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VAT Box 7 and supplies from unregistered traders

VAT Box 7 and supplies from unregistered traders

Hello everyone,

This question has been discussed almost two years ago but as it is still not clear I thought to raise it again. 

Are supplies from non VAT registered suppliers to be included in the VAT Return box 7?

I think this question is especially important for cases when the supply is VATable (standard or reduced rate) and affects Box 4. My concern is that including these supplies into Box 7 may later on be brought up by HMRC misleading their credibility checks (the purchases:sales ratio is abnormal, VAT repayments are being claimed where none were before, or your VAT repayments are higher than normal, etc.). In any case, it is confusing.

A definitive answer with supporting references if possible please.

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By DJKL
03rd Feb 2016 10:50

Yes if not excluded as not relating to a supply

Surely yes, HMRC guidance is pretty limited as to what purchases do not go in box 7, I would add a few more like corporation tax, but it makes sense to me anyway The fact is that just because a particular trader is not registered his sale to someone it is still a supply and needs included.

I have never heard of HMRC getting particularly miffed about omission unless the supplies omitted say impact a partial exemption calculation or a standard/zero rate apportionment for a retail scheme.

Re retail schemes it is possible to get craft suppliers etc to souvenir shops who are not registered , omitting them from the calculations/return would lead to miscalculated standard/zero apportionment: I have a client in this position and each quarter have to curtail  his tendency to treat them all as zero rated re apportionment( as there is no vat on the invoice.) and process them under the appropriate head depending on what is being sold.

Whilst HMRC guidance is not well written, see below, why do you think there is an issue?

However, you do not include the value of any of the following:

wages and salariesPAYE and National Insurance contributionsmoney taken out of the business by youloans, dividends, and gifts of moneyinsurance claimsStock Exchange dealings (unless you are a financial institution)MOT certificatesmotor vehicle licence dutylocal authority ratesincome which is outside the scope of VAT because it is not consideration for a supply3.9 Filling in box 8

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03rd Feb 2016 11:28

Let's face it .....

..... it doesn't matter, really, does  it ?

A VAT Officer once moaned about stuff I'd missed out of (what is now) Box 7 at a Control Visit. "Fine", I said, "just work out what it should be and send us your assessment."

He screwed up his eyes. "Oh, there'll be no effect on the VAT payable," he said.

"No," I said.

Points made and taken on both sides.  No further action.

We moved on.

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By DJKL
03rd Feb 2016 11:49

Agreed; in the main a non point

lionofludesch wrote:

..... it doesn't matter, really, does  it ?

A VAT Officer once moaned about stuff I'd missed out of (what is now) Box 7 at a Control Visit. "Fine", I said, "just work out what it should be and send us your assessment."

He screwed up his eyes. "Oh, there'll be no effect on the VAT payable," he said.

"No," I said.

Points made and taken on both sides.  No further action.

We moved on.

Agreed, I think  it is only re vat  apportionment schemes that their omission from returns/calculations may lead to errors in the vat due calculations.

I have a client vat visit coming up  at end of the month, must ask the officer during his visit whether they have any "policy" re the issue?

Thanks (2)
03rd Feb 2016 12:42

Could do, but ........

DJKL wrote:

Agreed, I think  it is only re vat  apportionment schemes that their omission from returns/calculations may lead to errors in the vat due calculations.

Mmmm - I don't see that as a Box 7 issue, per se.  What goes in Box 7 isn't necessarily the same as the figures I'd use for TOMS or a retail scheme. What do you have in mind ? Partial exemption ?

Quote:

I have a client vat visit coming up  at end of the month, must ask the officer during his visit whether they have any "policy" re the issue?

Don't bother - they don't have one.

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By Tykva
04th Feb 2016 14:21

Notice 700:

"6.1.1 Taxable supplies

Supplies of any goods and services, which are subject to VAT at any rate, including the zero rate and reduced rate, are called taxable supplies. They are called taxable supplies whether you are registered for VAT or not."

"6.1.2 When VAT registration is required

...

If you are registered for VAT, you must charge and account for VAT on all your taxable supplies from the date that you are first registered."

"3.2 What is VATSupplies are outside the scope of the tax if they are:·         made by someone who is not a taxable person·         made outside the UK and the Isle of Man (but see paragraph 4.8.3 for special place of supply rules for certain international services)·         not made in the course or furtherance of business” 

"Value Added Tax ACt "Scope of VAT on taxable supplies.

(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. 

(2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.""

Thanks (1)
04th Feb 2016 12:32

Box 7

The references to taxable supplies in Notice 700 support the inclusion in Box 7 of supplies from non registered suppliers. But, as the previous comments confirm, do not spend too much time on this issue. The data merely goes into the UK trade statistics, so an 'error' of £1,000 is not going to be significant in the bigger scheme of things,

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By DJKL
04th Feb 2016 13:00

Don't know about that

leshoward wrote:

The references to taxable supplies in Notice 700 support the inclusion in Box 7 of supplies from non registered suppliers. But, as the previous comments confirm, do not spend too much time on this issue. The data merely goes into the UK trade statistics, so an 'error' of £1,000 is not going to be significant in the bigger scheme of things,

Don't know about that, maybe the constant revision of National Statistics these days (much to George's chagrin) is down to multiple traders not understanding what to include on their returns.

 About as much use as the survey questionnaires they keep sending me (quarterly under pain od death)  re one of our entities that is virtually dormant. (Nil, Nil, Nil, None, Nil, Nil, None)

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By Tykva
04th Feb 2016 14:19

The problem in our case is that it is thousands of GBP.

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04th Feb 2016 14:38

Not really

Tykva wrote:

The problem in our case is that it is thousands of GBP.

It's still not a problem.

What are the consequences of getting it wrong ?

A VAT officer whinging at a control visit ?

Toss a coin and move on with your life.

Thanks (1)
By DJKL
04th Feb 2016 14:56

Curious business

Tykva wrote:

The problem in our case is that it is thousands of GBP.

You are a curious business if you pay thousands per quarter for supplies that would be within the scope of vat were the parties vat registered?

To be clear , presume you are not talking about other supplies without vat from non UK persons, or supplies that maybe ought to be treated under say a secondhand goods scheme?

Whilst I do come across a range of payments to non registered parties in the course of my work they tend to amount  to a couple of hundred pounds most quarters for most clients ( except when they get my fee,as I am not vat registered being a part time practice- mainly evenings/weekends)

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04th Feb 2016 12:49

Stopped

I stopped caring many, many years ago.

Near enough is grand.

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By Tykva
09th Feb 2016 15:54

HMRC reply: "I refer you to VAT Notice 700/12 how to fill in and submit your VAT return.

In particular, paragraph 3.8 filling in box 7 which says that you must show the total value of your purchases and expenses but leave out any VAT.

Therefore, any goods and/or services you make payment for would be included in box 7."

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09th Feb 2016 16:48

Exempt

Tykva wrote:

HMRC reply: "I refer you to VAT Notice 700/12 how to fill in and submit your VAT return.

In particular, paragraph 3.8 filling in box 7 which says that you must show the total value of your purchases and expenses but leave out any VAT.

Therefore, any goods and/or services you make payment for would be included in box 7."

Oh - so they want exempt supplies in there ?

That's the thing - it's all very woolly and unclear.  Why can't they just add in a sentence that makes it unequivocal ?

So - what sanctions did they impose ?

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