There are a few areas of the VAT system that will only give you one chance to get it right, including choosing the start date for a new VAT registration. Although this may not seem very important, getting this wrong can be extremely costly as seen in a recent failed tribunal appeal by Max Investments Ltd (TC05063).
Max Investments lost out on a VAT claim of £120,000 simply by asking for the wrong VAT registration start date.
Unfortunately the tribunal could only reverse HMRC’s refusal to back-date the registration if a number of conditions were met. These included whether the accountant had made a genuine error or misunderstanding in asking for the wrong date.
While accepting the accountant misunderstood the difference between goods and services might have been a genuine mistake, the company failed to meet the other conditions and therefore lost its appeal.
The lesson here must be to make sure, the client and the accountant know exactly how the rules work before making any VAT applications. It can be very costly to discover you can’t change your mind later on.
For more information or issues arising around VAT please contact our VAT expert Melanie Lord firstname.lastname@example.org.