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Reissuing VAT invoices to separate VAT exempt disbursements

Reissuing VAT invoices to separate VAT exempt...

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A client has recently had a VAT visit that has discovered that he incorrectly charged £40.75 MOT fee to customers as exempt when he was only paying £28.00 to the MOT centre.

The HMC&E have raised an assessment for VAT on the basis of the MOT being VAT inclusive and therefore on the full sale price of £40.75, not just the service charge of £12.75.

We acknowledge that the client should have shown £28 MOT fee as exempt with the remaining £12.75 as VATable to properly adhere to VAT disbursements rules.

We have suggested to the HMC&E that if our client was to raise credit notes and reissue invoices showing the MOT fee and service charge separately that he would only have to account for the VAT on the £12.75.

HMC&E have stated this is not allowed, does anyone have any views on whether or not raising credit notes and reissuing invoices should be allowed?
Daniel Grenham

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By frauke
17th Mar 2006 21:48

VAT exempt disbursements
You may have an additional problem.

Another accountant I know, is currently fighting a vat assessment on VAT exempt disbursements, (also car industry) which were listed seperately on every invoice. The VAT office have assessed the disbursement for VAT on the grounds it is part of the service provided, even though it was shown seperately.

It will be a while before I know the final outcome.

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By AnonymousUser
21st Mar 2006 12:13

on a losely related matter

Can anyone please tell me if the fees from MOT are taken into account when calculating the vat registration threshhold ?

I always thought they were excluded.


I hope you dont mind me slipping in this question Daniel.Thanks.

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22nd Mar 2006 09:29

Response to previous comments
No worry about posting a related question.

The MOT fees if treated correctly as a disbursement are exempt.

Exempt supplies are NOT included within the turnover for the VAT threshold calculation.

Regarding Frauke's point, what were the disbursements in your case as MOT fees are clearly disbursements when treated correctly on the invoice. Other items recharged would depend on the exact nature of the charge and who the service was provided for.

However, the MOT is a service provided by a third party for the final customer and not for the VAT trader and therefore if trader simply passes on the cost (with no profit or additions) then it does qualify as a disbursement and is exempt.

Back to the original question, has anyone actually got a view / opinion on the reissuing of the invoices?

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