Incorrect VAT invoice

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We are foreign business reclaiming UK VAT through VAT refund claim for foreign businesses (VAT Notice 723A). Everything is going fine with VAT returns, but we have doubt about invoics from UK suppliers that are without VAT (and in our opinion it's services that should be taxed in UK). 

Questions: 

1. Can we get penalty if our UK supplier should have charged UK VAT and it didn't? We don't know why they don't charge it, but we are sure service is taxable in UK. 

2. For foreign businesses VAT refund is possible until 31.12.2023. for invoices dated from 01.07.2022. till 30.06.2023., what will happen if supplier will correct one of those invoices after 31.12.2023. will we still be able to reclaim VAT, or not? Is date of correction or when Invoice is issued important or date when service is made? 

Replies (8)

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Stepurhan
By stepurhan
01st Dec 2023 13:28

UK businesses only have to charge VAT if they are VAT registered. They do not need to register until their 12-month turnover goes above £85,000. So if you are dealing with a small business, they will never charge VAT.

Other than that, have you talked to the supplier? A discussion on why you should be charged VAT might be worthwhile. It could just be a case of them not being aware of the option, with the complexity of the VAT rules.

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By Many
01st Dec 2023 14:22

It's not one invoice, it's hundred of invoices, and it's time consuming to chase suppliers to correct invoices and reasons why there is no VAT.

So I am wondering about our responsibility (questions above).

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Replying to Many:
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By Southwestbeancounter
01st Dec 2023 14:40

I think @stephuran may well have answered your question in their reply above:

"UK businesses only have to charge VAT if they are VAT registered. They do not need to register until their 12-month turnover goes above £85,000. So if you are dealing with a small business, they will never charge VAT."

So..... If they legitimately didn't have to charge VAT, then they would not have charged VAT so there is no VAT to reclaim in that instance.

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Replying to Southwestbeancounter:
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By Many
02nd Dec 2023 06:19

Thank you, I have read that about 85k, also I know some services are exempt in UK even UK has right to tax (example work on new residental buildings). That just complicate things, it's hard to control and dispute invoices from all over world as every country has different tax laws. But from experience its not that they are under 85k, they just mix it up because of DRC or something.

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By FactChecker
01st Dec 2023 15:23

Or, to put it more bluntly, you are hopefully not 'reclaiming VAT' that you can't demonstrate you've paid (as VAT - not merely as what you think should've been VAT)?

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Replying to FactChecker:
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By Many
02nd Dec 2023 06:09

FactChecker wrote:

Or, to put it more bluntly, you are hopefully not 'reclaiming VAT' that you can't demonstrate you've paid (as VAT - not merely as what you think should've been VAT)?


No we dont reclaim, there is nothing to reclaim there, but it is better option for us then having to wait 9-12 months for HMRC to refund us.
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VAT
By Jason Croke
01st Dec 2023 17:01

You would not submit invoices to HMRC that are without VAT, if you are making a VAT refund as anon-UK business (Notice 723) then you'd only be submitting invoices with VAT shown on the invoice.

HMRC would therefore not see any of the invoices from the suppliers who have not charged VAT because you don't need to supply them to HMRC as there is no VAT to reclaim.

To sort of answer your question, HMRC could have a random inspection of your supplier and HMRC could force the supplier to issue a retrospective VAT only invoice to you as the customer on the basis the supplier was getting the VAT treatment wrong and should have been charging UK VAT. HMRC will assess the penalty on the supplier as it is the supplier who is responsible for getting the VAT right.

The supplier could raise a VAT only invoice to you and then depending on the contractual terms, you may be required to pay this VAT over to the supplier (who then pays over to HMRC), you would in theory still be in time to make a UK VAT refund on the basis that the VAT only invoice would have a current date on it which could then go into the next year claim window.

What makes you think the place of supply is the UK? Default rule is reverse charge/taxed where the customer is except for certain land related services and live performances/exhibitions.

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Replying to Jason Croke:
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By Many
02nd Dec 2023 06:06

Yes, that is everything I need. We are mostly receiving construction work related services that are exempt from main B2B rule and goods that are not exported outside UK, so UK has right to tax. UK suppliers probably mess it up because of DRC, and because sometimes we import some of goods.

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