Construction companies and individuals with an annual turnover of up to £150,000 are eligible for HMRC’s flat rate VAT scheme designed to save money and make bookkeeping easier for small firms.
Changes to the scheme were made last year to combat abuse, yet Hudson Contract is aware of companies acting as tax specialists approaching clients and operatives promising large payments from HMRC if they use their services to prepare and submit a back-dated VAT claim.
“As always, the old saying ‘If it sounds too good to be true then it probably is too good to be true’ applies,” warns Hudson Contract Senior Accountant Marc Chapman. “From what I’ve seen, most of the VAT in these claims is due to HMRC, and once the so-called specialists have taken their cut, not much is left, with some even receiving bills for the privilege! Even worse, when HMRC scrutinise the claim, if they find any errors in your VAT calculations, they could impose penalties and interest, so the claim could really backfire. We advise our clients and operatives to steer clear of any firm that promises to make them money by reclaiming VAT on their behalf.”
Those who are wondering whether to stick to the flat rate scheme beyond April, when an initial discount expires, should speak to their usual financial advisers.
VAT will become more complex for the construction industry from October next, with HMRC introducing a ‘domestic reverse charge’ which is designed to combat fraud. “It’s a good idea to discuss this with your accountant sooner rather than later, especially if you rely on VAT to assist cashflow,” Marc Chapman advises. “HMRC have pledged to give one year’s notice of the precise changes, so we will send our clients further information later this year.”
Senior Accountant, FCCA MAAT, Hudson ContractMore from this expert