Afternoon
I have a client, an electrician and he has been doing some work for another company.
He often has to purchase materials for the jobs he is doing but the other company are insisting he gives the original receipts to them.
I have said by all means let them have copies to back up the material costs charged but the original invoices are his, not theirs.
Why are they insisting on the originals? They are all addressed to him for items purchased on his trade accounts.
Thanks for your time!!
Replies (25)
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They may just be wanting to review/check the amounts on the invoices he has submitted.
Presumably there is an agreement with regards to what your client can/cant charge to the company for his services.
If they are insisting on seeing invoices, i would try them with copies - the orignals are your clients and will be needed for his own bookkeeping accounts etc.
Perhaps speaking to the company directly will clear this up fairly quickly and easily.
CIS?
If he is a sub-contractor doing work which counts as construction for a company which is a contractor, CIS will apply and the company will be required to deduct CIS tax from the total amount of his invoice after deducting VAT, materials and consumables. The CIS guide says that "the contractor can ask the sub-contractor for evidence of the direct cost of materials".
I agree that he should hand over copies, not the originals.
The other thought - you didn't mention if your client was VAT registered - if he is not then they will be using the invoices to probably claim vat against
That was my thought - not permitted though!
The other thought - you didn't mention if your client was VAT registered - if he is not then they will be using the invoices to probably claim vat against
That was my first thought though - although the client is not permitted to recover the VAT in this circumstance as the supplies were not made to him.
Reclaiming VAT
The other thought - you didn't mention if your client was VAT registered - if he is not then they will be using the invoices to probably claim vat against
That was my first thought though - although the client is not permitted to recover the VAT in this circumstance as the supplies were not made to him.
Can you reclaim VAT using copy invoices, through?
When you say he "has been
When you say he "has been doing some work for another company", is the other company his client or is he an employee/sub-contractor of the company?
Some people will reclaim VAT on anything and everything
Even insurance! If they are that way inclined, then I doubt a copy invoice or even a different name on the invoice will stop them. These are the people who should get a real rollicking from their accountant (if they have one) and ideally should receive a VAT inspection.
VAT fraud?
Even insurance! If they are that way inclined, then I doubt a copy invoice or even a different name on the invoice will stop them. These are the people who should get a real rollicking from their accountant (if they have one) and ideally should receive a VAT inspection.
Online invoices?
He asks for 2 invoices to be supplied with the goods
I'm not sure if suppliers would be happy with that. If company is insisting on original invoices as a condition of the contract, then he may as well give in and keep copies himself.
99% of our invoices are sent by email so people can print off a copy if they need to. Do the client's suppliers offer electronic invoices? If so he can sign up for them and the original/copy invoice problem is moot.
Client is agent of company
Ok, so I have just spoken to this lovely company.
If my client was VAT registered then copy invoices would be ok.
As he's not VAT registered they want the original invoices to claim the VAT back and won't pay my client without them.............
It sounds like your client is acting as an agent of the company. If the client is being paid back (in full) for the cost of the goods, then ownership will be with company and they are entitled to reclaim VAT. It's like if an employee bought something with their own money and were reimbursed, the company would be able to reclaim VAT. But if there's anything dodgy going on, then you can https://www.gov.uk/report-vat-fraud
Eh dear
Ok, so I have just spoken to this lovely company.
If my client was VAT registered then copy invoices would be ok.
As he's not VAT registered they want the original invoices to claim the VAT back and won't pay my client without them.............
So easy to avoid this situation but still the company prefers the fraud route.
If they want the VAT, tell them to buy their own materials. The VAT stops at the first unregistered trader.
I would think that asking HMRC to "clarify" the position on an "educational" visit should secure payment for the subcontractor.
Happy Yorkshire Day!!
Can they legally claim the VAT back if the invoices aren't addressed to them?
That would be my first argument.
If no (which I suspect) surely having copies would suffice just as well.
Idiots!
Good luck, Doris. I think you may need it.
In future, it may be worthwhile suggesting they buy the goods themselves, or provide the subbie with a company credit card so he can go buy the materials/goods on their account.
EDIT: The subbie needs the invoices for his own accounts. Also, do the contractors intend to claim the purchase AND the subbies invoices as costs? I wouldn't put it past them.
Scan them.
If it is a matter of the sparks getting paid he could scan them, or otherwise copy them and then send them on. They DO have his business as the purchaser. As he is not VAT registered there is less formal requirement anyway. If the main contractor wants to do something underhand with them that is more of a problem for the OP & reporting.
Grim reading
The subtext to this seems to be, 'let us get on with our little VAT fraud or your client won't get paid'. That's not something I could leave alone.
Me neither
The subtext to this seems to be, 'let us get on with our little VAT fraud or your client won't get paid'. That's not something I could leave alone.
Me neither.
So, give...
...them the invoices & do a report. What's the problem?
Okay: I do understand. But I want to see the sparks get paid.
Who are you going to report?
The contractor and/or the client for facilitating the fraud?
Lazy
I did tell them they cannot claim vat on other peoples invoices but they said they could because they were paying my client for them.
And so they could - if only they arranged for the goods to be supplied direct to them. Agree with DMG above.
"Lazy" can be so expensive.
Anyway, I'm sure they won't mind you telling HMRC all the details so that you can set your mind at rest.
Disbursement = VAT claimable
Perhaps the contractor is treating the goods purchased as a disbursement incurred on their behalf buy the subcontractor, maybe that's what's in the contract?
If that's the case then no potential profit margin for the subcontrctor (other than a possible handling fee / delivery fee or labour charges).
For the disbursement to be tenable purchase invoice would need to be one of two things:
EITHER
a cash sale invoice (with mutual agreement that the purchase is made on behalf of the contractor by the subcontractor)
OR
addressed to the contractor
The disbursement route makes the subcontractor look more like an employee than a self-employed person.