VAT and PII claims: Don’t get a hit on your policy Revisited
The Rising Trend of VAT-Related Professional Indemnity Claims
As I present to accountants around the country I’m always pointing out that when it comes to professional indemnity insurance claims in relation to vat are high up there in terms of number of claims and the amounts paid out.
The Complexity of VAT: Understanding the Increase in Claims
Why is the incidence of claims in relation to VAT on the rise? Well, for me, the answer is that VAT has, since its inception, masqueraded as a “simple tax” and for the most part, this appears to be the case yet over the years as the thickness of the annual Vat text books have grown and grown. The differences between Zero Rating and Exempt, Confectionery and Cakes, and everything Land and property have become more and more blurred and a staple at the tribunal, so the mistakes have flowed.
The High Stakes of VAT Mistakes: Impact on Professional Indemnity Insurance
As a minimum clients will look to claim from you any monies lost as a result of bad or inaccurate advice, and of course, they will also look to cover all costs incurred at establish and prove their loss. When a claim is made regarding Vat it is usually for large sums as Vat is a turnover based tax not a profit based tax so the sums can soon mount up.
The Importance of Seeking Expert VAT Advice
So if you are not sure what rate of vat to charge or if a land and property transaction has you scratching your head vat wise or you are not 100% sure about the vat treatment of management charges then “don’t guess to impress” because if you are wrong then a large hit on your Professional indemnity Insurance is heading your way and it will cost you in terms of increased future premiums and loss of professional reputation.
When in doubt over VAT, seek specialist advice.
The above was my blog from June 2018 and now 18 months on I revisited the stats for the ICPA group Professional Indemnity scheme, and still number one ranking claim is VAT. The highest incidence is virtually equal between anything to do with Land and Property and failure or late registration.
Navigating the Quagmire of Land and Property VAT
Land and Property is an absolute quagmire to negotiate and usually involves significant amounts of money, which means if the VAT treatment is incorrect, the claim is going to be for a large amount.
Land and Property is so involved that in our practice, the moment it raises its head, we are in touch with our VAT support and make sure that we have the very best advice for our clients, and yes, that comes at a cost to us and ultimately them but as I point out to the client expert advice comes at a cost. Still, that cost is priceless, and we make it plain that it’s not a matter of debate.
The Perils of VAT Registration Missteps
The other large claims area is registration issues, whether failing to register in time or never at all, which again usually means a big loss of revenue to HMRC and, as such, a big claim. I often scratch my head as to how these claims are still being encountered because, after all, we do know the registration limit, don’t we? In fact, I would suggest that every member of staff in every practice knows the VAT registration limit. It’s like knowing the basic rate of tax, personal and corporate we know it.
So, how are these cases occurring? I suppose it’s the age-old “Wood for the trees”, and in each case, the practice was duly mortified that it had been missed, so please make sure you and your staff don’t miss the “Raging ****** Obvious.”
I’m still saying it, and it’s still true: “Don’t guess to impress”, especially regarding VAT.
The Vital Role of Diligence and Expertise in VAT Matters
The importance of diligence and expertise in handling VAT matters cannot be overstated in a landscape where VAT complexities and the resulting indemnity claims are on the rise. This underscores the critical need for ongoing education and expert support for accountants. Joining the Institute of Certified Practising Accountants (ICPA) offers access to a wealth of resources, expert advice, and a supportive community to navigate these challenges.
Embrace the opportunity to enhance your practice’s proficiency in VAT handling and protect your professional reputation by becoming part of a network dedicated to excellence in accounting. Join the ICPA today and equip your practice with the tools and knowledge to manage VAT complexities successfully.
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