I was interested to note a recent article that flagged up the disallowance of VAT input tax if a supplier’s unpaid bill was more than six months old. This would seem to be the flip side of VAT bad debt relief, that output tax paid to HMRC, on invoices that are not settled by customers after six months, can be recovered.
I am sure that there are many such “flip-side” tax issues, but it would be interesting to be a fly on the wall when your staff are explaining these matters to clients? Are they getting both sides of the story?
Very often it is the fine print that catches us out. We get the gist of the main thrust of arguments, but overlook the closing remarks that can make all the difference to client’s tax affairs.
In the above example, a client using the standard VAT accounting model would happily adjust their VAT return for sales invoices overdue for payment for more than six months. After all, this is a positive contribution to hard-won cash flow. But if they were not informed of the flip-side, that input tax on suppliers’ invoices more than six months overdue for payment also need to be adjusted, this may leave them vulnerable to later adjustments for VAT errors, and penalties and interest.
Our company, Informanagement, provides an inclusive tax update process for practitioners, we aim to provide both sides of the story in appropriate cases. If you would like to see how our online services could help you and your staff keep ahead of changing circumstances, and communicate these to your clients and prospects, contact us any time for a demonstration.