Possible mistake with VAT registration date

[SoFar]

I registered for VAT quite recently and am just in the process of doing my first VAT return.

Reading about Reverse charges for EC / Non-EC services in:

Electronically supplied services and broadcasting services:New EU rules
HMRC Reference: VAT Info Sheet 01/03

I spotted this paragraph:

"If you are not already registered for UK VAT, the value of any broadcasting or electronically supplied services supplied to you in the UK, for use in your business, by a supplier outside the UK, must be added to the value of your own taxable supplies in determining whether you should be registered. Even if you make no taxable supplies yourself, you will still be a taxable person if the value of your imported services exceeds the registration limits."

However, this very relevant nugget of information is not mentioned anywhere (that I can see) in the 41 pages of this document:

Should I be registered for VAT?
HMRC Reference:Notice 700/1 (Oct 2007)

Which is the documentation I used when determining my registration date. I also paid my Accountant separately to calculate my registration date and he has obviously also missed the fact that the EC / Non-EC services I used should have been added into the calculation.

What is the best way forward from here? I don't want to rely on my accountant as I feel he should have spotted this to start with.

Should I try and meet with a VAT officer to discuss it?

Will it be quite straightforward to change my registration date, which should only be to a few months earlier? Given that my first VAT return isn't due till the end of May.

 

[Kent Accountant]

I can honestly admit that I would have been caught in the same way as your accountant. It is certainly not a scenario that occurs frequently :redface:

What services do you receive that increase your turnover to the registration level?

Probably best to contact the VAT National Advice Line 0845 010 9000who should be able to point you in the right direction. Don't think there are any VAT officers you can meet with to discuss things any more

 

[SoFar]

Thank you for your reply. It's slightly re-assuring that it's not a common scenario.

The electronically supplied services I receive are: web hosting and domain name registrations, plus advertising through Google Adwords, all from outside the UK.

On their own they wouldn't bring me to the registration level but combined with my normal turnover, the registration level will have been reached earlier than previously calculated.

I will contact the Advice Line as soon as I have calculated the correct registration date.

Do you think admitting this mistake will make it more likely I have a VAT investigator at my door, or will they view it in a positive light because I am not hiding anything? Hopefully I will still be able to get my VAT return submitted in time...

 

[Kent Accountant]

Frankly, I doubt that they will worry much. The error level at which mistakes have to be notified to HMRC has now been increased to £10K so I imagine that they will not be too concerned with your error

 

[3pic]

The reverse charge provisions operate in the UK as a self-supply. The recipient of the supply calculates output tax, on the charge for the imported service and accounts for this as output tax in the VAT return. At the same time he claims corresponding input tax.

The value of imported services is taken into account for VAT registration purposes. If the total of the services supplied under the reverse charge and
the taxable supplies made in the UK by the UK recipient of the reverse charge exceed the £67k registration threshold. If so, the business is liable to register for VAT in the UK and charge itself the VAT on the imported services, although recovering such VAT as input tax, subject to the normal conditions.

As for the registration date.....HMRC could, in the future, decide your effective registration date was earlier than you have claimed (which you now realise anyway). You could write to them explaining why you think you should be registered in an earlier month, but then you MAY be subject to a belated notifcation penalty (a penalty for not registering at the correct time) which will be 15% of the tax due (outputs less inputs) but can be mitigated to Nil and may even be only for a small amount anyway.

I would go with Kent and leave it as it is - although the error threshold of £10k is irrelevant as this is a late registration issue rather than non-payment of VAT issue.

Upon a future inspection, an Officer, if they even pick it up, wouldn't be bothered to do the paperwork for one or two months delay - especially as these are reverse charge values and thus you are simply paying over and then recovering VAT, thus there is no overall loss to the revenue.

 

[Jaydee]

thus there is no overall loss to the revenue.

Yes and no - no loss to the Crown from the reverse charge mechanism, but they are losing the undeclared UK output VAT throughout the few months delay.

 

[SoFar]

Thanks for your replies.

I spoke to the Advice line today and was advised to write to EDR's HMRC in Grimsby explaining what has happened, which I have done.

Ignoring the reverse charges for a moment, I will owe output tax on payments from the three months that should have been included in my registration, so thought it best to admit my error now.

 

[SoFar]

I've only just had a letter back from them:

So that we can determine the correct date of registration would you please supply the following details:

Within 14 days, please provide monthly turnover figures for the last 3 years or the commencement of trading up to end of May 2008.

There are a couple of problems I have with this.

1. What format should the figures be in? Should it just be the total income in Jan 2006, Feb 2006 etc.?

2. As the error in my registration date was created by me not including the services I was paying for in the US, do I include these in my turnover figures?

I would contact HMRC to ask but last time I was sent from department to department and hardly anyone could help.

 

[Suzina]

I'd give them another call. When we started up a few years back I seemed to spend quite a lot of time on the phone with them and they were very helpful. We were also offered (and attended) places on a training session where we could ask any questions which worked well for us as we were doing strange things with zero rating and the answers were not always known by the first bod to answer the phone. And if you find the name of someone helpful write it down in a safe place!