100K Back Vat due - help!

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roadrunner

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One of our suppliers rang us this morning saying that they discovered that they had not been charging Vat on their Invoices and that now they have to issue us with an amount of €100K vat due going back on Invoices to 2004. Our cashflow at the best of times is severely restricted - this would casue major problems. Their FC said the might be able to spread amount over a few months & we could claim back on our Vat return.
What is our postion here - do we have to pay this Vat?
 
With respect if you are running a business that is big enough to employ a Financial Controller, you should be getting your own professional advice on business issues such as this?
 
ubiquitous said:
With respect if you are running a business that is big enough to employ a Financial Controller, you should be getting your own professional advice on business issues such as this?
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Yes all avenues of advice are being utilised including our Auditors - no harm in getting the informed knowledge of AAM formulites either!
 
paddi22 said:
Is it not the other company's financial controller he is talking about?
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Yes - I think it was.

Roadrunner - how were the invoices from the supplier presented originally? Did they include a VAT figure? If they did did you offset any of this against any VAT due from your customers when returning to the Revenue? Is the supplier an Irish company charging Irish Vat?

If the original invoices didn't include a VAT figure then maybe you should have queried it?
 
The original Invoices were on a proforma basis & charged Vat - afterwards they stopped charging Vat so it went unnoticed both by our auditors & theirs. Aside from rights & wrongs what can be done now - do we have to accept vat charges going back so long?
 
I find it hard to believe that neither you or your accountant didn't note the lack VAT on their bills. Either you were complicit in tax evasion or your supplier is trying to pull a fast one, having given you a proper invoice but then not passing on any VAT to the Revenue.

Did you receive proper invoices quoting VAT number? Did you charge VAT to your customers and offset the VAT paid to your supplier against this?

(Post crossed)
My understanding is that you have a VAT liability and are obliged to pay it. I'm sure you could bring your supplier to the courts for any further expenses caused by this but I'm sure that would be small beer compared to the VAT liability.

However surely you have probably paid Revenue this amount in VAT already and as such you could then simply offset it against what you have already paid but didn't need to at the time?
 
claim vat back at earliest possible time and leave the supplier wait a bit. Surely they do not expect immediate payment...... at least use 30/45/60 days. or pay some now and when you get your refund pay the balance.

it is only a timing issue isn't it? if so minimise the time between payment to supplier and receipt from Revenue.
 
NB - I am not an accountant or a Tax Lawyer

My opinion based on my experience is that you will be liabel to pay the VAT on any invoices where the VAT amount was 0.00 - VAT is a tax due to the Revenue and VAT registered businesses are merely the collectors of the VAT.

However, if you haven't offset the VAT charged to date then you should be able to offset it once charged.

Post crossed - I agree davecork's approach seems the most sensible
 
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roadrunner said:
Yes good advice there from davecork - a lot more helpful than Howitzers smug cynical views.
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Howitzer said:
However surely you have probably paid Revenue this amount in VAT already and as such you could then simply offset it against what you have already paid but didn't need to at the time?
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Seems very similar to davecorks advice.

The fact that your bills were proforma and the subsequent omission of VAT in future bills was not outlined in your original post. You can only comment on the information posted.

Cynicism on tax related threads is usually well justified, I'm still sure clear how your accountant missed the subsequent lack of VAT charges.
 
efm said:
NB - I am not an accountant or a Tax Lawyer

My opinion based on my experience is that you will be liabel to pay the VAT on any invoices where the VAT amount was 0.00 - VAT is a tax due to the Revenue and VAT registered businesses are merely the collectors of the VAT.

However, if you haven't offset the VAT charged to date then you should be able to offset it once charged.
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Yes thats the redeeming part of the situation - we wern`t charged Vat on these invoices so we can recliam any that is now charged.
The problem is timing of repayment of vat;as I`ve said we struggle quite a bit with our cashflow. The other element is - would it trigger a revenue audit to have one substantial vat reclaim amount like this?
 
roadrunner said:
The other element is - would it trigger a revenue audit to have one substantial vat reclaim amount like this?
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Well if the first time the Revenue know anything about this issue is a claim for 100k refund then possibly!

