[allanjohnlittle]

Hi everyone,

I registered my limited company for VAT back in March but I have discovered a member of staff submitted several invoices prior to registration, which we've been paid for. How should I address this? Will this flag with the IR from the customer when they file accounts or when we file our accounts?

Many thanks for your help.

[IP2]

HM Revenue and Customs is one of the more laid back Government Departments, my advice would be to call them, hold your hands up to the error and ask their advice. If you try and conceal it, it could cause you far more problems down the road, but coming clean now will probably just result in having to pay back the VAT that you should not have charged.

[allanjohnlittle]

Thanks for the reply. If I did ignore this, what are the repercussions and how possibly could it be identified, out of interest?

[UKSMF]

If it was before VAT registration it may be a good idea to offer a refund to the customers of the difference and just get the accounts back into line that should be fine and also a great opportunity to sell them something else lol

Regards

Dave

[IP2]

Originally Posted by UKSMF

If it was before VAT registration it may be a good idea to offer a refund to the customers of the difference and just get the accounts back into line that should be fine and also a great opportunity to sell them something else lol

Regards

Dave

Problem with that is if they have claimed the VAT back, how they then account for the refund from a now VAT registered company...hmmm....sorry, just thinking out aloud!

As for repercussions, I suspect more frequent and stringient VAT inspections and possibly a Tax inspection. The VAT office will generally check records every three years and select a couple of random quarters to micro check.

As for how they would find out, I am assuming that you did not put a VAT number on any of your invoices, so should one of your clients have a VAT inspection your invoice could be flagged then, probably not something you want hanging over you for the next few years - seriously think the hands up approach and advise from HM Revenue is going to be in your interest ultimately.

[Peter W]

If you have not paid any of the VAT to Customs and you know your customer well enough, you might be able to sort it out between yourselves.

Any VAT errors under £2,000 can be quietly corrected on your next VAT return.

Otherwise, I agree with IP2 - give Customs a call. Try the National Advice Service first, on 0845 010 9000.

Nowadays Customs carry out VAT inspections less frequently. A well behaved small company can expect one visit every 5 to 10 years. For the best chance of avoiding inspections, just make sure that all VAT returns and payments are filed on time.

The only other way that the error would be picked up is by your accountant at the end of the year. If you have charged VAT but not paid it to Customs, and refuse to correct the error, then it will give him an accounting headache, and no-one wants that do they?

[James Smith]

I would suggest you just need to issue a VAT only credit note back to your customer, with the appropriate refund sent at the same time.

From their side it is not a VAT "error", so it will go on their return in any case. On yours presumably you are completing your first VAT return for the period ending May for submission today so adjust for it now, no harm done although it is probably worth giving your accountant a quick ring first to talk through this proposal as presumably you have one with staff and a limited company.

Edited to add, couple more thoughts:

1. If your customer ISNT VAT reg, then just re-issue the invoice. They wont care, more cash for you!
2. If this is as it looks your first VAT return definitely call your accountant to run through it before you submit to make sure you have got it right and in particular as you have been trading pre-registration. There are all sorts of issues with the first return about pre-registration VAT, such as on stocks and assets purchased in the previous 3 years plus services incurred in the previous 6 months where you can make a reclaim. Serious amounts of money available if you do it right!

Regards,