15% VAT change - please help

15% VAT change - please help

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Part of our business sells consultancy at a day rate - that bit is easy. However, the expenses incurred are not invoiced immediately. For example, I issue expense statements quarterly and try and get a PO off the customer soon after. As some customers don't get me a PO immediately I have some June expenses that have yet to be invoiced. It might actually be February 09 before I get the PO and can invoice. So, in February, do I invoice these expenses at 17.5% because it related to June 08 or do I have to use 15% because I'm invoicing well into the 15% period?

TIA
Paula

Replies (16)

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By User deleted
11th Dec 2008 11:49

Really?
Sorry Andy - I seem to have overlooked any previous postings that have set out the answer in a clear and comprehensive way. Perhaps you could point us all in the right direction?

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By paulwakefield1
10th Dec 2008 13:30

Light touch
It sounds as if your customers may well be fully taxable. So I would rely (eek) on HMRC's light touch approach and not worry about it.

".......the other "Nom De Plumes" that I have used .........."

"English is a great language - be proud to use it - and in full "

That amused me. :-)

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By forgeron
11th Dec 2008 11:58

Sorry to be pernickity but ...
as a French resident I just cannot resist.

It should actually be Noms de Plume as it is pen names rather than pens name.

Once again, sorry (i cringe myself!) ...

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By skylarking
11th Dec 2008 10:43

Cutting
I don't think you have cut through anything very much, Martyn, but just repeated what has already been said. Well done.

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By User deleted
10th Dec 2008 16:57

Back to basics
Paula

Cutting through all the c**p that has so far been contributed to this debate, you might wish to consider the following:

The basic tax point is the date that the goods or services are supplied - in your case, June 2008. This is overridden by the actual tax point, which is the date of invoice IF ISSUED WITHIN 14 DAYS OF THE BASIC TAX POINT.

As your services were provided more than 14 days before the invoice (and no payment has been received either), the basic tax point defaults to the date of supply - ie June 2008, which means that you should charge the old rate of 17.5%.

Alternatively, if your services are deemed to be a continuous supply (which is quite possible for consultancy services - although by no means definite), you should account for vat at the rate appropriate at the date of invoice (or payment if earlier) - ie 15%.

As you can see, it hinges on whether your services constitute a continuous supply or not - you need to review the nature of the consultancy contract/engagement letter to determine this.

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By User deleted
08th Dec 2008 17:53

Thanks for your comments
Re. the expense reclaiming policy and whether or not we are committing suicide - surely this depends on the amounts we're talking about and how cash rich the company is. To put it into perspective, one customer owes £51 on an initial deal value of £35,000. The cost of chasing for a purchase order, raising invoice + other associated administrative expenses would exceed that so the business waits until the amount gets into the hundreds of pounds or when the project has ended, whichever comes first.

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By User deleted
08th Dec 2008 13:36

You rumbled me, Moriarty
OK. It's a fair cop, Nevil (Mr Tirman). I can see that your name is a anagram of my own letters. Very cunning. If you had said "Nitram" I would have twigged it instantly.

But have you rumbled some of the other "Nom De Plumes" that I have used when I sent stuff in?

Bless you for complimenting my Website. There's a White Fiver being faxed over to you as I speak/write.

Regrettably, tonight (Monday 08.12.08), I am having to miss my radio programme (on www.TheJumboSound.com) for other commitments. Next Monday 15.12.08, I will also miss - for reasons that I cannot disclose yet, but it is a lifetime event for me.

I am still uncertain as to whatever those infernal initials PO or is it OP refer to in these replies.

English is a great language - be proud to use it - and in full (not in initial letters)

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By Richardrussell
08th Dec 2008 13:13

Thanks Paul
The comment about a year was meant to reflect the OP's position - expenses incurred in June 08, invoiced in February 09. If we are talking about the real world, I think that if expenses incurred in Jun 08 were invoiced in Feb 09 - commercial suicide apart! - it is more likely than not that those expenses would be invoiced at the current prevailing rate, 15%.

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Teignmouth
By Paul Scholes
08th Dec 2008 10:54

Richard - read your history
Yep you are right.

With regard to invoicing much later, firstly on a "real world" planet (rather than let's have a go at the PBR planet) any business that completes work or incurs a direct expense now but doesn't invoice for a year, won't be around long.

Secondly the 14 day tax point rule I think has been there since 1973 (can't be bothered to check that) didn't you know?

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By User deleted
07th Dec 2008 20:01

To the previous poster
a. Why use the name Good English Porfessor, you are Martin Levin

b. It's not PO, it's OP and it means 'original Post' or 'Original Poster'

c. Your website is inspiring and fantastic, I would urge everyone to visit it. Such a breath of fresh air.

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By User deleted
07th Dec 2008 17:02

What's a PO?
I always thought that PO stood for POSTAL ORDER.

Please use GOOD ENGLISH in this forum

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By Richardrussell
06th Dec 2008 10:27

So
if the expenses are incurred in, say, November and invoiced within 30 days in December, you can charge 15%.

However, if you don't invoice until much later, such as February in the OP or even next December, you have to charge 17½%?

Well that seems logical.

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Teignmouth
By Paul Scholes
05th Dec 2008 23:52

Good this isn't it?
Trying to keep it at it's simplest, the way I read it is that If you provide a service or goods before 1 December but don’t invoice till after 1 December you may only apply the 15% rate if the period between the two is less than 30 days (it was extended from 14 days a few days ago).

In your case therefore as the expenses were incurred & presumably therefore supplied months ago the tax point is months ago, ie @ 17.5%.

You could say that expenses are actually subsidiary to the service and look at when that was supplied but, again, it's likely to have been months ago.

Only you will know whether you are treated as supplying a continuous service and therefore the invoice date will be the deciding factor but, from what you say, that doesn't seem to be the case.

The only other thought is whether there is a delay of the tax point if the sale is conditional on the customer's approval. I've not seen this before but it would be covered by existing VAT law and not the PBR.

On balance therefore I don't see how you can charge 15% on any expense or service unless it was supplied after the first week of November and invoiced up to 30 days later after 1 December.

As an aside and in answer to all those who have griped about this fun & games, don't forget it's the complexity of the UK tax system that keeps us all in business, if it were too simple then we would be out of a job. Then as a further aside to me, after 30 years of this fun & games, my argument is wearing thin and I'm looking forward to retirement!

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By User deleted
05th Dec 2008 13:59

From the HMRC website:
What about continuous supplies of services e.g. work in progress?
For continuous supplies of services, such as ongoing construction work, you should account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier. In these cases, invoices issued or payments received on or after 1 December will be subject to 15% VAT

My reading of this is that it's 15%.

Confused.

p.s. Am I the only one who wishes he had changed income tax so that it would be Payroll's problem, not mine?

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By skylarking
05th Dec 2008 13:01

Really?
To me it sounds like it's an invoice for a service provided before 18 November and is therefore 17.5%.

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By Richardrussell
05th Dec 2008 10:55

15%
You are issuing an invoice in Feb 09, the standard rate of VAT will be 15% (although you can never be sure with this government).

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