Destroyed VAT records

[weegirl]

Hello, I have taken on a new client who has been flagged up for a VAT and Self Assessment inspection. The problem is, he had a bad flood during the winter months, as a result, he lost a lot of his supplier invoices. He can prove the flood happened as he has the repair invoices for the plumbing and building work.

We are trying to track these down, but it is not proving an easy task. Where does he stand if he genuinely cannot obtain copies of these?

I have managed to obtain copies of his bank statements, customer invoices from Quicken, credit card bills, but it is the supplier invoices that are the problem.

Thanks

[pawncob]

How many suppliers does he have? Any supplier should be able to provide copies for account customers, so approach them first.
Cheque/DD purchases can be determined from bank statements/cancelled cheques (depends on the bank, whether these are available)
If he buys cash items on an irregular basis, it may prove impossible to obtain these, but if he has them recorded in his prime records, HMRC should accept this as evidence, notwithstanding the statutory position. As a fall back, previous years' invoices may provide corroborative evidence (assuming no dramatic change in turnover).

[weegirl]

He has worked with approximately 150 suppliers over the years, approximately half of which are USA/EU based. I have contacted them and requested copies, but he problem is that the inspectors want to see records from mid 2006, and some of these suppliers from that time are now out of business, some have moved, and some are just not bothering to respond.

Fortunately he is not a cash based business, and with the exception of a few small purchases, everything was purchased by cheque, credit card or bacs, and customer payments were received by cheque or bacs.

He doesn't mind taking the hit on the cash purchases, but it would bankrupt him if they disallowed all VAT on the missing records. I thought they would have had allowances in place for situations such as this, but am not sure how lenient they are with the recent changes.

We have made more than a reasonable effort to obtain copies of these documents, but will that be enough?

[wamstax]

Hi There I think that you can easily get round this by looking at the HMRC Statement of Practice of March 2007 see the following link http://customs.hmrc.gov.uk/channelsPortalWebApp/downloadFile?contentID=HMCE_CL_000502 where you should be able to download a PDF copy of the statement.If you look at Appendix 2 of that statement it gives you the questions to answer to see if you can claim the input tax without a valid notice.
Question 1 - clearly you have alternative documentation other than the invoice - possibly supplier statement it says but equally client could get paid cheque(s)
Q2 - Presumably client can tie up purchase for which not got invoice to a Vatable supply
Q3 - Clearly you would have cheque
Q4 - Tracking of supply should develop this question and general chat about business operations possibly
Q5- Contemporaneous evidence of supplier would be needed
Q6 - need to prepare client for these questions

Clearly all is not lost and with proper preparation and some out of the box thinking (including letting them see your efforts to obtain duplicates) you should see the client through. Look out for the inventive Enquiry Officer who might ask the odd unprepared question just in case your client was having them over.

OK hope that this assists you and I am always up for helping other professionals (and clients of course) on a fee basis if you find my advice helpful

[wamstax]

If you have any difficulty with the link the Statement of Practice of March 2007 was entitled "VAT Strategy: Input Tax deduction without a valid VAT notice" and you can google it with "VAT Strategy Input Tax without valid VAT invoice" There was a previous one in 2003 but I think the 2007 one fits best and includes a decision flow chart at appendix 1

Feel free to give me a ring on 07751720507 if any problems

[weegirl]

Hello again, thanks for your advice.

The inspection went okay, the inspector was understanding and because there was very little cash going through the business, he is willing to accept what I have managed to gather up plus the bank & credit card statements. Not sure about the cash petrol recipts yet though, but these do not amount to much.

Thanks again

[wamstax]

No problem and glad to have helped