Expert VAT help needed please!

[dodobookends]

Hopefully there's someone who can answer this rather complex one for me...

A property owning company 'A' - VAT registered and property opted to VAT chargeable to commercial tenants - is refinancing their portfolio and the bank engages a surveyor to value the property before granting the loan. The valuer's fees include VAT and the bank takes money out of 'A's account to pay the fees.

The VAT invoice from the surveyor is addressed to the bank, however since the bank it exempt they cannot recover the VAT input tax.

The bank then sends an invoice for the full amount to 'A' but since the bank's charges are exempt their invoice is for the total sum, and 'A' cannot claim the VAT back as there is none to recover.

On previous similar occasions (and with another bank) the surveyor and bank have both agreed that the surveyor's invoice should be addressed to 'A' rather than the bank so that 'A' can ultimately recover the VAT.

This time the bank and surveyor refused to do this.

Does company 'A' have to suffer the full cost, or is there any way of recovering the VAT element even though the surveyor's fee invoice is not addressed to them?

Major disagreements at work and many ££££s involved..

It all hinges on whether it was a disbursement or not. Have a look at the HMRC guidance:-

www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers

If it was a disbursement, you can claim the input vat, if it wasn't a disbursement, you can't because you don't have a valid VAT invoice made out in the name of the vat registered trader.

I would have said no. Surely the bank is engaging the surveyor in order that it can perform its services to you (which includes having the property valued). Therefore it is part of the bank's cost of doing the business, not something that the bank is purchasing on your behalf.

I've not yet had sight of the documents. Also, I think that the bank didn't pay it and then invoice it, they took the money direct from 'A's account to settle the surveyor's bill, so I don't know whether it would be classes as a disbursement or not.

redhat the revaluation was for millions and part of the agreement was that 'A' would pay the fee.

The whole thing is clouded as we do the VAT return for 'A', but the negotiations with the bank were all handled via solicitors and a property management company on behalf of the business owner, and the property management company is adamant in insisting we can recover it, but they don't seem to be aware of the implications/penalties if it isn't allowable and it is picked up during an inspection. The VAT involved is a five figure sum so we cannot get this wrong!

The VAT involved is a five figure sum so we cannot get this wrong!

In that case, ask for a decision from HMRC - tell them the full facts and abide by what they decide.

Yes that must be the most sensible thing to do. Then you know for sure that you are doing the right thing.

Thanks, I did consider ringing, but sometimes if you do that it puts a little tick in their "shall we do an inspection?" box in their collective brain and we've already had two inspections of other subsidiaries in the group recently and I can't stand the prospect of another!

Fortunately for me it isn't my responsibility to make the final decision (thank God for that!), but I'm the one that usually sorts out VAT queries in the office and this has been really bugging me. We've already taken advice from our accountants who have said 'no' (and I agree with them) but the people who do the property management side are refusing to take no for an answer and won't accept what the accountants and we are telling them.

I think I'm going to have to ask the accountants to break the habit of a lifetime and put their instructions in writing. They are usually happy to give advice on the phone but are wary of putting things in black and white. I'd much rather err on the side of caution and not recover it.

Your accountants should be quite happy to give advice in writing. If they have a view they should stand by it. Only giving advice over the phone is a cop out.

Your accountants should be quite happy to give advice in writing. If they have a view they should stand by it. Only giving advice over the phone is a cop out.

But of course, expect to pay for them to put it in writing, whereas they may be happy to give a quick few minutes of advice without charge by phone.

I work in a large accountancy practise and everything must go into writing. But I guess that's just all the red tape of being a large firm.
The fact I got a little excited about a VAT query has just cemented where I think I'd lie to specialise

We pay them an annual (large) fee anyway - we've often found that they aren't all that keen on backing up what they tell us over the phone, and we suspect that it's because they don't want a paper trail and are side-stepping liability!

Cop-out indeed.

