Case Study: VAT Demand

Last year a small partnership business received a VAT notice from HMRC stating they had breached the Value Added Tax (VAT) threshold 5 years ago, which their accountant hadn’t identified, the demand was for £105,000 plus interest, surcharges and penalties!

If you do not register for VAT (Value Added Tax) when you hit the threshold you are liable to large financial penalties and potentially the VAT (Value Added Tax) you haven’t charged since you should have been registered.

The consequences of such can be devastating to a small business and can even be such a reason to close the business down.

We were approached to review the issue, as if the VAT demand was correct the clients would have been forced to declare themselves bankrupt; having no means on settling the debt. The client was in an extremely upsetting situation and their health and wellbeing was suffering under the stress.

Our team worked through the HMRC calculations and found fundamental errors within their figures. Our clients were not given VAT (Value Added Tax) relief on a large amount of expenditure, the majority of work they undertook was zero rated as they were working on new build properties which had to be factored in, we were also able to advise on various capital expenditure claims that could be made resulting in a substantial reduction in their VAT (Value Added Tax) liability to a final figure of £25,000.

Once we got the VAT (Value Added Tax) liability down to a manageable level we liaised with HMRC and negotiated a payment plan which the clients could afford.
To move forward we also set up a computerised bookkeeping system so that the partners are now in control of their business and can monitor any fluctuation in sales thus ensuring that this never happens again and they can keep an eye on there up to date liabilities at any given moment in time.

The work done by PWH made a substantial impact on the client’s business ensuring the continuing operation of the trade, not to mention the personal relief that the owners felt now the matter has been resolved.

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