The worm that turned?

Time to do something about the MTD ITSA fiasco

Didn't find your answer?

Enough is enough.

As a profession we have put up with all the stupid initiatives heaped on us over the years, but really MTD ITSA is the final straw.

A firm can have hundreds or thousands of tax returns to file annually and currently has between April and January to get them all done, which is barely manageable, but we are used to it and the system works.  

Now we are expected to file them quarterly.  They are not simply 'updates', they are tax returns.  Don't be fooled into thinking any initial concessions to allow estimates, or rubbish to be filed will last.

This is just not feasible.  It will be January every few months.  

What are we supposed to do?  Quadruple our fees?  Quadruple our staff?  (can any firms even manage to recruit anyone at this time?)  Sack 75% of our clients?  Who else would even have capacity to take them on?

This is going to take a wrecking ball to the entire profession and the taxpaying public. We are sleepwalking into an almighty mess and nobody is doing anything about it.

We have heard this week that the professional bodies have written to the Government expressing their 'support' for the proposals but merely urging 'delay'.  Support? Delay?  This thing needs strangling at birth.

I am loathe to say trade union, but is it now time that some sort of professional accountants association was formed that takes a more confrontational approach and loudly and rudely calls out this BS?

Thoughts?

Replies (436)

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Replying to johnhemming:
RLI
By lionofludesch
28th Aug 2021 15:36

johnhemming wrote:

Hand signed by the minster?

The minster ?

Well, there are several in these parts but I wouldn't expect that .....

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Replying to johnhemming:
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By Paul Crowley
28th Aug 2021 15:27

Very unlikely my clients read the FT
They might read the local rag
But the local rag chose not to engage with me
They wanted me to buy an advert to express my opinion on MTD

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neand
By neanderthal
28th Aug 2021 10:27

i am a small practitioner dealing with smalll clients (unorganised and too busy to make a living an paythe gvnt 50% of that) with small number of staff and resources. all this MTD business is a fallacy. Efficient software (promoted by professional bodies as a panacea - perhaps because it will only serve to fill their coffers) will not solve the problem becasue no software deals with chasing clients 4 times and entering info by magic wand. On the other hand, you cannot realistically tell clients thair fees is going up 4X or that they should do their own bokkeeping. in a nutshell, come the next day i will not have a practice and all my liefetime's hard work will disappear. as simple as that. i spoke to my PB about all this and they are grateful for my insight!

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Replying to neanderthal:
By petersaxton
28th Aug 2021 12:29

You dont have to increase their fees dramatically. Make a sensible judgment call about which clients can explain their transactions properly. Get clients to attach documentation to transactions or send them to you. The one's who make an effort will only see a slight increase in fees. The client's who dont make an effort will have their accountant deal with their accounts at the back of the queue and will see penalties from HMRC.

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paddle steamer
By DJKL
28th Aug 2021 13:21

I do so love the idea of accounts prepared just from bank transactions, untouched by human hand so to speak, bank feeds leading to HMRC submission without a care in the world; I just wonder how that might have worked with things like the time, a number of years ago, that one of our beasties received circa £250k by mistake from a TV company, it took a long time for the banks to get their act in gear and correct it, over 7 weeks we sat with that money.

There is also going to be great fun with the business that say receives deposits for future sales, agents whose turnover is commission not receipts and the thousand and one other peculiarities of particular activities.

There is also eventually the larger beasties who whilst turning over in the hundreds of thousands are not vat registered and have never had to worry about quarterly accounts ( which I believe do not really help us anyway, these days I spend my time monitoring cashflow not profit, but luckily we are a partnership so fair few years before MTD finally catches up with us and I, anyway, will be long retired by then)

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Replying to DJKL:
By petersaxton
28th Aug 2021 13:48

There's sales invoices to be posted. Documents to be attached.
The peculiarities you mention would have to be dealt with at the end of the year so I dont see the problem with dealing with them in a more timely manner.

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Replying to petersaxton:
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By DKB-Sheffield
28th Aug 2021 15:59

petersaxton wrote:

There's sales invoices to be posted. Documents to be attached.

Hi Peter,

IMO and based on my circumstances, and including time to open file, review and enter (excluding chasing)...

