I have just found online the Paymex v Revenue and Customs case and from reading through I at least know what the issue is and why it was raised.
I was surprised to see that the hearing concluded back in April of 2011 and the original appeal by Paymex dates back to 2007.
I am wondering, therefore, Why this seems to be such a big issue now, nearly 12 months on? When did IP's stop closing cases based on this ruling? and why?
Its safer and easier for an IP to be able to reclaim the VAT that has been wrongly paid over to the taxman,if the IVA case remains open.
Remember also that this case is resulting in the biggest change in procedure since protocol compliant IVA's came in.
IP's dont want to close cases to find themselves then unable to reclaim the VAT and end up liable for the refund to creditors out of their own pockets.
Complex and with several regulating bodies and HMRC involved it has the potential to take a while to sort out properly.
Paul
Discharged today the 8th feb 2012. View is much brighter now.
Continuing to rebuild our credit worthiness.
This is my current understanding of the situation:
In 2007 Paymex first tried to get HMRC to agree that IP fees on personal IVAs should be exempt from VAT - HMRC ruled that they should be standard rated.
Paymex appealed against this ruling and the appeal was heard by the VAT Tribunal in May 2011. The Tribunal ruled in favour of Paymex and HMRC decided not to appeal, so now IP fees are exempt from VAT.
IPs now have the option to make a claim to recover VAT that was incorrectly charged over the last 4 years (this is the maximum period allowed to make a reclaim). Although making a claim is optional from an HMRC perspective, IPs have been advised by their regulators that under the Insolvency Act they have a duty to recover the VAT on behalf of the creditors.
IPs have been advised that if they do not do this they could be held personally liable by the creditors. As a result of this IPs are generally not closing cases until the VAT refund has been received (which could takes months if not longer).
This is a nightmare for everyone - debtors are left in limbo and IPs now face additional costs and administrative headaches as their businesses are now partially exempt from a VAT point of view.
The really perverse thing is it looks like Paymex have not had any benefit from this, so god knows why they did it.
Last edited by vince666 on Wed Feb 08, 2012 6:33 pm, edited 1 time in total.
I would have thought this should not affect the person in the IVA and basically it is between HMRC and the Supervisors/Accountancy firms involved. From my understanding the accountancy firm will claim the VAT back from HMRC and this will be paid over where it should be allocated to the Creditors as part of the IVA.
Just thinking about my case though I cleared mine 100% with a bit of statutory interest and thinking about it my ex and I are entitled to the VAT element and must start thinking about claiming this back from my supervisor.
font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by plasticdaft
Its safer and easier for an IP to be able to reclaim the VAT that has been wrongly paid over to the taxman,if the IVA case remains open.
Remember also that this case is resulting in the biggest change in procedure since protocol compliant IVA's came in.
IP's dont want to close cases to find themselves then unable to reclaim the VAT and end up liable for the refund to creditors out of their own pockets.
Complex and with several regulating bodies and HMRC involved it has the potential to take a while to sort out properly.
Paul
Interesting you state the problem is with IVA protocol compliant IVAs.
Mine wasn't and was closed with no issues but as a side comment I would not have entered an IVA with this protocol 5+ years ago as it seems to have added as standard things like 'you will remortgate in 4 years or pay 12 months extra to realease equity'
Never had that and if I had would've gone bankrupt instead and in todays market with an iva protocal iva you are stuck with a 6 year IVA and then no closire due to VAT.
What a disaster.
Last Payment - November 2011 - Completion Certificate received 2 weeks after last payment, Removed from Insolvency Register within 4 weeks after last payment.
In ray.a's case, he may be entitled to retain the monies in the event of a claim made to HMRC and subsequently refunded to the IP who Supervised his case.
The VAT issue has nothing to do with only protocol compliant IVAs, and I don't think that is what Plasticdaft actually said.
I don't want to add fuel to the fire as it were, but all this VAT thing was worrying me so i contacted my IP.
Basically the reply i got was that the HRMC had refunded the VAT back on IVA's but due to delays in closuals they didn't close any cases during the summer so im looking at a 6 month extension but i won't need to pay any additional funds, i will just get a letter explaining the extension and a predicted closual date, so not too bad.
I have tried contacting my IP, but emails go unanswered and there is only so long I can stand to be on hold!
My original question was, though. Not why the cases could not be closed, but why NOW it seems to be such an issue as the Paymex HMRC case goes back to April of last year. I'm assuming cases were closed last year from this time without problem?
I was told they had stoppped closing cases while the paymex was going on, and then didn't restart until they had the refund. My Ip firm got the refund in Nov so now processing closuals again. Just a big backlog.
