is the customer legally obliged to pay the VAT if

is the customer legally obliged to pay the VAT if

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Hi

If a supplier applies to register for VAT with effect from date threshold was exceeded, and he invoices his customers pending vat certificate but does not tell registered customers that a VAT invoice will be issued within 30 days of the vat certificate being issued so that they can claim the input tax or that a second invoice for the vat element only will be issued, is the customer required by law to pay the vat on being presented with a vat invoice by the supplier? I would think not because the supplier did not follow the procedure as per HMRC VAT notice 700/1 para 4. Any members' feedback please? many thanks.

Replies (4)

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By mrme89
12th Aug 2014 10:00

If you are VAT registered, what does it matter?

 

Isn't it better to keep on good terms with your supplier?

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Replying to I'msorryIhaven'taclue:
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By Weald Accountant
12th Aug 2014 10:36

It could matter as it could hit the client’s cash flow for a couple of months depending on how frequently they prepare VAT returns, and whether the amount of VAT is a lot in relation to the size of the client, but otherwise I would agree with mrme89.

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By Euan MacLennan
12th Aug 2014 10:57

I am rather confused

... by your very long first sentence.

Why would the supplier apply "to register for VAT with effect from date threshold was exceeded" and not from a month and a day later?  If he had done the latter, it is more likely that the VAT registration would have come through in time.

Did the supplier's invoice have 20% added or not?  Your comment about "a second invoice for the vat element only will be issued" suggests that the first invoice did not have 20% added, so what is the problem?  Just pay the (net) amount as invoiced.

If the supplier's invoice had 20% added, but no VAT number, I would treat it as a pro forma or application for payment, pay only the net amount of goods/services and tell the supplier that I will pay the 20% VAT as soon as he produces a proper VAT invoice.  No cash flow problem for the customer or for the supplier, who certainly will not be submitting a VAT return and paying over the VAT until after he is registered.

 

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By DMGbus
12th Aug 2014 13:33

Contract - price "ex VAT"?

I see this as a contractual matter.

When the goods/services were ordered there will have been agreed a price.

An agreed price ex VAT or a price with no reference to VAT or a price stating inc VAT.

If an invoice has to be issued during the "no man's land" of having applied for VAT registration but not yet received the VAT number then HMRC recommend billing "price plus the VAT rate" with no reference to VAT.  This is rubbish, no customer with an agreed price should accept such rubbish - it could land the customer with a 20% price increase  if no VAT invoice was later supplied or if the supplier's VAT registration application was not fulfilled.  

The alternative, contractually better, strategy is:

Supplier makes customer aware that all prices are "ex VAT"Invoice the customer for net value only with a prominent note "any VAT due on this supply will separately invoiced upon receipt of the supplier's VAT registration number which is currently awaited from HMRC"Issue a VAT only invoice once the VAT number is obtained (or credit original non-VAT invoice and reinvoice price + VAT)

If the VAT matter is vague from a contractual viewpoint then it is a matter of mutual co-operation between supplier and customer regarding the extra 20% VAT charge.

Honourable customers would accept the back-dated VAT charge so long as the paperwork was satisafactory (proper VAT invoices) and most importantly provided that the customer was eligible to fully recover the VAT charge.  Clearly a non-VAT registered customer (or partially exempt) customer should not accept a surprise VAT addition to their purchase costs if they had not been made aware of this contractually before entering into contract.

 

 

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