Just wondering what others do in respect of reclaiming input VAT on regular costs (paid via DD), such as mobile phones, BT charges, advertising costs when the client hasn't received a monthly VAT invoice?
I haven't been reclaiming the input VAT, as I haven't had a VAT receipt/invoice, despite these being subject to input VAT... Is this what others do in practice? I have asked the client to obtain the VAT invoices so that we can reclaim, but given these are regular payments, is he required to provide the actual receipts?
Many thanks for any responses in advance.
Replies (30)
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Invoices should be available
All of the items you mention sound as though the client will have an online account, through which VAT invoices can be downloaded - this is certainly the case for BT bills and mobile bills.
I always ask clients to provide a copy of the VAT invoice, but if they do not do so, I generally include the item in the VAT reclaim anyway and warn the client that they should ensure they have a copy of the VAT invoice in case of query by HMRC.
Cash register Ink
You should also enquire of any client if the enjoy the smell of cash register ink. If they do, they should not risk claiming as a business expense.
Invoices are so important...
... especially with phone bills because the invoice will show the VAT breakdown. I have noticed an increase in Zero rated items in recent years, so if you assume 20% VAT include in the total you might be over stating input tax. Also, but not in your OP, if the DD is from Microsoft, Adobe, etc. the invoice will confirm if they fall under the reverse charge rules.
The invoice must also be in the business name, as there are restrictions on reclaiming VAT if the contract for a mobile phone, for example, is in the name of an individual.
As Sparkler points out there is always a way of getting a copy online, and most suppliers will send an email with a link to the invoice and giving advance warning of the DD, as they must do under DD rules. Several of my bookkeeping clients can't be bothered to do this themselves so have given me their logon details. I can understand this as finding and printing the invoice can sometimes be a real pain.
And it's not just for VAT, the invoices will be needed to support the calculation of business expenses. Without them there is always a danger of penalties under Business Record Checks as well a VAT.
Evidence
What is required is evidence that input tax has been incurred. If the client has some monthly invoices, but not all, it seems to me that bank statements provide evidence of the missing months, although care is needed because, as has been said, the Vat might not be 20% of the total.
Obviously it is in the client's best interests to obtain and keep all business records, for a variety of reasons.
ok but what happens if...
the supplier fails to / refuses to issue a VAT invoice?
How can you force them to issue the invoice, or is it HMRC who can force them and if so how?
Legally obliged to..
If a supply is made to a VAT registered business the supplier is legally obliged (VAT Act 1994) to issue a tax invoice.
Thanks Shaun
Where abouts in VATA 1994 is it? I found it years ago and lost the reference!
Also is it a supply TO or BY a VAT registered business?
Some telecoms and utilities ....
... are now charging for a VAT invoice if the contract is not a business contract.
Problem
E-billing is a big problem.
Client's don't download them or print them. By the time you ask for copies, they've disappeared from the website as they only keep the last twelve months (if that).
I wrote to all my clients about it last April. Surprisingly, some took notice. Though I don't expect it to last. Ah well - at least I can say I told them.
It isn't just ebilling ...
... quite a few telecoms now print 'this is not a vat invoice' on their demands for non-business lines.
Why?
... quite a few telecoms now print 'this is not a vat invoice' on their demands for non-business lines.
I've often wondered why they do that. You see it a lot on credit card slips from garages. Why have two bits of paper when one will do ? Who benefits ?
This is a common problem.
... quite a few telecoms now print 'this is not a vat invoice' on their demands for non-business lines.
There are different tariffs for residential(personal) and business contracts and the conclusion I came to is that phone companies don’t produce VAT invoices for residential contracts because they expect that VAT is not recoverable. They don't want residential contracts used for business.
That's my theory but I would like to see the reasoning from someone working for a telecoms company.
More money
... quite a few telecoms now print 'this is not a vat invoice' on their demands for non-business lines.
There are different tariffs for residential(personal) and business contracts and the conclusion I came to is that phone companies don’t produce VAT invoices for residential contracts because they expect that VAT is not recoverable. They don't want residential contracts used for business.
That's my theory but I would like to see the reasoning from someone working for a telecoms company.
Maybe I'm just being cynical, but pretty sure it's because business accounts make them more money.
Ok so i have now read the regulations and i am confused
the regs say that if the supply is to a REGISTERED person, what if when the original supply was made the recipient was not a registered person but became one shortly after and brought the relevant goods supplied into his business?
Does it really mean that if the goods aren't supplied to a registered person that a VAT invoice doesn't need to be issued?
The "goods" i am talking about here are £300k of retail goods supplied by a registered trader, and NO VAT invoice supplied. How do we get the VAT back? We have no VAT invoice, but we do have a supply and a tax point?
Alternative evidence
the regs say that if the supply is to a REGISTERED person, what if when the original supply was made the recipient was not a registered person but became one shortly after and brought the relevant goods supplied into his business?
