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2 VAT queries (and a random one)

2 VAT queries (and a random one)

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1. While I was away at the weekend we had some workmen round.  My wife asked for an invoice so she could send them a cheque and they said if we pay by cheque they will have to add VAT, so couldn't we pay cash. "Haha", I said with a smile, "They're on the fiddle, they are basically saying if we force a bank entry on them by making them put the payment into the bank they will have to be honest and charge VAT".  Except they then went on to say BACS would be VAT free too.  What's with that?!?  Have I missed a rule that says payment method dictates VAT treatment?

2. Where a hotel/boarding house or similar is let for more than 28 days, does it become ZR?  I know that no VAT is charged, and that it doesn't become exempt, but the HMRC guidance seems to shy away from using the phrase 'Zero rated' as if this is a unique rule (SR but without VAT... though that is surely the definition of ZR)

3. If you say someone has a glow, would you pronounce the synonym 'oara' (aura) or 'oaroara'?  A chap pronounced it as the later, but I would say the former.  But then I wondered...

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Euan's picture
By Euan MacLennan
22nd Jul 2013 09:54

Northern Lights

'oaroara' goes with 'borealis'

but then, I am not sure that 'oara' is a glow (in this weather, it is more likely to be sweat) - it is more of an air.

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Quack
By Constantly Confused
22nd Jul 2013 10:27

I may have misspoke

I wanted to imply the word Aura but without saying it (though I seem to have then said it anyway!).  The chap was using it to predict the sex of a baby.

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By Democratus
22nd Jul 2013 10:41

Easy 3 in 1

if you pay the workman by BACS the aura surrounding their book entries changes to such an extent that the sex of the babies born within a 10 mile radius of the bookkeeper become indeterminable and the resulting Aurora in the northern sky becomes more visible, but only to those who have second sight and reached the VAT threshold.

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By thisistibi
22nd Jul 2013 10:43

Hmm

Maybe the BACS details weren't going to be the bank details you might expect, e.g. wife.  Whereas you might need more convincing to write out a cheque to his wife!

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By Steve Kesby
22nd Jul 2013 10:48

On question 1, I assume they must using the system whereby one bank account is VATable and the other isn't and they're proposing a BACS to the non-VATable bank account. It's a special system only available to builders, plumbers, window cleaners and the like.

On question 2, the supply remains standard-rated but the amount of the consideration is adjusted so that if no facilities other than the accommodation is provided the taxable amount of the consideration is just the first 4 weeks worth. See paragraph 9 of Schedule 6 VATA 1994.

What HMRC guidance are you referring to? Because notice 709/3 seems to me to make it clear that the liability of the supply  isn't changed, just its taxable amount value.

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Replying to Paul Scholes:
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By kiwilondon99
22nd Jul 2013 11:01

4%

 

steve re 22/7 10.48

I thought that vat became 4% after the first  28 days of the exact same individuals    ie if a company was the client/tenant and changed its in situ personnel then the rates revert to 20% first 28 days + 4% therefter.   for individuals, first 28 @20  balance @ 4%

 

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Replying to Paul Scholes:
Quack
By Constantly Confused
22nd Jul 2013 15:08

I need to broaden my horizons

Steve Kesby wrote:

On question 1, I assume they must using the system whereby one bank account is VATable and the other isn't and they're proposing a BACS to the non-VATable bank account. It's a special system only available to builders, plumbers, window cleaners and the like.

On question 2, the supply remains standard-rated but the amount of the consideration is adjusted so that if no facilities other than the accommodation is provided the taxable amount of the consideration is just the first 4 weeks worth. See paragraph 9 of Schedule 6 VATA 1994.

What HMRC guidance are you referring to? Because notice 709/3 seems to me to make it clear that the liability of the supply  isn't changed, just its taxable amount value.

That explains quite a bit, as usual I have looked over Schedules 7A to 9 and assumed all answers are contained there.  I should spend some time reading the other Schedules...

As to where I found the 'ambiguous' phrasing, good question...  It will have been 709/3, though re-reading it now it seems much clearer than on my previous reading.  Blame my Monday morning brain I think.

This whole 4% effective rate concept is completely new to me however, so I will have to read up on it.

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By Steve Kesby
22nd Jul 2013 11:19

Agreed

There is a minimum of 20% of the consideration that is deemed to be for facilities (reception, cleaning, meals, etc), so the part of the stay over 28 days will still have an effective VAT rate of 4%.

And corporate block bookings where the staff change will reset the 28 day clock.

