please advise if action by HMC&E is legitimate

[russell.s]

I am in an IVA and have been just coping with the payments for 1yr. At the same time I am developing a new business in the motor trade.
I have been waiting for an overpaid VAT refund of £1200 but have discovered that Customs & Excise have sent this to my IVA Supervisor.(I was not notified!).
I have strongly objected to this, to both parties, because this money is already allocated for VAT on new stock that I have needed to purchase.
Can you please advise if this action by HMC&E is legitimate and how should I proceed?

[MelanieGiles]

Hi russell.s and welcome to the forum

Is the VAT refund a post-IVA refund? If so, and it is due in the normal course of trading, your IP will need to return the money to you.

[russell.s]

Thanks very much Melanie for your encouraging reply.
All of the VAT refund relates to POST-IVA trading.

I will talk to my IP about this but so far they are deliberatig.
Presumably, I will have to challenge this further, in which case, are you please able to suggest a procedure?

[MelanieGiles]

I think that common sense will prevail, as your IP will know that this money is required in the normal course of trading and is not defined as a windfall.

[russell.s]

WOW!! what a lightning response.
Thanks very much and many thanks to this Forum.

I will proceed as you have suggested.

[ianmillington]

Just one point here.

As you are VAT registered there are complications as to how VAT works. The net effect is that there should be neutrality when it comes to VAT on the IPs post-approval fees. Typically the procedures should be as follows:

1. IP does bill and draws fees from IVA fund including VAT
2. IP sends you the bill and you recover the VAT element in your next VAT return
3. On receipt of repayment of VAT from HMC&E (or deemed repayment by way of the reduced payment you make on submission of the VAT Return) you reimburse the IVA fund with the VAT element of the IPs bill.

Whilst I note that HMRC have probably fouled up and paid the Supervisor is it possible that he is recovering, for the fund, the VAT element on his fees? If so, have you been provided with invoices so you can submit claims to HMRC?

Sorry if this sounds complex, but it is.

Ian

[MelanieGiles]

Ian

HMRC will no longer wear the claiming of input VAT on IP fees - even for sole traders! I had an argument with them a couple of years ago, and the produced the relevant section of the Finance Act which covered this.

[ianmillington]

Interesting! I consider any day in which I don't learn something to be a day wasted! Thanks Melanie[:)]

Russell, please disregard my post

Ian

[russell.s]

Hi Again.

Is this topic still open for further advice on the VAT refund please?

[Viki.W]

Hey Russell, there is a meeting tonight so it's a little quiet, I'm sure one of the experts will see your post, it's still open so ask away. Viki X

[russell.s]

Hi Viki

Thanks for your post - I wasn't sure how these things worked.
Sorry for the delay replying - must have had a big Sunday lie in.

My further query: -

After some persuasion I have at last got the £1200 back from the IP, but they say that this is a 1 off concession and that any future payments will not be returned to me.
My concern now is what other assets, built up by my new business, may be under threat during the IVA and then post IVA.

I am wondering if I was poorly advised and should have taken bankruptcy, particularly because I am not a home owner.

[Viki.W]

Hey Russell, your post is back at the top now so an expert will help you shortly. Viki X

[MelanieGiles]

I do not understand this issue. Are you saying that you have been submitting VAT returns which are showing refunds due to HMRC and your IP has been pocketing the money? If so this is ridiculous as you need that money to be reinvested back into the business. Can you please clarify exactly what the refunds are for.

[ianmillington]

If they are normal refunds as a result of day to day trading, then they should be paid direct to you and I think you should take it up with HMRC and get them to amend their records. They should not be making refunds to the Supervisor. You are the registered person, not the Supervisor.

So far as the question of poor advice is concerned, because of restrictions imposed by bankruptcy on business activities, that procedure is generally speaking the kiss of death to any business, if that business involves buying and selling. From what you say the IVA is probably the mechanism that is enabling you to develop your new business whereas if you were bankrupt it would be difficult if not impossible.

Ian

[russell.s]

Hi Melanie and Ian

Thanks for your response, these are my normal quarterly VAT returns. Because I bought a lot of stock last quarter I was owed this VAT refund!
I have spoken to HMRC about this and they have told me the reason they paid it to my IP was because there is a clause in my IVA contract that says the money should go to them, which I argued against because I desperately needed the money to keep trading and to help my cash flow. This concerns me greatly as if this happens again it will cause me further problems.
I am trying to get a copy of the contract as i don't have one to hand.