Confessions of a Vatman
Page 36
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VAT comes high in any haulier's list of headaches. In the first of four articles a former VAT inspector explains the obligations of a business to the tax. Value Added Tax is a tax on consumption, and the responsibility for collecting it on behalf of HM Customs and Excise is put upon traders who are registered for VAT. It follows that any person who is in business is likely to become responsible for charging VAT upon their supplies and for paying that over to Customs.
Obligation to charge VAT
UK VAT law requires every taxable person to charge VAT, where appropriate, upon all supplies made by them. However taxable persons are specifically defined by UK law as a person who is, or is liable to be, registered for the tax.
Notification
There is no requirement to tell Customs and Excise about your business unless you become liable to register for the tax which starts when the taxable turnover of the business exceeds the registration threshold, currently .£45,000, in a 12-month period. Many people make mistakes by believing it relates to their yearly turnover, so when the year-end trading has not exceeded the threshold, they forget about it for 12 months. Such an assumption is wrong and late registration often results in a penalty Notification to Customs of liability to register has to be by the end of the month following the 12 previous months in which the turnover exceeded the threshold.
There is also an immediate requirement to notify if it is known that the turnover will exceed the threshold in the next month: if a haulier starts trading on the first of a month and knows he would exceed the threshold before the end of that month, he is obliged to notify Customs immediately, Where notification is not made to Customs at the correct time there is obligation to pay VAT on the transactions despite not having charged the customer.
Registration should be made if a going concern is taken over and the previous 12 months indicates a turnover greater than the threshold—registration is obligatory
Requirement to keep Records
Every registered trader is required to keep books and records sufficient to enable an Inspector to satisfy himself that the correct amount of tax has been accounted for_ Customs is not empowered to lay down how books and records should be kept. but if advice given by it is not taken, it may be the case that an assessment will be made, in which event it then becomes an obligation of the Taxpayer to prove Customs wrong.
Rendering of returns
Once registered for VAT the taxable person must render returns of value added tax to the Controller at Southend—usually quarterly or monthly. All returns must have reached the Controller on or before the last day of the month following the accounting period. Failure to do so will mean a surcharge.
Notification of errors If after making a return an error is discovered and the net error is greater than £2000, Customs and Excise must be formally notified of that fact. Failure to do so could result in a penalty and interest. Burden of proof
When Customs and Excise issues an assessment which is disputed, the burden of proof is not upon C&E, it is required of the taxpayer.
Powers of Customs
Customs and Excise have extraordinary powers, such as will require the tax payer to produce any book, invoice, bank statements and profit and loss accounts. Most of the time tax payers will produce such documents as a matter of course but if such requests are resisted, Customs does have the power by way of written notification to demand production.
Decisions made by Customs and Excise If Customs makes a decision, or gives a direction, it must, upon written request, give that decision in writing, and the name of the person giving that decision must be disclosed. Where a decision is unfavourable, the Commissioners must reconsider it, but only where facts not previously considered are put forward. The ultimate remedy to any disagreement is the right of appeal to a tribunal.
Other obligations of customs and excise
Obligations are not all one way The assessments referred to above must be communicated to the tax payer within a statutory time. Usually this period is one year from the date when the Commissioners had information in their possession, sufficient to make the assessment, or within two years of the relevant accounting period. (Customs has been known to be late in making an assessment, and as a result has been obliged to withdraw it) Additionally, where assessments are concerned. C&E is required to demonstrate how it has arrived at its figures. Customs is not required to defend an assessment, but it is obliged to explain both how and why the assessment is raised. It then becomes the responsibility of the tax payer to prove the Commissioners' contentions incorrect.
11 by Brian T Corbould In subsequent features the spotlight will he on the legal powers of VAT inspectors,when the Vatnuin visits; and penalties and appeals.