it actually been dissolved? Or have they completed dormant accounts for the period that the invoice relates to?

The problems if you wish to claim, as I see it are:-
1) having the proof that the husband's business has NOT claimed it. (Could claim as part of cessation accounts at later date perhaps or he is very late with his filing? Depends how old the invoice is)

2) proving that the goods have actually been retained by your client at the time of the VAT return, given they wont show up as part of a stock take, or asset register especially as the invoice was not in their own name.

Doug's points are very pertinent, especially given the very high likelihood of a VAT inspection on the first return, especially if it is a repayment situation.

I would suggest erring on the side of caution, especially if its not much ££ in the scheme of things v penalties.

That said - an interesting piece here might help (or hinder) www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit13300

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Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Cheshire wrote:

Is/was the 'other Accountant' doing the the husband's books?  No, I did the previous year end to Jan 17.  Accounts weren't done for Jan 18

You say the 'husbands previous company which had ceased trading'......so to clarify - was that a Limited Co? Has it actually been dissolved? Or have they completed dormant accounts for the period that the invoice relates to?

Ceased trading Dec 17, applied for strike off March 18, dissolved Oct 18

The problems if you wish to claim, as I see it are:-
1) having the proof that the husband's business has NOT claimed it. (Could claim as part of cessation accounts at later date perhaps or he is very late with his filing? Depends how old the invoice is)

Invoices are Jan/Feb 18, they have my client's shop as the delivery address, but the spanner in the works are that some were paid using his credit card. (shown as a loan to my client in the accounts.)

2) proving that the goods have actually been retained by your client at the time of the VAT return, given they wont show up as part of a stock take, or asset register especially as the invoice was not in their own name.

Primarily materials that then went into fixtures and fittings (plaster boards for walls and ceilings, shelving etc)

Doug's points are very pertinent, especially given the very high likelihood of a VAT inspection on the first return, especially if it is a repayment situation.

I would suggest erring on the side of caution, especially if its not much ££ in the scheme of things v penalties.

I agree with you.

That said - an interesting piece here might help (or hinder) www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit13300

Thanks, the blog article I read prior to starting the thread made me think I might have been wrong in my thinking, and indeed I was slightly.  Having re-read the article this morning one of the clinchers is that you can show the end party paid for the goods. Him using his credit card rules that out imo.   https://www.oneaccounting.co.uk/blog/what-proof-do-you-really-need-reclaim-vat

 



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Artois wrote:

A year or so ago one of my clients had an enquiry carried out into their purchases claimed on their SA Tax Return, they were not VAT registered but they also had some Invoices that were in a different name adding up to about 3k, we explained to HMRC that this was because my client had used his friends account as he got a better discount than him, we also supplied HMRC with a copy of the delivery address that showed a job my client worked on, a copy of the original cheque that my client wrote (thanks Joanne) as well as proof of the cheque clearing on the bank statement, HMRC did accept this but did then say in their closure notice

"Please note that all your purchases need to be in your name, so although we have allowed the whole deduction in this instance based on your explanation, we would not do so in case of a future compliance check on later years"

This would seem to mean that not only would they not allow the VAT element in your case but would actually disallow the whole Invoice.

If you do allow the Invoices, my opinion would be that the materials would come under the 4 year rule, but if they were supplied and fitted by a Builder then this would come under services.

As you know I am not an expert on VAT so hopefully someone with a bit more knowledge will be along to offer you more advice.


 If it can be proved that the client paid for the invoices, then I'd disagree with the Inspector in this case. As long as the evidence is there that the goods were for the client and paid by the client then I think a case can be made. 

See my comments to Joanne, and it only came to light afterwards, I don't think the evidence is there in my case, but certainly I was wrong to think the invoices have to be in the end users name, which is where the person the husband spoke to may have been coming from.

I very much appreciate yours and Joanne's comments. They have helped me to think it through better.



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.

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