1. Posting 24 sales invoices, once per year - 10 minute job
2. Posting 6 sales invoices, 4x per year - 9 minute job per quarter
3. Posting 2 sales invoices 12x per year - 8 minute job per month
4. Scanning invoices, attaching to bank feed transactions and posting - 5 minutes per invoice.
5. Ask the client upload all of the information. However some of the photos of documents I've had from clients are illegible and low res. - 10 minutes on the phone telling them how to take a proper photo!

Clearly, all of this assumes clients have the technology and understand it! Some of mine don't

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Replying to DKB-Sheffield:
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By DKB-Sheffield
28th Aug 2021 16:35

Addendum!

Just checked and my estimate was out! 20 mins to post 24 invoices BUT 10 mins of that was opening and closinslg software!
24 invoices = 20 mins x 1 year
6 invoices = 13 mins x 4 quarters
2 invoices = 11 mins x 12 months

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Replying to DKB-Sheffield:
By petersaxton
28th Aug 2021 18:19

The client I am moving over onto Xero has been shown how to enter sales invoices on Xero. I have prepared explanations for the more usual activities and I link to videos.
I dont see why it should take any longer than how they do it before using Xero.

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Replying to petersaxton:
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By Paul Crowley
28th Aug 2021 18:37

And 5 times a year
not once
So should be no fee increases at all really

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Replying to Paul Crowley:
By petersaxton
28th Aug 2021 18:55

What is five times a year? Submitting the returns?
I would suggest that accountants makes sure information is right throughout the year rather than after the year end. Some people seem to be obsessing on the sending of data to HMRC. When people prepared VAT returns was it the submitting the data to HMRC that was the problem or ensuring that the data behind the figures was right?

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Replying to petersaxton:
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By Jimess
01st Sep 2021 11:19

Surely the review of the information and checking that the data behind the submission is correct is all part and parcel of the process of submitting VAT returns for clients. In most cases the accountant does not have access to the information throughout the quarter to adjust and amend throughout the VAT period. If there are only a few clients you are working with that provide constant access in that way you could manage that process, but certainly in my firm it would be entirely unworkable for the multiples of clients we are looking at with MTD for ITSA, we simply would not have the manpower to manage that process. Bear in mind that self assessment and tax returns are only one part of the work that most small accountancy practices carry out and a good majority of it is not the bread and butter work. MTD for ITSA also threatens the ability of small practitioners to service any other work that they carry out. It is not just MTD for ITSA clients that we need to think about, it is the entire run of work that the practice does over the course of a year.

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Replying to Jimess:
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By johnjenkins
01st Sep 2021 11:31

You're so right. To do what Peter does would be to completely re-organise your business with outlay for manpower that may not be justified and much not being able to be reclaimed. The alternative will be a lot of small self employed doing cash work and only declaring £9999.

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Replying to Jimess:
By petersaxton
01st Sep 2021 11:43

If you are doing MTD for VAT and then MTD for ITSA there will still be personal tax returns, company accounts and tax, payroll, confirmation statements, etc. but MTD will help to make a lot of that work easier.

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Replying to petersaxton:
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By johnjenkins
01st Sep 2021 12:24

Doing work digitally can make work easier. MTD incorporates quarterly updates mandatory which will not make work easier. All the medium to large sized business will probably be on digital accounting in some form because their volume of paperwork will dictate their software. To even consider that a business with an income of £10k should do quarterly updates to eliminate errors and so that HMRC can notify the tax liability is too ludicrous for words. Surely, Peter, you can see this.
The problem now being that if HMRC are even considering £10k as the threshold there is something very seriously wrong with their thought process. Logic says that all business should submit quarterly updates, there's no point in having a threshold.

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Replying to johnjenkins:
By petersaxton
01st Sep 2021 13:11

"To even consider that a business with an income of £10k should do quarterly updates to eliminate errors and so that HMRC can notify the tax liability is too ludicrous for words. Surely, Peter, you can see this.
The problem now being that if HMRC are even considering £10k as the threshold there is something very seriously wrong with their thought process. Logic says that all business should submit quarterly updates, there's no point in having a threshold."

You seem to be arguing against yourself. You say "To even consider that a business with an income of £10k should do quarterly updates to eliminate errors and so that HMRC can notify the tax liability is too ludicrous for words." and you also say "Logic says that all business should submit quarterly updates, there's no point in having a threshold."

