Creditor Deposits

Discussion in 'Insolvency' started by LiveNetworks Ltd, Feb 1, 2018.

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  1. LiveNetworks Ltd

    LiveNetworks Ltd UKBF Regular Free Member

    193 41
    Really interesting reading the 'sponge bob' post and regarding the last post of a company taking customer payments in advance.

    I've been looking at the accounts of a former supplier over the last 12 months. Most recent accounts show over £100K negative working capital for the last 2 years, zero bank balance and just £50K shareholders funds. The shareholders funds being propped up by an intangible asset that looks like R&D.

    Based on the accounting principal of not netting off, I'd have expected there to be a bank balance for their client deposits if they were being held separately (and then a corresponding creditor) No positive bank balances, probably the first alarm bells.

    Now I've noticed that deposits used to be treated as a payment in advance with an VAT invoice being raised at the end of every month.

    Now they're raising a VAT invoice for 'services' with each deposit despite the fact that at that point no service has been delivered and the deposit is subject to be refunded to us on demand.

    Have I missed a change in HMRC recommendation on accounting and tax treatment of payments in advance or is this a bad sign?
    Posted: Feb 1, 2018 By: LiveNetworks Ltd Member since: Jan 31, 2018
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