I have a client who is a garage & is not an approved MOT test centre. He therefore takes the cars eleswhere & recharges the MOT to his customer. He shows it seperately on an invoice to the customer and only charges the customer what he pays to the MOT test centre. So far so good!
But, he also uses an agency to obtain work from contractors. So he will log in to the Agencies website, prices a job & then the Agency gives him the go ahead to do the job. The Agency then produces a self billing invoice to my client & they have set charges for a particular job and the set charge for the MOT's he does is higher than what he pays to the MOT test centre. So the self billing invoice charges the higher amount with nil VAT (as outside the scope). Apparently the agency say that as all their MOT's are set at this price, they cannot change it on their software.
So for example, my client pays £30 to MOT test centre & the Agency with Self billing invoice pays my client £45.
So either
a) my client accepts this & fears falling foul of HMRC rules about the fact that if he charges more for an MOT than the test centre the excess amount is then vatable
or
B) he changes the VAT amount on the self billing to reflect the differnce of £15 by putting it through as an additonal charge of £12.50 + VAT of £2.50 whcih he then pays over to HMRC
Replies (10)
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Since your client ....
... is not intending to profit from MOT work, agree with the Test Centre to charge £45 for agency jobs.
Have we misunderstood each other?
I was referring only to jobs coming through the agency. There would be no need for the garage to change its prices to the outside world. The only difference is in the amount that the garage charges your client for agency jobs. Yes, it would require a dual pricing structure, but if the garage ends up making a profit of £15 on agency jobs I reckon the cost of the 'confusion' would be worth it :) (And do garages not already operate a dual pricing structure in respect of repairs depending on whether or not they're covered by insurance? Or am I just being cynical?)
Not quite right
BKD, the recharge of MOTS is exempt only if the garage makes no profit. If the cost is £30 then whole of the £45 is standard rated so the VAT at stake is £7.50
Confused again?
We're not talking about a re-charge. The supply in question is the MOT carried out by the garage, not the OP's client. So, whether the garage decides to charge £30 or £45 for an MOT, it should be exempt. In both cases, the OP's client is not making a profit - being charged, and passing on, £30 to 'normal' clients and being charged, and passing on, £45 to agency clients.
@BKD
You are confused. The client here is not an MOT station. He pays another garage £30 for the MOT. If he recharges this at £30 then this is treated as a disbursement and is exempt. If he recharges at £45 he makes a profit and thus the charge is no longer a disbursement and becomes a standard rated charge with £7.50 VAT at stake.
Are you suggesting that the MOT station charges different rate depending on who the client's customer is? How does this help the client? Even when the £45 becomes standard rated, the client keeps £7.50 out of the £15 profit.
Missing the point, Neil
I am indeed suggesting that the MOT centre charges different rates - see my very first response on this thread.
You are correct that the MOT centre could continue to charge £30 for all jobs, and the client take a £7.50 profit on agency jobs. But my responses were on the premise that the client (a) does not want to have to account for VAT on the charges and (b) does not intend/want to make a profit on MOTs. My suggested course of action dealt with those intentions. If the intentions are different then, yes, I would agree with you.
OK, BKD
Technically I have no argument with what you say. It just seems a strange commercial decision to loose £7.50 per transaction for a bit of bookkeeping.