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Replying to petersaxton:
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By johnjenkins
01st Sep 2021 13:48

Not so, Peter. What is the point of having a threshold, it defeats the object of the exercise, which is to eliminate errors and notify tax liability. So logic says "no threshold" The point I was making about the £10k threshold is the thinking behind it. Who chose the £10k threshold and why? These are two different statements, Peter.

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Replying to johnjenkins:
By petersaxton
01st Sep 2021 14:53

Are you saying there shouldn't be a threshold?

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Replying to petersaxton:
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By johnjenkins
01st Sep 2021 15:57

I'm saying there shouldn't be quarterly updates, but if you are going to have them then they should be for all business. I'm also a great believer in all business to be VAT registered with the proviso that no money changes hands between registered business. There seems little point in thresholds if everyone has to do quarterly updates.

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Replying to johnjenkins:
By petersaxton
01st Sep 2021 16:59

So somebody who does some self employed work while looking for another permanent job should get set up for MTD for ITSA even if they only earn a couple of thousand pounds.
I have a client who has self employed income of £1,000 per year. You think he should be registered for VAT.
"no money changes hands between registered business"
They all work for free?
"There seems little point in thresholds if everyone has to do quarterly updates."
You could say that the threshold is £0.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 09:13

Does it matter if someone is on PAYE and has say rental income of £9k or £11k? You totally miss the point.
No VAT changes hands between registered business but I'm pretty sure you knew what I meant, and yes, Peter, all self-employed should be VAT registered. The reason for this is quite simple. VAT is not supposed to be a tax on business. By having a threshold greater than £0 it does become a tax on business.

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Replying to johnjenkins:
RLI
By lionofludesch
02nd Sep 2021 09:34

johnjenkins wrote:
The reason for this is quite simple. VAT is not supposed to be a tax on business. By having a threshold greater than £0 it does become a tax on business.

VAT is a tax which is borne by the retailer. Joe Public is only interested in what he pays. Nesquik is the same price in the shops, whichever flavour you buy. Joe doesn't get his chocolate flavour cheaper - the retailer takes the benefit of the zero rating.

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Replying to lionofludesch:
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By johnjenkins
02nd Sep 2021 09:57

Wrong. Different flavours sometimes have different prices as do different coloured products. There is no benefit in zero or exempt ratings. The rate of VAT on any product is irrelevant. VAT is a purchase tax on Joe Public which is passed on by the registered business to HMRC. So what is the point of registered business paying other registered business a tax that it is not supposed to be on business?

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 10:13

"There is no benefit in zero or exempt ratings. "

20% VAT:
Selling price £120
VAT £20
Net price £100

Cost price £50
VAT £10

Profit £50

No VAT:
Selling price £120
Cost £50
Profit £70

or

Selling price £120
Cost £50
VAT £10
Total cost £60
Profit £60

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 10:24

Wrong. The selling price of £120 includes £20 vat. So if no vat the selling price is £100.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 10:47

Why should the selling price be different?
When a retailer sells something they ignore any VAT effect.
Are you saying that a retailer not VAT registered will sell something for £100 when all VAT registered retailers will sell for £120?

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 11:05

So, Peter, you go to the shops and see Nesquick priced at £120 (a little over priced but it'll do for the purpose of this exercise). Next door they are selling a similar (was going to say same but I know how pedantic you can be) product at £100. Which one would you buy?

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 11:34

It's being pedantic to check you meant VAT when you said "money"!?
Let's not mention VAT again and always replace it with "money" for your benefit.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 11:58

Ah, but you didn't check did you? You just made a comment, or was that your way of checking? No, Peter you quite rightly pulled me up, that's why I said similar not same. You see, Peter, I don't have a problem in being pulled up cos I know I'm not perfect, yet.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 12:05

You explained. We are all happy.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 12:11

Is that the Royal wee.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 12:28

No. I'm sure you are as well.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 11:41

"So, Peter, you go to the shops and see Nesquick priced at £120 (a little over priced but it'll do for the purpose of this exercise). Next door they are selling a similar (was going to say same but I know how pedantic you can be) product at £100. Which one would you buy?"

If I wanted the product I would most likely have bought it from the first shop I had gone into.

The sellers would decide prices based on costs and price elasticity of demand. Why shouldn't somebody else sell the products for £90 and possibly sell many more?

