My client is a VAT registered Limited construction company. They pay a procurement company for various services including purchasing materials and health and safety equipment for various jobs. The procurement company is NOT VAT registered.
The procurement company has purchased some fire extinguishers for my client and paid for them out of their own pocket. They have issued my client an invoice for this cost and also provided receipts which are all in the name of my client. Can my client claim back the VAT? If so, should the procurement company be invoicing my client?
Thanks
Replies (16)
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Ask the procurement company, to ask their own accountant.
are they applying disbursement rules?
essentail reading , for all parties to the arrangement.
indeed I would expect the procurement company to have alerted thier customer base to the ' rules'.... as a part of the good service they offer !!
What Frank is saying is ..... it depends.
There's not enough information.
To whom did the fire extinguisher company address the invoices for fire extinguishers ?
But it doesn't look good. It's no way to run a procurement company.
Ask the procurement company, to ask their own accountant.
are they applying disbursement rules?
essentail reading , for all parties to the arrangement.
indeed I would expect the procurement company to have alerted thier customer base to the ' rules'.... as a part of the good service they offer !!
If I understand correctly, the procurement company has purchased goods (fire extinguishers) but it has purchased those goods in the name of the construction company.
How has it done that? Is it acting as an agent, buying goods on behalf of and in the name of the construction company and then just passing the invoice over to the construction company?
Couple of questions. 1, presumably the procurement company charges a fee for this service, is that correct? 2, why is the construction company getting a third party to buy goods in their name when they could buy the goods themselves in their own name?
I get that a procurement company might be able to get better discounts, but would think the suppliers would be billing the procurement company, but you've stated the suppliers address their invoices to he construction company but are sent to the procurement company.
Frankfx is right to suggest asking the procurement company because it is not at all clear what the relationship is here, agent or principal. Until you identify who bought the goods/who owns the goods, the answer will be difficult to conclude.
I thought it would be a simple yes or no answer and some advice on how to post the entries to accounts.
Well, I don't know what made you think that !
Bottom line is - can your construction company produce a proper VAT invoice addressed to itself ? As an unregistered trader, the procurement company cannot do that.
I will now go back to client and procurement company. However, I know what the answer will be.... just claim back the VAT!!!
In which case, your job is simple, file SAR and disengage.
Take it you don't know the answers to the 2 questions I asked. If it were me, I'd not make a decision on the VAT recoverability until I understood the contractual context of what is going on here. Even if the invoice is addressed to the contractor and has the suppliers VAT number, etc, that VAT may not be recoverable if HMRC take a view that there is a supply being made by the procurement company and therefore the flow is supplier sells to procurement, procurement sells to contractor.
"Vat is a simple tax'
Then laugh.
My quick take is that the procurement company do not know the formal process involved to optimise the position for their customers.
If they did they surely would have made that clear at the outset of the working arrangements.
Just have a look at the Westow Cricket club Vat ruling, see Accounting Web today.
As I said in my opening post revert to the procurement company
And the Vat legislation.
You are paying the procurement company good money.
Let them deliver excellent tailored service to you.
This 'procurement company' cannot be much more than a one man (van) business if it has not needed to be vat registered..
This 'procurement company' cannot be much more than a one man (van) business if it has not needed to be vat registered..
To keep things simple, I purposely left that point aside.
Reality, procurement company know zilch about VAT.
Unless of course they believe (rightly or wrongly) that the passed on cost of Purchases doesn't form part of there turnover, in which case they would only have the fee aspect as the threshold to determine vat status.
"I have gathered from the advice given that my initial question was not factual enough to give a straighforward answer"
Facts are important.
Buy protective work boots
From middle aisle Aldi, standard rated
Buy from specialist supplier and meet the prescribed conditions and rules, zero rated.
https://www.gov.uk/guidance/protective-equipment-and-vat-notice-70123
Just a cursory read of the foregoing should reinforce the importance of facts.
And remind you that VAT requires attention to detail.
If the Invoice is in your clients name then you can claim the vat. Does not matter who pays for it that's just bookkeeping.