Energy sector small businesses urged to check if they are eligible for refund of VAT overpayments
PUBLISHED: 13:59 09 May 2018 | UPDATED: 13:59 09 May 2018
Small businesses in the energy sector are being urged to claim potential VAT overpayments back before it is too late - after it emerged that they could have been paying too much tax over a long period of time.
James Shipp, partner at leading regional accountants, business advisers and financial planners Lovewell Blake, says that firms which chose to join HMRC’s Flat Rate Scheme could have been told to apply at too high a rate of VAT, thanks to a guidance notice issued by the Revenue which has now been judged to be unclear.
Mr Shipp, who is based at the firm’s Lowestoft office, said: “Many small businesses, and especially those in specialist sectors such as the offshore and energy industry, may have been paying a rate which was inappropriate for that sector.
“In those cases, it may be possible to make a claim to HMRC for any overpaid VAT – but there is a four year ‘capping rule’, so time is starting to run out in many cases.”
The Flat Rate Scheme was designed to simplify VAT for smaller businesses, who paid a flat rate, rather than recording expenses and recovering input tax. The rate applied varied from industry to industry – and it is the guidance notes which helped businesses decide on which rate to apply which have now been judged to be unclear.
The Flat Rate Scheme was overhauled in 2017, and many businesses are now applying the ‘Limited Cost Trader’ flat rate of 16.5 per cent, or have left the scheme altogether.
“Because the guidance was unclear, many businesses may have opted for an inappropriate rate, believing that it was the ‘closest rate’ to their business, especially in specialist industries such as energy and offshore - which in many cases were not specifically mentioned by the guidance,” said Mr Shipp.
“That is why we are urging firms in the sector which have been using the Flat Rate Scheme to consider whether they might be able to recover some of that overpayment.”
Lovewell Blake’s specialist Energy and Offshore team is offering advice and support for businesses in the sector which may have overpaid VAT within the Flat Rate Scheme.
For more information, email email@example.com, or call 01502 563921.