Likely outcome to late deregistartion

[Kitty Kat]

The plot thickens...

I may be going over old ground, so bear with me

So the client traded happily till, say, the end of August 2011. It was then bought as a ToGC (specifically stated in the contract). However, the client then kept its registration going (and completed returns as needed) as a 'tidying up' exercise and because we are dealing with an HMRC enquiry on their behalf, plus doing their cessation accounts.

So the big question (as I see it) is, the client thinks they can keep reclaiming the VAT we charge (for the ongoing enquiry and the cessation accounts) provided they don't deregister. But they can't, can they? They haven't raised an invoice since September (the business was bought as a ToGC, how could they even if they wanted? They sold the entire economic entity surely?!?) so they have made no taxable supplies, so cannot reclaim any VAT.

Which seems unfair, if someone winds up their business on the 31st of December, puts down their pen and clears their debts, then we as accountants take 6 months to do the accounts (which we don't start until January, so no work done before they ceased), then raise the invoice in July, how could they recover the VAT?

As always I feel I am missing a salient point...

[Generix]

The plot thickens...

I may be going over old ground, so bear with me

So the client traded happily till, say, the end of August 2011. It was then bought as a ToGC (specifically stated in the contract). However, the client then kept its registration going (and completed returns as needed) as a 'tidying up' exercise and because we are dealing with an HMRC enquiry on their behalf, plus doing their cessation accounts.

So the big question (as I see it) is, the client thinks they can keep reclaiming the VAT we charge (for the ongoing enquiry and the cessation accounts) provided they don't deregister. But they can't, can they? They haven't raised an invoice since September (the business was bought as a ToGC, how could they even if they wanted? They sold the entire economic entity surely?!?) so they have made no taxable supplies, so cannot reclaim any VAT.

Which seems unfair, if someone winds up their business on the 31st of December, puts down their pen and clears their debts, then we as accountants take 6 months to do the accounts (which we don't start until January, so no work done before they ceased), then raise the invoice in July, how could they recover the VAT?

As always I feel I am missing a salient point...

I don't see why they can't recover the VAT.

In any case, had they deregistered then they could recover it via the post-deregistration input VAT form (I forget the number).

[Generix]

The ongoing charges relate to the taxable business that already occured. If the entity has an obligation to meet these costs then it can recover the VAT thereon.

[Kitty Kat]

The ongoing charges relate to the taxable business that already occured. If the entity has an obligation to meet these costs then it can recover the VAT thereon.

I'm aware of the post registration recovery form, but I thought/assumed it was where, say, someone did some work prior to deregistartion then sent the invoice after, making the tax point after deregistration, but the work before.

But regardless, if it is the case that work on the cessation accounts and enquiry would be recoverable for VAT, that's great! But leads to my next question: are we making things worse by not deregistering them, as we are allowing them to have non-chargeable periods instead of stopping them and making the post deregistration rules (and the form) kick in?

[Generix]

The ongoing charges relate to the taxable business that already occured. If the entity has an obligation to meet these costs then it can recover the VAT thereon.

I'm aware of the post registration recovery form, but I thought/assumed it was where, say, someone did some work prior to deregistartion then sent the invoice after, making the tax point after deregistration, but the work before.

But regardless, if it is the case that work on the cessation accounts and enquiry would be recoverable for VAT, that's great! But leads to my next question: are we making things worse by not deregistering them, as we are allowing them to have non-chargeable periods instead of stopping them and making the post deregistration rules (and the form) kick in?

Now that you mention that, I can't remember if the tax point has to be before the dereg date for the post dereg form........and my brain is too focused on trying to remember if I've packed everything for holiday and making sure I haven't forgotten to make any VAT returns etc. before I go....I'll trust that you've looked/will look that up.

In terms of making things worse, I'm a big believer in not deregistering until all costs are recovered, much rather do it that way rather than psot dereg form. So I would say no.

[Kitty Kat]

I think I'm missing a fundamental point

In my head, zero sales in a period means zero possibility of recovery (as there were no taxable sales, so deminimis aside, no recovery is possible). But can a purchase relate to a taxable supply in another quarter, thereby making it recoverable?

In which case despite there being no sales in the quarter, the expenses incurred relate to taxable supplies, so are recoverable?

The form specifically gives the example of a deregistration before the tax point, so I'm now clear on that point at least

[Generix]

In which case despite there being no sales in the quarter, the expenses incurred relate to taxable supplies, so are recoverable?

Yes

[Kitty Kat]

In which case despite there being no sales in the quarter, the expenses incurred relate to taxable supplies, so are recoverable?

Yes

I iz dum lol But less dumb than when I first came here, so progress is being made in the education of Kitty

Now stop answering my inane questions and go pack!

[Generix]

In which case despite there being no sales in the quarter, the expenses incurred relate to taxable supplies, so are recoverable?

Yes

I iz dum lol But less dumb than when I first came here, so progress is being made in the education of Kitty

Now stop answering my inane questions and go pack!

haha, happy to help in the further educating of Kitty

Mostly done packing, just need to get a few bits then am jetting off tomo...