A recent case has again thrown up an issue upon which HM Revenue & Customs has generally been quite relaxed in the past, but perhaps indicates a change of attitude (possibly linked to the need to increase the amount of VAT collected).  The case concerned purchase invoices made out to the names and addresses of in various “aliases” (as they were described in the Tribunal) of the taxpayer.  Whilst the case may well turn on its own facts, and of course, we all know that a decision of the First Tier tribunal does not create VAT law, it could well highlight an issue for businesses using trading names (as indeed Covertax does!), and having more than one trading address (as indeed, Covertax also does!).

Upon registering for VAT, the second box on the form is for the trading name of the business – indeed the question asks for “a trading name”, and I know that the norm is to include a single trading name in that box.  Additionally, there is only one box for the address of the business, and this is normally the “Principal place of Business”. This is most simply stated being the place where purchase invoices are received and from where sales invoices are issued  - actually, this is at variance to the EU Law concept of “Fixed Establishment”, which I know causes some problems for businesses ordering goods from another member state where the address shown on the VAT registration certificate does not agree with the address at which the customer wishes to receive the invoice.

I would like to say that this is only a theoretical problem, but the recent case demonstrates that it is not, and I have, in practice, had to deal with one instance this year where the officer initially sought to disallow purchase invoices where the name and address did not agree with that on the certificate of VAT registration – I was successful.

So what can you do to protect yourself?  Well that depends on whether you perceive that there is not a real threat, which is a position businesses assuming that the UK VAT regime is very practical, and the officers open to discussion and agreement, could well take, or whether, at the other end of the scale you wish to take all action possible to prevent problems in the future.  Whilst experience tells me that most businesses would not take the former position, the majority would still seek to cross that particular bridge when they came to it (which could be too late if a hard line is taken by HMRC).  Accordingly, the first step, which is a reasonable one, would be to ensure that all purchase invoices are addressed either to the business, or to a recognised trading name of the business, and at a recognised trading address – invoices addressed personally to directors, for example, or addressed to the home address of employees, partners or directors, should be filtered out (with the possible exception of travel and subsistence expenses, which is of course a whole new subject in itself).  You might then consider producing a list of all trading names and addresses of the business and submitting that in writing to HMRC – this does assume that HMRC would put this on file, of course, and then take notice of it upon an investigation.

A sledgehammer to crack a nut? Possibly.  However, if as result of a VAT inspection you have to go back over four years of invoices to justify your position to HMRC, or go back to suppliers asking for invoices to be reissued in the correct name and address format, your future administrative costs could be substantial.

If you require more specific information contact me at steve@covertax.co.uk or via Strong & Herd LLP and I’ll be happy to assist further.  Just let me know you read this article on the Strong & Herd website.

Steve Botham Director Covertax – Chartered Tax Advisors
Website address http://www.covertax.co.uk


Written on 22nd August 2013 by Steve Botham, S&H LLP Associate 

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