Unfair competition

Unfair competition

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Our non-VAT registered clients have been approached by a local Charity that runs its own payroll bureau and offered rates to process their wages well below what we curently charge. The main difference is that the Charity is not charging VAT even though it's income runs into millions and it charges VAT to attend it's functions.

Our client asked them why there was no VAT on the quote and they were told that it was because there was no VAT on wages.

Does anyone know how they can operate in this manner?

Replies (13)

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By rjoconnor81
09th Jun 2014 16:51

Sounds very wrong to me - the reasoning behind it is wrong, wrong, wrong!!! 

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By User deleted
09th Jun 2014 16:59

Sounds like ...

... someone at the charity has a little knowledge...

Short answer, they can't, they have completelly mis-understood the law and you can either call them to discuss or call HMRC, get an e-mail address and send a copy of the quote to them.

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By mrme89
09th Jun 2014 17:20

My dad has just set up a cleaning product business.

He also supplies paper products. He recently went to a certain type of 'supermarket' and saw the exact same toilet rolls as he was selling at the same price he was buying them at.

He called the company to discuss the price difference ... "we've known him years so we don't charge him vat".

After talking to another supplier, it appears that the paper industry is rife with this. Along with the payroll industry of course.

 

Back to the OP...

As OGA has already said, get a written quotation and give HMRC a call. Don't hold your breath on any action being taken though.

 

 

 

 

 

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By Peter Kilvington
09th Jun 2014 17:23

How did they know who to approach

I might be missing something here but how did they know that these were your clients, that you ran the payroll and that theses particular clients are not VAT registered.

 

As an aside to my original comment if they do not know that the service is liable to VAT what confidence have you got that they can run a payroll.  The comment that there is no VAT on wages is correct however there is VAT on providing a payroll service, maybe a bit of confusion on how the question was asked or answered.

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Replying to johnhemming:
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By User deleted
10th Jun 2014 09:19

With respect,

Peter Kilvington wrote:

As an aside to my original comment if they do not know that the service is liable to VAT what confidence have you got that they can run a payroll.

 

With respect, there is no actual need for a detailed knowledge of VAT in preparing PAYE & NIC.

Operating in business, charity or otherwise, without that knowledge is a different kettle of fish entirely...

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By jndavs
09th Jun 2014 18:16

Charitable purpose?

Is this within the remit of the charity?

It does not sound like a charitable purpose to me.

You may want to check with the charities Commission.

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RLI
By lionofludesch
09th Jun 2014 18:18

No no no

The charity needs a chat with its accountants - maybe to establish why the accountants are charging VAT on their wages .... I mean, fees.

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By Chris08
09th Jun 2014 18:20

Reputation

Charities rely very heavily on their reputation. They will rarely risk that reputation for anything.

Therefore, if you know what they are doing or the way they are conducting themselves is wrong, my suggestion is that you complain to the trustees. They probably do not know that this is going on - as it sounds more like an unthought-out local initiative for fund raising.

If it is as bad as you think, the trustees will probably be thankful for you bringing this to their attention.

If not,then as well as HMRC, you also have Charity Commission and I guess trading standards if they are falsely advertising, and of course the local press may take an interest.

 

 

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By WhichTyler
09th Jun 2014 18:21

Perhaps...

...the price includes VAT, like this: http://www.stewardship.org.uk/support-services/fees-other-services .

Not clear why they do some inc.and some exc. VAT, but perhaps their customer base is largely non-business?

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Glenn Martin
By Glenn Martin
09th Jun 2014 18:58

Is it Unfair.
For me it's not really unfair competition. You face the same threat from every other bookkeeper or accountant who is not registered for VAT and it would only make a difference to your clients who are not registered for VAT either.

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By User deleted
09th Jun 2014 19:23

There may be VAT ...

... om wages re-billed, depending how it is contracted!

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By FCExtraordinaire
10th Jun 2014 10:52

Charity

It can't be right unless they are covered by some de-minimus rulling that its is such a small part of their income,  it is not chargeable to VAT.

I would speak to the local HMRC.

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By PaulMM
10th Jun 2014 13:18

Trading Company?

Could it be that the payroll bureau is being operated by a trading company wholly owned by the charity? If so then the turnover of the company may not be sufficient to register for VAT -(although this wouldn't explain the strange reason given by them as to why they don't charge VAT).

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