Well I guess we’re all back to “normal” and perhaps feeling pleased to be back at the desk. I know I am. I enjoy the technical challenges of VAT and it’s good to get my brain working. And last week, I realized that even after 30 years working in VAT, every day is a learning experience.
To understand why, here’s a very familiar scenario for VAT consultants:
It’s about 4.30pm on a Friday afternoon and you’re looking forward to weekend after a long week of client work, marketing and remembering to do your time sheets.
Your phone rings and a voice at the other end says”our client is just about to complete on their property purchase/business sale/asset sale/supply agreement and we wondered if you would check out the VAT clause in the contract to see if we missed anything. I’ve just emailed you the relevant page so you can have a quick look for us”.
The VAT clause itself is pretty standard stuff and looks like VAT clauses in 90% of commercial or property transactions. Along the lines of the parties agree that the transaction is liable to VAT at 20% unless HMRC rules otherwise…...
But there are two problems with this situation. The first is sort of obvious; that the lawyers, tax partners, auditors, client etc should have taken advice about the VAT liability of the transaction at a much earlier stage in the proceedings. The contents of the VAT clause are really meaningless on their own. We can only ever give meaningful advice about any VAT issue if we know what’s going on. So if a client or a colleague or a solicitor wants to know whether they’ve got the VAT issues covered, the VAT consultant has to know who is selling what to whom, who is paying and how much – the basic commercial and legal facts. We can probably make positive suggestions that can help the parties deal with cashflow and other VAT issues such as whether there’s a transfer of a going concern, VAT invoicing and accounting and identify specific VAT issues that need to be addressed.
VAT consultants also have a responsibility to understand the commercial and legal issues – or we may give the wrong advice
When I left HMRC to join the accounting profession as a VAT consultant, way back in the 1970’s, I thought I knew about VAT. I thought I knew enough about the tax to be able to tell clients when they should or shouldn’t be charging VAT on their sales and whether they could recover VAT on their expenditure.
The first couple of years were a steep learning curve and a lesson in humility, as I realized how little I knew about commerce, business and the legal side of things. You learn these things by experience and realize that the most important issue isn’t what’s contained in the VAT clause, it’s what’s contained in the rest of the contract.
And I’m still learning. For example, over recent years, I’ve had to increase my knowledge about international terms of trade so that I can work with a couple of clients whose sales include FOB, FCA and other types of transactions that can affect the VAT liability of the sales, which has a significant effect on their cashflow and their overall profitability.
We’re all a bit responsible…
I guess it comes down to us all working together to get the best results for the client. If I want to help my client add value to their business by minimizing VAT costs and avoiding potential problems, then I have to take it upon myself to understand their business. If my client, or their accountant or their solicitor wants the best VAT advice – whether it’s a major transaction or day to day trading, then they have to remember to tell me what’s happening – and preferably not at the last minute!
And yes: Je suis Charlie
Dreadful events in France last week – there seem to be bad events all over the work all the time, but for some reason we seem to be particularly affected by the events across the channel last week. Probably because it’s our neighbour and a strong, democratic nation. Let’s hope it’s not a portent of more such attacks to come.
Marie
January, 2015