I would assume that you should make contact with the revenue to explain the situation to make sure you comply correctly and that they are aware of why you are making abnormally large reclaims - and make sure you do so in writing!

As an aside - I would question why your auditors failed to notice this issue - surely this is one of the reasons for having auditors (I know I know I'm living in dreamland!)
 
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efm said:
Well if the first time the Revenue know anything about this issue is a claim for 100k refund then possibly!

I would assume that you should make contact with the revenue to explain the situation to make sure you comply correctly and that they are aware of why you are making abnormally large reclaims - and make sure you do so in writing!

As an aside - I would question why your auditors failed to notice this issue - surely this is one of the reasons for having auditors (I know I know I'm living in dreamland!)
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Yes - speaking to the suppliers FC, the auditors were mentioned alright!
Suppliers F.C have contacted revenue & likewise we will be contacting them as well, verbally & in writing.
 
efm said:
Well if the first time the Revenue know anything about this issue is a claim for 100k refund then possibly!

I would assume that you should make contact with the revenue to explain the situation to make sure you comply correctly and that they are aware of why you are making abnormally large reclaims - and make sure you do so in writing!
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I have heard it said that the selection process for Revenue Audits is automatic and that correspondence to explain particular trends etc is useless in averting an audit.
efm said:
As an aside - I would question why your auditors failed to notice this issue - surely this is one of the reasons for having auditors (I know I know I'm living in dreamland!)
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Most companies nowadays are audit-exempt. Audits are in any event of limited use in detecting irregularities of this nature as they are predicated on reviewing sample data. As such having an audit done will increase the possibility of any such irregularities being found but it will not guarantee this.
 
ubiquitous said:
I have heard it said that the selection process for Revenue Audits is automatic and that correspondence to explain particular trends etc is useless in averting an audit.
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Yes I have heard something similar but I was under the impression that Revenue would still have some sort of "manual" audit trigger if somebody saw something that they thought was odd and couldn't see an explanation for it.

ubiquitous said:
Most companies nowadays are audit-exempt.
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Good point - particularly since they raised the exemption threshold in the previous budget

ubiquitous said:
Audits are in any event of limited use in detecting irregularities of this nature as they are predicated on reviewing sample data. As such having an audit done will increase the possibility of any such irregularities being found but it will not guarantee this.
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Again I agree but would an auditor be expected to check some key figures? ie sales, corporation tax, VAT
 
efm said:
Yes I have heard something similar but I was under the impression that Revenue would still have some sort of "manual" audit trigger if somebody saw something that they thought was odd and couldn't see an explanation for it.
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Indeed they probably have - the opposite would not make sense.

efm said:
Good point - particularly since they raised the exemption threshold in the previous budget
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At the risk of being ludicrously pedantic, the audit exemption threshold was raised by the enactment of the 2006 Companies Act, not the Budget or Finance Act.

efm said:
Again I agree but would an auditor be expected to check some key figures? ie sales, corporation tax, VAT
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Indeed, but again you are back to the question of the effectiveness of audit sampling and testing. It is impossible to give a 100% guarantee that audit tests, even when properly performed, will reveal all oddities and irregularities.
 
Soft advice being given here. In all probability you will have to pay the VAT. However there is no way you should pay any of it until you get your refund from the revenue. This could take a long time as you will, dependant upon your turnover and past history, almost certainly be audited. This will entail extra costs in small additional revenue audit take and professional advice and staff costs to deal with the audit - who pays for this. I would be approaching my supplier questioning them if you should deal with them again and I would look for every discount going for the inconvenience that they are causing you. As regards your own bookkeeper, accountant and auditor I woudl be asking them what are they at? You are paying them to handle these matters and large errors like this should have been spotted. Again especially with your accountant/auditor I would be looking for some compensation. At the very least no increases for a few years!!
 
ubiquitous said:
At the risk of being ludicrously pedantic, the audit exemption threshold was raised by the enactment of the 2006 Companies Act, not the Budget or Finance Act.
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Really? I thought it was through an ammendment to the [broken link removed]

Ha! - Pedantic right back atcha!
 
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