Vat question

Vat question

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Hi,

Am fairly new to Vat and wanted to ask advice.

We are Vat registered and have just paid for rental of display space at a fair.
We can of course now reclaim the input Tax back.

A client is willing to pay for these costs as a gesture of goodwill, but will have no involvement with it what so ever.

When the invoice is raised, should it include Vat to our Vat registered and very generous client?

David

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By martinfoley07
26th Jan 2007 18:38

hmm, marc...
......... experts can make hard work of non events (excuse the pun, but it fits well enough).

It is 100% a technical question as to "what exactly the money is for", as all posters (myself included) have said. There is (and can be) no doubt or dispute about that.
As HMRC would also (correctly) say, it is a question of fact.
Er.......that's where we get difficulties - when things are simple questions of fact!!
It seems likely the questioner is struggling a bit with that very aspect (from his question- although we havn't heard back from him yet, and I may therefore be totally misreading his ruminations)

As the giver is VAT registered it is hardly beyond the capabilities of mankind to note the invoice appropriately, without malice, without evil intent, without robbing HMRC of a penny, and with letting everyone get on with actually generating wealth, rather than endlessly agonise over exactly what the money really, really, and truly represents?

(n.b. usual caveats apply about not knowing full details of the circumstances. e.g. is one entity FRS, etc etc, which could skew the argument about a quiet life)

However, for the avoidance of doubt, a VATed invoice should not read "issued as a receipt for monies given without any strings or consideration for past, current or future services and as an absolute gift by the generous donee".

And as an aside, David, if it is a pure unadulterated gift, why give it to the company rather than the owner?
Since it is late Jnauary, as further aside to noone in particular, I wonder if Berlusconi's UK tax lawyer put VAT on his "gift" receipt !! (OK, I think I can guess the answer to the last one !! No receipt, right!?)

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By AnonymousUser
26th Jan 2007 14:02

I come to this late but...
Does your client receive anything in return for his money, i.e. does it represent "consideration" for "something done"? If not, no VAT is chargeable. Otherwise it is. Charging VAT for a quiet life is not an option - if VAT is not properly chargeable it is not input tax in the hands of your client and he has no entitlement to recover it. The receipt of a donation or gift (if that is what it is) will have no bearing on your right to deduct VAT on the rental of display space, providing it was rented for the purposes of a (taxable) business carried on by you.

Hope this clarifies and draws together the various strands for you.

Marc

[email protected]

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By martinfoley07
24th Jan 2007 10:57

what's in a word.
The word in the question I find interesting, David, is "invoice".
Is this an accurate use of the term, or a Freudian slip, or an innocent slip?

Why would you invoice someone for a gift ?
The act of invoicing is what highlights the matter, surely. What are you going to put on the invoice as a description of the transaction/gift/goodwill gesture?
Does he regard this as a gift?
Or is he providing you a service in return for which he expects something such as better relationship, better terms etc etc.

Whatever, is the client VAT registered?
If he is, just put VAT on the invoice and have a quiet life!! (as soon as I saw the title "Simple VAT question" it was odds on it would not be!!)
If he is not VAT registered, then it really is a matter of determining exactly what this gesture of goodwill is for VAT purposes (indeed, what it is for IT and/or CT purposes, although that is probably more open and shut) and careful wording of whatever document it is that you give him to confirm the safe receipt of his generous money!

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By theaardvark
23rd Jan 2007 16:53

No!
How David records the payment is books has absolutely no bearing on whether he should account for VAT or not.

Value Added Tax Act 1994 s.1 Para(1):

"Value added tax shall be charged, in accordance with the provisions of this act on the supply of goods or services in the United Kingdom..."

If there is no supply from David to his customer in return for this payment then there can be no requirement to account for VAT. If his customer expects nothing in return then what supply can there be?

This is very similar, in VAT terms, to grants given by Govt. and charities. It is given with no expectation of anything in return.

Regards

Paul Taylor
Senior VAT Consultant
Dains

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By theaardvark
23rd Jan 2007 14:14

No.
If your Client is genuinely providing you with a contribution toward your costs and is not receiving or expecting to receive anything in return then there is no supply from you to him / her. No VAT will therefore be due on the payment.

You must be absolutely certain that the Client receives nothing for his payment, including any advertising or preferential treatment.

You should also note that, as there is no supply, you cannot issue an invoice. If you must issue some documentation you should refer to it as either a "receipt for payment" or "request for payment" to avoid possible confusion.

Regards

Paul Taylor
Dains

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By User deleted
23rd Jan 2007 15:25

Yes....
David, you have already paid for the rental (including vat...!)
you need to record that payment in your books. The client is paying you ...and how are you going to record the receipt ( I dont think you can use as contra entry, as they are two different transacations...)

I think you need to raise an invoice to your client with vat on it...
(unless your client treats that as his drawings / personal )

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By User deleted
23rd Jan 2007 13:28

Yes
Not sure what comment to put - other than - yes!

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