The perils of ignoring VAT Assessments

After burying their head in the sand for many years, I was introduced to a client recently who had been made bankrupt by HM Revenue & Customs for unpaid VAT Assessments and surcharges.

The individual had not filed any VAT Returns or paid any VAT at all for many years.   HMRC had therefore issued estimated quarterly assessments, and surcharges, all of which eventually accrued total debts in the region of £160k and bankruptcy proceedings were inevitable at this stage.  This was where we came in, and introduced to the individual.

After discussions to fully understand the business (the VAT treatment of sales in this case were not straightforward) it was necessary to look again at the VAT periods concerned and determine the true extent of the liability.   Our team was able to conduct a full review of the VAT going back almost a decade.

After revising the Assessments, and adjusting the surcharges, the review revealed that HMRC had over assessed the individual’s VAT position by somewhere in the region of £65k.  By conducting a thorough review, we had effectively reduced the overall liability to somewhere in the region of £95k.

The individual would still have faced bankruptcy proceedings for non-payment of this lower liability, but we have ensured, that they will clear their debts many years earlier than they would, had they simply accepted HMRC figures without question.

Many Assessments are issued each year when VAT Returns are not filed, but you should not simply accept them as correct as highlighted in this case.   By ignoring the situation, this individual had compounded the problem, by taking advice earlier this could have been avoided.

Anyone requiring VAT advice can contact Brian Gooch who heads our VAT Advisory services