Q:
I submitted my 1st VAT return in Feb 09 and so far have not been paid for that return, an officer called me claiming to want to visit to verify the claim, when he did get here he was accompanied by another officer, they were here in total 3 hours askign allsorts of questions.
The officer in question has over the past few weeks asked me to supply evidence of how my business was funded albeit he as seen stock, purchase invoices etc. When i have spoken with other businesses they tell me they didnt have to go through any of that and that their 1st claim was straight forward. My 1st claim was a repayment for £12,000.
Can someone tell me if it is correct that he needs to see how my business was funded? should i submit another return once its due?
i am now at wits end and i fear that unless i get that refund my business will fold.
A:
A small proportion of VAT repayment claims are chosen at random for more detailed inspection. In some cases it’s the size of the claim (£12k is quite high for a first claim) or it might be that you haven’t started making any sales yet, or that your sales are all zero-rated so that you’ve not paid any output tax on your return. Sometimes it might be something as simple as a posting error on the return so the figures don’t add up properly
Whatever the reason for the query, they are entitled to carry out the review and the best way of avoiding any further delay is to co-operate and supply the information they request.
Chances are that your return was picked out for a very simple reason and perhaps it’s taken a while because the officer who has to authorize the repayment is being a bit over-conscientious in wanting to check every single point. But usually, these things are dealt with quickly as HMRC might end up having to pay you extra money as a repayment supplement (see below for further info on this) if they delay the repayment without reasonable cause.
Obviously I don’t know why they have asked about your funding arrangements. But they are allowed to look into any issues relating to supplies made to (ie your purchases and expenses) and supplies made by (ie your sales) the business. So that could include how you have funded the purchases. It doesn’t seem to be an unreasonable request – for example if you had a loan from a family member or the bank, just tell them the facts and if possible, show them some documentary evidence, eg correspondence with the bank.
However, the rules aren’t all in their favour. They are normally required to make repayments within 30 days of receiving the return or pay a supplement of the greater of £50 or 5% of the amount claimed. However, the 30 days doesn’t include the time it takes them to carry out “reasonable enquiries” which typically would include carrying out an inspection or requesting further information. So until their “reasonable enquiries” are completed, the 30 day clock is put on hold.
This subject is explained in further detail in the VAT Notice “Treatment of VAT Repayment Returns and VAT Repayment Supplement” which is here http://tinyurl.com/delgf4 on the HMRC website. It’s a short notice and should take about 10 minutes to read through.
It sounds as though they are simply following normal procedure for verifying the claim and their queries are “reasonable” in the circumstances.
I don’t know all of the facts of your case but the best way of speeding things up is to give them the information they have requested. And at the same time, explain how important it is that you get the repayment quickly or the business may fold. The officer may simply not realize how urgently you need the repayment, so make the point that you’ve responded to all of their queries and that you expect the repayment to be made without any further delay.
I would suggest speaking to the officer first by phone if possible and then writing so that there is a proper record of your concerns on file. Hopefully this will speed things up.
If they still won’t authorize the payment, they should give you a reason in writing and if you disagree with their reasons, there is an appeals process which is explained in the Notice. But I hope that things don’t get that far and you get your repayment soon.
And yes, even if you haven’t received the first returns’ repayment by then, make sure that your next return is submitted on time so taht they don’t have any other reasons to delay the initial claim.
Marie