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HMRC seeks Audit Scotland refund

HMRC is looking to recoup over £4 million in VAT rebates from Audit Scotland after claiming that it has been paid incorrectly since 2006.

Although Audit Scotland may be a big fish, the case goes to show why an accountant in Chester, or anywhere else in the UK, will need to ensure they get their clients’ books right to avoid being chased by HMRC.

It is believed that Audit Scotland recouped any VAT charged to external organisations that it brought on board to conduct audit undertakings.

A Scottish Commission for Public Audit meeting highlighted the issue when MSPs were told by Auditor General Caroline Gardner that the body had failed to budget for the correct amount of tax, and had decided to dispute the bill.

It is related to the tax status of the previous Accounts Commission for Scotland, which in 2009 joined with the activities of Scotland’s National Audit Office to create a brand new body known as Audit Scotland. Before the two merged, the Accounts Commission boasted Section 33 status which meant that it could reclaim tax on the audit charges placed on local government.

However, HMRC is disputing the agreement, saying that any tax that was recovered in this period needs to be repaid. The liability had been assessed at £4.1 million, with Audit Scotland reclaiming anywhere from £400,000 and £500,000 annually.

The issue of the requested VAT rebate is unfamiliar territory for Audit Scotland, according to Gardiner, but the body has been in talks with HMRC over a separate tax dispute which was eventually settled, so they may just come to an arrangement yet.

Posted by Peter
October 16, 2013

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