VAT Penalty in Refund situation

HcksawJimDuggan · 06-01-2016 10:52AM #1

Hi Folks,

Just checking to see if anyone has come across a similar situation:

Start up company filed first VAT return which consisted only of VAT input credits and as such was due a refund. Revenue requested a copy of invoices prior to issuing refund. One of the invoices on which VAT had been claimed was from the previous company operating in the Premises for Fixtures & Fittings and as such no VAT should have been charged under Transfer of Business relief. VAT return has been amended to adjust for incorrectly claimed VAT and return is still in a refund position. However, revenue have indicated they will be charging a 5% penalty on the incorrectly claimed VAT even though the refund had yet to be issued. Seems a bit extreme to me. Is there anything in the legislation that penalties can only be charged where there is a liability due or am I clutching at straws?

Cheers,
Hcksaw.

barneystinson · 06-01-2016 11:55AM

HcksawJimDuggan wrote: »

Hi Folks,

Just checking to see if anyone has come across a similar situation:

Start up company filed first VAT return which consisted only of VAT input credits and as such was due a refund. Revenue requested a copy of invoices prior to issuing refund. One of the invoices on which VAT had been claimed was from the previous company operating in the Premises for Fixtures & Fittings and as such no VAT should have been charged under Transfer of Business relief. VAT return has been amended to adjust for incorrectly claimed VAT and return is still in a refund position. However, revenue have indicated they will be charging a 5% penalty on the incorrectly claimed VAT even though the refund had yet to be issued. Seems a bit extreme to me. Is there anything in the legislation that penalties can only be charged where there is a liability due or am I clutching at straws?

Cheers,
Hcksaw.

Are you talking about more than 6k in tax? No penalty should apply if it's less than 6k (assuming no deliberate default).

HcksawJimDuggan · 06-01-2016 12:43PM

The VAT incorrectly claimed was €8K. The reclaim was a genuine mistake by the bookkeeper who was not aware of Transfer of Business Relief and had received a VAT invoice from the company selling the equipment.

I assume since it's over €6K the penalty will have to be paid.

Alan Shore · 06-01-2016 09:43PM

HcksawJimDuggan wrote: »

The VAT incorrectly claimed was €8K. The reclaim was a genuine mistake by the bookkeeper who was not aware of Transfer of Business Relief and had received a VAT invoice from the company selling the equipment.

I assume since it's over €6K the penalty will have to be paid.

Did you pay the supplier the VAT? Are they going to give it back off them? Are they going to get it back from the Collector General.

Did you buy the business from them or just the fixtures and fittings?

Do neither of you have an accountant?

http://www.revenue.ie/en/tax/vat/leaflets/transfer-business.html#section2

HcksawJimDuggan · 07-01-2016 10:27AM

Yes the supplier was paid VAT after providing a VAT invoice. They are currently attempting to get the €8K back from the supplier but it may be difficult as the reason they ceased trading was because they had incurred significant losses. Not sure if that supplier even paid it over to the Collector General.

Just the fixtures and fittings were bought from them. New business will be operated from same leased premises but there was a significant period in between the old company ceasing and the new company beginning to trade.

Accountant was only consulted after VAT returns were filed & queries by Revenue. The bookkeeper received a VAT invoice and incorrectly paid over the VAT as she was unaware of Transfer of Business Relief.

Alan Shore · 07-01-2016 08:15PM

HcksawJimDuggan wrote: »

Accountant was only consulted after VAT returns were filed & queries by Revenue. The bookkeeper received a VAT invoice and incorrectly paid over the VAT as she was unaware of Transfer of Business Relief.

Famous last words.

Are you in the same business as the previous tenant/supplier?

Was there any purchase agreement for the fixtures & fittings, was there any other items mentioned in the agreement?

Did your accountant argue that TOB does not apply to the purchase of fixtures only?

HcksawJimDuggan · 08-01-2016 10:23AM

Ya its the same business.

No purchase agreement drawn up and it was just the fixtures & fittings purchased.

Not sure in what part of TOB relief it states that it does not apply to the purchase of fixtures only. An updated ebrief was issued by revenue at the end of November and after reviewing it I think TOB relief does apply in this instance.

Alan Shore · 08-01-2016 10:32AM

We will have to agree to differ on that point. On that ebrief:

What are transfers of business assets qualifying for the relief?

2.1 VAT law refers to the transfer of a totality of the assets, or part thereof, of a business. Where a business is transferred, the assets that may be transferred can normally be sub-divided as follows:

premises
employees
plant and machinery
stock
goodwill
intellectual property
debtors

The classic transfer of a business as a going concern will include the transfer of all seven. However, some businesses may not have all seven. For example, there may be no plant, machinery or stock where the business is a service business. The Courts have ruled that the relief does not cover the transfer of assets alone. The transferred assets must constitute an undertaking, or part thereof, capable of being operated on an independent basis.

HcksawJimDuggan · 08-01-2016 11:18AM

That is a strong case for argument you have there.

The only thing is the business wasn't transferred as a going concern. The old business was shut for a number of months prior to the commencement of the new business which seems to be included in the revised version of TOB relief. In addition to the fixtures purchased, a substantial upgrade of the outlet was completed prior to the new business commencing to trade so not sure if we could use this to argue our case.

By any chance, would you know what the name of the case is where the courts have ruled on the relief so I can see if there are any similarities to this case?

Cheers,
Hcksaw.

VAT Penalty in Refund situation

Comments