Does it really mean that if the goods aren't supplied to a registered person that a VAT invoice doesn't need to be issued?
The "goods" i am talking about here are £300k of retail goods supplied by a registered trader, and NO VAT invoice supplied. How do we get the VAT back? We have no VAT invoice, but we do have a supply and a tax point?
If there is no VAT invoice, how do you know that VAT was charged? If there is some other form of evidence showing the VAT amount, HMRC may be prepared to accept that.
Correct
There's no obligation to issue a tax invoice to someone who's not registered.
One of my builder clients does that. His customers got frightened by the amount of VAT they were paying so now he leaves them in ignorance so that they can sleep at nights.
I can appreciate the sleeping at night bit but
this is keeping me awake!
My client exchanged shares he had in a company for £300k of its stock, i realise fully the income tax etc implications of a company transferring its assets to a shareholder and former director - the accountants at the time seem to have overlooked that...
My concern is that my client brought this lot into trading stock on his first day of registration and would like his input tax back on the goods that most definitely had VAT in the price, but no invoice equals no refund, so far...
sorry BKD just seen your post
The goods are detailed in a stock list, valued and it is specified by the legal documentation exactly what is being given in exchange for what.
There is no question of a TOGC because we are only talking stock here and nothing else.
how do i know? Because
It is not an item that is either covered by an exemption or zero rating and the company making the supply is a VAT registered business.
Sorry, but ...
... that doesn't prove anything, other than the fact that VAT ought to have been charged. It doesn't mean that it was.
I know a VAT-registered company that several years ago sold an opted property to a SIPP. How many people think that they charged VAT?
Evidence?
As BKD says without the evidence which is the tax invoice you will not get the VAT especially on a £300k purchase!! The VAT system works on the issue/receipt of tax invoices without which the system doesn't work.
BKD and Shaun
My starting point here is VATA 1994
Scope of VAT on taxable supplies
(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.
(2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.
So i have:
a supply of goods (for a consideration which i can value and prove) - tick
by a taxable person - tick
in the course or furtherance of any business carried on by him - tick
it is NOT an exempt supply or a zero rated supply as i have said before - tick
Nowhere does it say that the recipient of the goods has to be a registered person, because that would just be completely unworkable
the whole point of what i am saying is that just because the taxpayer doesn't think that there should be VAT charged, doesn't mean that there shouldn't be any VAT charged, there isn't enough room here to list all the failed cases where that was the argument. Maybe even your SIPP person BKD.
And yes Shaun the system doesn't work without the issue of a VAT invoice because that is the whole point of my post.
Anyway i have requested ADR so we will see where i get to with that.
You missed my point, minion
In my example, the company did not charge VAT on the property, although it ought to have done so. All the boxes were, as you say, ticked. But they didn't charge VAT. Because no VAT was charged, there was no VAT for the SIPP to recover. I come across all too often instances of VAT not being applied to intra-group management charges when it ought to be. Are you seriously trying to argue that the payee company would be entitled to recover input VAT in such cases where in fact no VAT had been charged - even though all the boxes had been ticked?
So, to repeat, just because something ought to have been done to comply with the legislation doesn't mean that it was. You're wasting your time trying to convince me (and others) that VAT was charged - concentrate on convincing HMRC.
i understand entirely
about the fact that VAT was not charged ie shown specifically in any invoice, but my point here is that VAT is taken to be included in the supply if you get boxes ticked. There are plenty of cases where HMRC have won that argument including late registration cases.
I am trying to convince HMRC hence the referral to ADR, i am not trying to convince anyone here that there is or isn't VAT in the transaction.
What i was trying to find out here is why in a situation where HMRC would argue that a supply was VAT inclusive that VAT cannot be reclaimed when the vendor refuses to issue a VAT invoice.
You are quite correct
HMRC will argue, if it suits them, that consideration for a supply will be treated as VAT-inclusive. But it doesn't mean that this will always be the case.
The first, and most obvious, question to ask is - "did the transferor account for output VAT on the transaction?" If they did, then there is the alternative evidence that HMRC may accept. If there was no such output VAT accounted for, what do you think HMRC will want to do before they even consider a refund of input VAT to your client? How do you think the transferor is going to react? Other than the prospect of interest and penalties, where is the incentive to HMRC? Second question (or perhaps it should be the first) - what did the paperwork for the exchange say as regards VAT?
There isnt an incentive for HMRC
this has rumbled on for over 12 months now so they will no doubt have a problem issuing any demands for the output tax. They have previously contacted the vendor with apparently no success.
We have asked the vendors accountants for confirmation that output tax has been accounted for and guess what, they have been sacked (who knows maybe they didn't point out the VAT issue). We cant get a straight answer from anyone.
I have successfully argued with HMRC in the past that VAT was included in a transaction for a payment related to restraint of trade, no VAT invoice just a Tomlin Order. In that case they were able to hit the other side for the VAT, in this case i think they are too late and dont want this as a one sided transaction.