VAT- more information required

[PaddyHorsington]

Hello

 

I'm hoping someone might be able to help with the following:

 

I help my brother with his VAT, we registered him six months ago and he submits his return quarterly. He buys and sells a small amount of machinery and has bought 10 items recently paying VAT, each approx £1k each (inc VAT). He has only sold about 5 of the machines and charged VAT selling them. We have stated this in the two quarterly returns filled out.

 

Our recent claim back for VAT was approx £1k.

 

The HMRC have contacted us asking for more information and have said that they would write. I'm  anxious as to what more info they require? We feel that we have done everything by the book and kept invoices (in and out going). Should we have saved any other information? 

 

Does anyone know what we might have done wrong/ not provided?

 

My conerns are that he has sold some of the machinery without charging VAT as at the time of purchase he was not VAT registered- is this is a problem and should he have charged VAT? He obviously hasn't tried to claim back any VAT on these purchases. 

 

Thanks for any help in advance.

 

Paddy

 

 

[Chalky78]

Hi Paddy,

 

This is pretty standard if you have a refund in your first few returns. HMRC are checking that the claim is valid and you are bookkeeping correctly. They will want to agree the claim to invoices. They will ask to see the invoices that make up the claim, and will probably be happy with that if they all agree. They may also check that any VAT reclaim on fuel have been carried out correctly.

 

There is not a problem not including VAT on purchases and Sales before he was registered as long as sales hadn't gone over the VAT threshold before you registered.

 

Hope this helps, but if you have any other questions let me know.

 

Dave

[PaddyHorsington]

Thanks Dave, that's really reassuring. It all seemed pretty simple just keeping invoices (cost and income). Just worried we had missed something. But if that's all we're likely to need then shouldn't be a problem. 

 

Paddy

[PaddyHorsington]

Sorry Dave forgot to ask, what is different about fuel? I've just been using figures on VAT receipt.

[Chalky78]

If your paying for fuel, and there is a private element to the use you need to put a fuel scale charge through. 

 

The fuel scale charge is dependent on the co2 emissions of the car. If there only a few receipts going through it is generally not worth claiming as it will be covered by the fuel scale charge. It is often better not to put fuel through the business and claim the 45p mileage rate.

 

You can find out more here:

 

https://www.gov.uk/reclaim-vat/cars

https://www.gov.uk/fuel-scale-charge

 

Dave

[PaddyHorsington]

Thanks Dave.

 

There was only a couple of fuel receipts. So as you say a bit pointless claiming. All I did was fill up and keep receipt when driving to view purchases, so easily justifiable along side invoices. Should I document this when replying to hmrc- or just leave it to avoid wasting time over a small amount? 

 

Paddy

[Chalky78]

I'd leave it to see if they request anything. It is probably worth working out your mileage for the trips as back up if they do ask.

 

Dave

[PaddyHorsington]

Thanks guys, you were right, no dramas and all sorted now. They did query the fuel and I ended up saying it was too complicated to calculate so could they leave it off. They got a touch upset about this- but I hope/ think it was ok as we were only talking £20-£30 in the end.

 

Please could you help me with the following questions:

 

If i'm VAT registered do I need to be charging this on my residential rent?

 

When it comes to self employed tax return, do I need include the incomes and outgoing with VAT or do I use the figures without VAT?

 

Thanks for your help.

 

Paddy

[Chalky78]

Hi Paddy,

 

Residential property is exempt of VAT so you do not need to charge VAT on your rent. However this means that you can't re-claim VAT on any costs relating to the property rental also. If your business is therefore just residential property rental you will not be able to claim any VAT back, and if you have other VAT-able trade you may have to use the partial exemption method of calculating your VAT.

 

With regards to your personal tax return, you will enter the figures without VAT depending upon what you have claimed back above.

 

Hope this helps, but VAT can be a bit of a minefield.

 

Thanks

 

Dave