To VAT or not to VAT

To VAT or not to VAT

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Stamps are exempt from VAT. My company does not therefore charge VAT on invoices when we recharge at cost to clients. However we actually provide a service, taking the clients letters, stamping them and posting them. The costs and also savings of the franking are not included in the charge we make to the client. Should we charge VAT as this is a service?
We also pass on the costs of rates. However in the majority of cases the rates are in our name and we do quite a bit of work in allocating, appealing etc to ensure the rates are correct. Could this also be classified as a service and therefore VATable?
Graham Mercer

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By NeilW
27th Apr 2005 13:29

Incorrect treatment
What you get on your input VAT does not relate in any way to your output VAT.

Stamps are only VAT exempt if you sell them as unused postage stamps to other people at or below their face value.

If you just use them as part of a service (ie put a stamp on a letter), then that is a standard rate supply. Even if you supply stamped envelopes that is a standard rate supply.

There is *no* connection between what you spend and what you 'recharge' to customers. They are completely separate from a VAT point of view and must be treated as such. It is just a line item on the invoice, like hours billed. You can charge expenses for a profit, a loss, or at cost. It doesn't change the VAT treatment.

The rule of thumb ought to be that items you provide are standard rated until proven otherwise.

NeilW


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