VAT only invoice following failure to register

VAT only invoice following failure to register

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This one is a first for me.

A classic situation has arisen whereby a supplier was late (talking years) registering for VAT, is caught and wishes to provide a VAT only invoice to a customer for £200 calculated on the £1,000 he originally invoiced.

The customer (for several reasons) is not happy and drags their heels and after months is told that the supplier has negotiated with HMRC and the VAT is now reduced to £167 and so now replaces the old invoice with a new one for the £167.

Reading between the lines HMRC have got fed up waiting and so have gone to the supplier for the VAT inclusive sum, but is he now trying it on in still getting the customer to get him off the hook, by collecting the £167 input VAT of HMRC to pass on to him?

When I've come across these situations in the past, if the customer has ignored the supplier s/he will not hear again from them again, they have to foot their own VAT bill.

Any views/ideas?

Thanks

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By shaun king
21st Apr 2015 22:44

Your client should be happpy

As the supplier has treated the amount received as VAT inclusive (correctly) and issued your client with a VAT invoice, then your client's cost have reduced by the Input VAT reclaimed from HMRC. Your client should be thankful that the supplier provided a tax invoice. Your client cannot pass thew Input tax claimed as he has already paid the supplier. If the supplier wants £1000 net he will have to invoice your client for the £167 plus VAT which is acceptable.

Thanks (1)
Teignmouth
By Paul Scholes
21st Apr 2015 23:45

Weird

Thanks Shaun

The situation doesn't quite fit this in that the supplier originally provided a VAT only invoice for £200, wanting to be paid the £200 (for the customer to then claim back on their next VAT return) but when the customer said no, he has come back with a new VAT only invoice for £167, asking the customer again, to pay the £167 in exactly the same way as he did the £200.

My view immediately was that the customer could just reclaim the £167 and that would be that because, as you say, it's the inclusive VAT on the bill he paid, but I was then told that the supplier wants a cheque for £167 which is why I felt he was trying it on (in fact I think it's his accountant that's advised him to do this).

So there's no way he's going to issue an invoice for £167 + VAT, besides which the customer wouldn't pay it anyway.

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