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Thread: Help! VAT paid to de-registered VAT vendor...

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    Help! VAT paid to de-registered VAT vendor...

    Hi,

    I run a small business, but now have a big problem I hope someone here has the answer to.

    A few months ago, one of my suppliers (who I have dealt with for some time) issued a invoice, including VAT, which I paid across to him. In retrospect, I should have checked the invoice and his VAT details carefully, but I am sorry to say that I didn't take that much care. It actually wasn't the first time I was working with that supplier, and past input VAT of a much lesser amount had been repaid, even after one his invoices had been supplied to SARS (after they flagged a previous VAT return for checks after submission on the efiling system).

    Needless to say, this was a relatively big transaction, and SARS subsequently rejected the repayment of the VAT component of this invoice (no reason given). At that point, I found out that the supplier's VAT number had been de-registered quite some time previously. I lodged an objection to SARS, but this was turned down on the basis that the invoice did not meet certain criteria (e.g. the wording "tax invoice" was missing, as well as some other details).

    I have requested that the supplier pays me back directly, but he is evasive....one story after another. He says that he is applying for re-instatement of his VAT number, and I will then be able to claim the funds back from SARS. I am dubious of this plan, though, after these dealings with him.

    My questions are:
    1) What is the best way to get recourse (i.e. repayment of the VAT component, that was paid across to my supplier in good faith at the time). I want to do this in a legitimate way, that cannot be argued by SARS (if the refund must come from them) and that is 100% legal.
    2) Can I expect any assistance from SARS? For example, if I report the supplier to SARS for the obvious VAT fraud, and they audit him, will he be required to pay me back? Or will he only be fined, which does not solve my problem?
    3) Is there any VAT ruling / legal precedent that anyone knows about for such a case?

    Moral of the story I guess is to check supplier's VAT registration and invoices carefully before paying them...an expensive lesson for me unless I can somehow get those funds back.

    Thanks in advance for any advice that people here may have...

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    Site Caretaker Dave A's Avatar
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    What information on the invoice (or quote) indicated a VAT component?
    The trouble with opportunity is it normally comes dressed up as work.

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    Hi Dave,

    The invoice listed a sub total, then an added 14% listed as "VAT", and finally the "Total due" (sub total + added 14%)...

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    Hi Trader,
    Firstly, no matter whether or not the vendor was registered, or de-registered, your obligation is to have a valid Tax Invoice in support of your claim for a vat input credit. His affairs with SARS are largely immaterial.

    It seems from what you say about SARS' reason for disallowing the input credit, that the invoice did not meet the criteria. This would have happened regardless of his status with SARS.

    Your options are to get a lawyer to issue him with a final demand for the VAT portion you paid him, or demand that he issue you with a valid tax invoice, and to follow through on it, or to lay criminal charges against him. I suppose you could also make another purchase from him, and withhold the cumulative vat he owes you..

    If you do get a valid tax invoice, you would need to submit a notice of objection against the assessment where the input credit was denied. Form ADR1 will do.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Trader View Post
    The invoice listed a sub total, then an added 14% listed as "VAT", and finally the "Total due" (sub total + added 14%)...
    You've certainly got a case against the supplier then.
    The trouble with opportunity is it normally comes dressed up as work.

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    Thanks for the advice...I was hoping to sort this out without the involvement of a lawyer, but it seems there is no other way. Problem is the legal costs could easily wipe out any debt that is recovered so it is a no-win situation.

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    Quote Originally Posted by CLIVE-TRIANGLE View Post
    Hi Trader,

    If you do get a valid tax invoice, you would need to submit a notice of objection against the assessment where the input credit was denied. Form ADR1 will do.
    I already filled in one of those ADR1 forms, for the original invalid invoice. If his VAT number is re-issued, I'm not sure SARS would provide a refund on a tax invoice he issues at this point (five months later) as there is a section of the VAT Act that says the invoice must be at the time of supply. If I can get him to issue such an invoice (assuming his VAT number is actually re-issued), and try to claim a refund on it, am I putting myself at risk of further penalties from SARS? Or would the risk of penalties fall on his shoulders, as he issued that invoice?

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