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 12:10

Ok, but next time (assuming you know that next door are selling the product cheaper and that they have got them in stock in the flavour that you like and that you had run out of the product and you wanted the product, no doubt you will tell me if I have missed anything out) which one would you buy?
The seller would have to take many things in consideration before coming to a selling price, including other similar products which could return more profit.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 12:31

I'd buy the cheaper one. Even if it was £110. You wouldn't think that was good to price it different to £100, at least according to your earlier statements.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 12:47

Trouble is you price it too high and/or sell too many you may have to register for VAT and that, Peter is another reason why you shouldn't have thresholds in VAT. It's called cliff hanging. (No Cliff jokes, please)

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 12:55

That's why entrepreneurs make the big bucks - or not

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 13:47

When clients first register for vat and you get the "do I have to", I say you want to be paying £1m in vat, then you know you're there.

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Replying to johnjenkins:
RLI
By lionofludesch
02nd Sep 2021 10:36

johnjenkins wrote:

Wrong. Different flavours sometimes have different prices as do different coloured products. There is no benefit in zero or exempt ratings. The rate of VAT on any product is irrelevant. VAT is a purchase tax on Joe Public which is passed on by the registered business to HMRC. So what is the point of registered business paying other registered business a tax that it is not supposed to be on business?

It's not my experience and I disagree with you in toto.

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Replying to johnjenkins:
RLI
By lionofludesch
02nd Sep 2021 10:42

johnjenkins wrote:

Wrong. Different flavours sometimes have different prices as do different coloured products. There is no benefit in zero or exempt ratings. The rate of VAT on any product is irrelevant. VAT is a purchase tax on Joe Public which is passed on by the registered business to HMRC. So what is the point of registered business paying other registered business a tax that it is not supposed to be on business?

Well, on the Nesquik thing, that's not my experience at all. I just disagree with you in toto and nothing will change that.

I would say that the benefit of registered businesses paying other businesses VAT (a system which has been adopted in many countries outside the EU) is, from the traders' point of view, they don't need to verify their customer's credentials, which I would see as a bigger ballache that charging VAT.

From the Government's point of view, they stand to lose a lot more cash if a retailer goes bust.

It's tried and tested. Be careful what you wish for.

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Replying to lionofludesch:
By petersaxton
02nd Sep 2021 10:49

Businesses would slap any old VAT number on their orders.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 10:58

See response.

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Replying to lionofludesch:
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By johnjenkins
02nd Sep 2021 10:56

Go round the shops, Peter, you will see the price differences (maybe not on Nesquick as I don't look at it cos I don't like the taste) on different flavours and colours. So we have a card system that verifies. As you are into cloud then surely you can see it wouldn't be difficult to check customers vat credentials. Don't forget, Peter, the Government want to make the UK the most advanced digital business blueprint in the world. World leaders in the digital field I heard being mentioned. Government might get stung if a retailer goes bust but look at what they're making on unregistered business.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 11:04

"Go round the shops, Peter, you will see the price differences (maybe not on Nesquick as I don't look at it cos I don't like the taste) on different flavours and colours. "

Is that due to VAT registrations? If I was in business and not VAT registered and I saw many retails selling an item for £120 I wouldn't say that that's because they are VAT registered and I should sell for £100. I'd say I could sell that for around £120 and make more profit.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 11:16

If you sold for £100 you would sell loads and make more profit. That's market forces and nothing to do with vat.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 11:50

"If you sold for £100 you would sell loads and make more profit. That's market forces and nothing to do with vat."

If you sold for £90 you would sell loads and make even more profit. That's market forces and nothing to do with vat.

This is why I said that you shouldn't reduce the price simply because there's no VAT being charged.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 12:03

Of course you reduce the price if there's no vat involved. Take the hairdresser that's not vat registered, they can charge cheaper than the one that is. Not rocket science.

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 12:20

"Of course you reduce the price if there's no vat involved. Take the hairdresser that's not vat registered, they can charge cheaper than the one that is. Not rocket science."

If the price is £120 for a VAT registered business a non-VAT registered business would not charge £100. They would charge what would maximise profits depending on price elasticity of demand. This may be £90 and it may be £130.

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Replying to petersaxton:
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By johnjenkins
02nd Sep 2021 12:29

Why wouldn't they charge £100? Or are you saying that they wouldn't charge £100 purely because the vat registered person is charging £120 and that the extra £20 is vat. They might feel that is the right price for any number of reasons

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Replying to johnjenkins:
By petersaxton
02nd Sep 2021 12:46

Not the best reason though. The best price is what makes more profit in total.

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