More likely that they want to avoid having to book a lot of time down that the client won't be happy to pay for. Writing a tax report takes time. Nothing to do with a cop-out. It's irrelevant how much you're paying for other services. If you make it clear you're happy to pay for a written report, then they'll be happy to do it.

It's like me agreeing a price for a decorator to do my lounge and then expecting them to paint the kitchen ceiling for the same price. Or booking my car in for a new exhaust and expecting them to change the spark plugs for free.

I take your point, but all we need is a reply to an email asking "XYZ has happened, can we recover the VAT or not?" and that wouldn't take them long as they've already given us a verbal answer!

To expand on your analogy, it's like agreeing a price for your decorating and them giving you the figure verbally and also by email/post.

I take your point, but all we need is a reply to an email asking "XYZ has happened, can we recover the VAT or not?" and that wouldn't take them long as they've already given us a verbal answer!

No it isn't. A written piece of advice that a client intends to rely on needs a lot more than just a few words on an email. A simple email line is no better for you than them telling you the same over the phone. There's no recourse to them if you're challenged and you've nothing to defend yourself against HMRC penalties. You may as well just make a file note yourself to note down what you were told if all you want is a quick email. Tax isn't like that - it depends on the detail. A quick email or phone call may well mean that you didn't give them all the relevant facts in the first place so their advice may still be wrong, but not their fault, your fault.

The whole point of reliance of an expert means that the client may well refer back to that advice in case of HMRC dispute, and may well be part of penalty negotiations if HMRC win that the advice was flawed. That means the accountant has to do a proper report, setting out the background facts as they understand them, setting out their advice and setting out their reasoning, i.e. references to legislation, HMRC guidance notes and/or case law. A proper report gives the client the opportunity to check what facts/detail was given to the accountant in the first place.

A written report will almost certainly get reviewed by a senior staff member too, as yet another check that it's right, so that's more time to charge.

There's absolutely no way I'd ever accept any liability nor responsibility for any "off the cuff" advice I gave a client verbally or by a quick email, and I make that absolutely crystal clear to them. If it's something important and if they want to rely on any advice I give, then it's the proper job with a proper report, or nothing. You'll find that most professionals will have that kind of disclaimer written into their terms of business - every firm I've ever worked in and every professional firm I've ever dealt with have something similar so everyone knows where they stand.

There's no way we in the office are prepared to accept the liability for the decision either - we aren't employees of the business. We are self-employed part-time freelancers (which is why I ended up posting the query here) and we are quite happy to take the accountant's verbal 'no' as an answer since it is more prudent.

However, the property management people are livid and are not accepting this, which is why we need some actual proof from the accountant that we can shove up their jacksies show them.

You or your client needs to pay for a proper, binding opinion. You can get that from the accountants or you can engage a VAT consultant/specialist. The alternative is asking HMRC for a ruling.

By the sounds of it, you don't want to take responsibility yourself and are wanting to pass the buck to someone else. The accountant likewise won't want the responsibility unless they're paid to do the job properly.

If you're self employed rather than an employee, you are in a bad position if your client doesn't agree with what you beleive is the right thing to do. If you believe you're right and your client is wrong, then you have to consider your position and also your legal responsibilities under the Money Laundering regulations, i.e. whether or not you should make a report to the relevant authorities. I'd suggest you contact your professional bodies's helpline and maybe also your professional indemnity insurance providers for advice if this looks to be turning into a dispute with your client.

It isn't an issue of me not wanting to take the responsibility, because it isn't me who presses the button and files the online VAT return. I don't actually have the authority to take the final decision anyway, so I'm not buck-passing or anything like that. As I've said, we in the office believe that we should be prudent and not recover it, and so does the accountant (verbally anyway!).

Quick update: the issue rumbles on and on...

However, no longer a problem for me or my colleague as we have both handed our notice in - and since there were only the two of us in the accounts office, the owners will now have to make alternative arrangements