I'm morbidly fascinated by how the accounting for this works.

They can probably keep the amount as asset on the balance sheet until court decision (at which point liability will be created if they lose). Instead of having it in the "cash in bank" account it moves to "cash at HMRC" account, or something like that.

Debit: liability account on balance sheet

Credit: cost of sales

Or you could just account for VAT properly in the first place like 99% of businesses manage to.

World isnt black and white. If you believe you don't owe it, why would you account for it as if you did. In fact it just occurred to me, just imagine what it would look like in court if their internal books showed they accounted for it as if they believed they owe it, but didn't pay it. No, this makes perfect sense. Each side proceeds based on their interpretation and once a court rules that you're wrong, you correct.

> Or you could just account for VAT properly in the first place like 99% of businesses manage to.

Ah yes but if you RTFineA it's not as clear cut

And I kinda agree with them in this case. They shouldn't be liable for VAT on the whole of the trip cost.

I would naïvely expect them to charge VAT to the customer for the full amount, but be able to reclaim against that any VAT paid to the driver. Isn't that how VAT normally works?

> They shouldn't be liable for VAT on the whole of the trip cost

I was going to reply to this to say "why not, everyone else does?" and then read the actual Tweet thread, which is very interesting. Thank you for encouraging me to read it!

I can't believe i actually wrote that backwards!