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Replying to memyself-eye:
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By kiwilondon99
22nd Jul 2013 15:24

vat comp example + follow up

 

steve: thanks

not 100% sure of the basic calculation

Assume room is £ 100 / night excl

1]  is it then for the first 28 nights £ 100+ 20% vat  = £ 120 /night   AGREED

and then for

2]  excess of 28 nights £ 100 +(20% of 20%VAT)  = £ 104 incl vat           ie vat @ effective 4%

or

3] excess of 28 nights  £ 100 - less 20% of the minimum consideration  your comment above = £ 80 + vat @ 20% = £ 16  and   Total £ 116

 

Out of interest, may i ask what what did you meant by the phrase  ' a minimum of 20% of the consideration that is deemed to be for facilities'  and by implication what is the maximum and how does it feed through re vat - hence my query re option 2 + or 3] above 

 

I have looked at a couple of providers T&C's and they tend to state inter alia :     VAT is charged at the rate in force at the date of invoicing. Currently, where named individuals occupy the apartment, VAT is charged at 20% for the first 28 nights, and at 4% thereafter

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Replying to memyself-eye:
Quack
By Constantly Confused
23rd Jul 2013 09:02

Thanks, just so I'm clear...

Steve Kesby wrote:

There is a minimum of 20% of the consideration that is deemed to be for facilities (reception, cleaning, meals, etc), so the part of the stay over 28 days will still have an effective VAT rate of 4%.

And corporate block bookings where the staff change will reset the 28 day clock.

So... (sorry if I'm repeating what is above), the first 30 days is standard rated as it is an exception to the general rule in Sch 9 Group 1, however if the same person occupies for more than 28 days then the VAT on the accomodation becomes free of VAT (Sch 6 Para 9(1)), but not on 'facilities other than the right to occupy', and the value of such facilities are always taken to be at least 20% of the total value.

So if a B&B is let out for 28 days at £100 a night there will be VAT of £20 per night added to it.  From day 28 there will be VAT on at least £20 of the £100, but not the remainder.  If food and drink represents 50% of the cost, then there will be VAT on £50, but if all that is provided is bread and water then it will still be £20 that is used.

 

 

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By Steve Kesby
22nd Jul 2013 16:11

@kiwilondon99

You need to look at the appendix to VAT Notice 709/3, but your 2 and 3 should come out with the same result, either:

a) you look at the VAT exclusive amount so £100 + £20 VAT for the first 28 days and £100 + £4 VAT (£100 x 20% x 20%) thereafter, or

b) you look at the VAT inclusive amount £120 (including £20 one-sixth VAT) for the first 28 days and £104 (including VAT of £120 x 20% x 1/6th = £4) thereafter.

So your calculation 3 doesn't compare like with like.

The "minimum" 20% just means that if the actual amount of consideration attributable to services other than mere provision of the room exceeds 20%, then it's that actual amount that prevails. If the actual amount attributable to those services is less than 20%, then it's 20%.

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By Steve Kesby
23rd Jul 2013 13:55

@CC

I don't disagree with anything you've said there. I assume the mention of 30 days in the first paragraph is a typo. There's no mention of 30 days in Schedule 9 and Schedule 6 refers to 4 weeks.

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Replying to stepurhan:
Quack
By Constantly Confused
23rd Jul 2013 15:39

Thanks

Steve Kesby wrote:

I assume the mention of 30 days in the first paragraph is a typo. There's no mention of 30 days in Schedule 9 and Schedule 6 refers to 4 weeks.

Gah I put 30 days then realised and went back and changed them all, except I clearly missed one!  I blame the heat...

Well I've learned something today, which is good.

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By Chris Smail
23rd Jul 2013 14:22

There are other reasons for asking for cash on the nail.

Such as avoiding bad debts, cashflow and so on

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By kiwilondon99
08th Oct 2013 22:17

@Steve

@steve - sorry it has been a while re the above thread

 

if a client was to take a 90 day contracted  booking of an apartment, and invoiced at day 0 30 + 60 -  in essence for the following 30 days [ ie 3 invoices]

 

is the first invoice therefore  28 days @ 20% VAT and 2 days @ effective 4%

 

then the next invoice period 2 and period 3 would be at  what rates

'continuation booking 30 days   @  4% VAT '  .........or ..........

do you in essence replicate invoice one [email protected]% and [email protected]%

 

tia

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Replying to atleastisoundknowledgable...:
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By aland
22nd Jun 2015 17:54

I think it's fairly obvious that it continues at 4% effective. How often you choose to present invoices can have no bearing on the vat due.

 

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