materials on sales invoice

materials on sales invoice

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A man provides some specific services relating to cars. In order to provide his client with the service he needs to buy an expensive part, worth £800. Labour is worth £200, (he has got some overheads on top, work is done within one day).

At the moment his invoice includes: labour + part +vat =£1200. He has exceeded vat reg threshold a while ago.

Most of his competitors keep the price around £1000, all of them use the same parts supplier and have one customer a day.

It came to his mind that possibly he does not need to put that £800 worth part on the invoice and avoid vat registration.

What do you think - will it be allowed?

Thank you!

Replies (2)

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By petersaxton
19th Nov 2011 07:02

Solution

It would be possible for the customer to buy the materials and then the "man" could invoice for the services he provided.

If the "man" buys the materials then he has to include it on the invoice. I don't think he can claim he's buying it as an agent for the customer.

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By User deleted
19th Nov 2011 09:38

Agency?

Since, as Peter suggests, there is nothing to prevent the customer sourcing the part himself and asking the mechanic to fit it and charge for his services it should, in principle, be possible to arrange the supply in such a way that it can be treated as a disbursement. However, my knowledge of mechanics and garages is such that most would be unwilling to get involved in the steps necessary for this to be achieved.

In any event, would it really help your client? If he were able to avoid VAT registration as a result, he would not be able to claim back the VAT on the part (assuming the supplier is VAT-registered). He would therefore have to pass on the full £960 to his customer. He would not have to charge VAT on his own supply, but in the example given - a saving of only £40.

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