Shropshire accountant warns firms on taxation of tax
A local firm of accountants is advising businesses across the region that VAT refunds received through overpayment may be liable to further taxation.
After a recent First-tier Tribunal rejected several major retailers’ appeal against HMRC raising Corporation Tax assessments on VAT refunds totalling more than £600 million, Shrewsbury-based DJH Accountants is warning local businesses that any tax refunds received should be regarded as being potentially taxable in the year of receipt.
The retailers disputed HMRC’s claims, suggesting the refunds were not based on trading income, and therefore should not be taxed. But the Tribunal rejected the retailers’ arguments on stringent grounds, claiming that the refunds were based on trading receipts, and that both the refund and any interest payments on the refunds made were subject to taxation.
Fiona Green, Taxation Director at DJH Accountants, said: “It may be great news for a business when they receive a tax rebate, but it is advisable to be aware that some refunds are liable to taxation and may not be the full amount the business is entitled to. The Tribunal ruling in this case is dealing with a particularly large amount of money, but it does not necessarily mean that sole traders and SMEs aren’t at risk to similar.”
