VAT and duty paid by vineyard

VAT and duty paid by vineyard

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I act for an English vineyard whose wine is made by a commercial winemaker. As would be expected the winemaker charges VAT on the normal production processes.

As we are VAT registered we can claim the vat back in the usual way? As we have yet to register with HMRC for Duty and do not have a secure place to hold duty free bottles of  wine, we pay our winemaker the duty before he delivers the wine to us.

I appreciate that this means we pay duty on wine we might give away as promotion but this is immaterial at present. My question is that our winemaker is charging VAT on the duty he is paying over on our behalf. My contention is that it is our duty he is paying over so it is in the nature of a disbersement and therfore it should not be subject to VAT.

It is, after all, our wine not his and all he is selling to us is his processing charges. We are reclaiming the VAT he charges on our VAT returns so to that extent we are not impacted, but my concern is that if VAT should not be charged in the first place then they could be added back in the event of a vat inspection. anyone any thoughts please?

Thanks, Paul

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