Case Studies

• Mistake when filling in a tax return
• Who is self employed and problems with IR35
  
• Unexpected bill follows PAYE visit
  
• VAT visits

VAT Cases

Aziz had decided to start his own business. He had £100,000 of his own money to get started. With this, and £200,000 in finance, he had enough to buy the equipment he needed. He had decided to go in to the lorry rental business. The vehicles were all brand new, so he didn't really need any service bays. He found a small lock-up unit to carry out minor repairs, and with an office and a phone he was on his way.

His first VAT return generated a refund of £40,000, cash that was badly needed to fund the first weeks’ overheads while the rentals started to generate some profit. He was lucky, because the vehicles were all out on rent, so when the VAT man arrived to check the calculations, all he found was Aziz, a desk, a phone and a few tools in a lock up unit. After a look through the paperwork, everything seemed to be OK, but the VAT man said he wouldn't be able to release the refund just yet.

Later that same day, officers with warrant cards arrived at our offices to seize any paperwork we had on Aziz's business. Understandably, Aziz was terrified -- he had never experienced this before. Tax Champion sought to reassure him that everything would be OK, and so it was: the next morning the papers were returned, and the refund paid. The VAT man apologised, but said that his suspicions were sound because the repayment claim was large and there were no vehicles present during the inspection. The fact that we, as a professional firm, had been involved from the start, went a long way to reassuring them that everything was in order.

* * *

People are always concerned when the VAT man visits to check their records. There is a reasonable fear that something you have done could be wrong, be it a simple mistake or a misunderstanding of the rules. But you would understand Frazer's panic when the VAT man informed him at the end of a visit that he owed over £500,000! The Revenue would be raising an assessment, and payment was required in 30 days.

Half a million pounds is a lot for most people, but for a business with a turnover of less than £1million, it would have closed them. Frazer had treated all his sales as zero-rated, but the VAT man has treated them as standard-rated and added a 30% penalty for good measure. Tax Champion stepped in, and after we showed HM Revenue and Customs that all the sales were exports, they quickly reversed their decision and closed the case.