Share this content

VAT - How hard is it?

VAT - How hard is it?

Didn't find your answer?

I have requested a copy of a VAT invoice for a purchase made by credit card. The supplier sent me a VAT invoice but charged VAT @ 20% on the gross value. I politely replied and advised them that the invoice was incorrect and asked that they send a modified invoice.

They sent me a modified invoice showing the correct net amount, but no VAT charged on the card processing fee.

I replied again advising the invoice was still incorrect. They told me that the invoice is correct because they do not charge VAT on the card processing fee (they are not a bank or card provider - they provide goods and the goods were paid by card via sagepay). 

I asked again for a correct VAT invoice. I was sent an invoice which was completely different again and told that the goods were discounted and VAT charged on the full price.

I have now asked them to just confirm exactly which invoice they are using for their records so I can use the same for mine so the VAT is neutral at least.  However, I am concerned that the company is a large company with UK turnover c£19m.  Should I pursue this?

Replies (56)

Please login or register to join the discussion.

By mrme89
28th Jul 2015 16:13

I'd email them and spell out exactly how the invoice should be set out. For example:

Item £100.00

CC Processing Fee £5.00

Net £105.00

VAT £21.00

Gross £126.00 

 

Finish the email along the lines of 'I await your amended invoice and trust you will update your records accordingly'.

 

EDIT: This isn't a transport company is it?

Thanks (1)
avatar
By Gem7321
28th Jul 2015 16:14

I have already tried that, and the reply was 'VAT is not due on the card processing fee' so I replied advising that they should read s4.7 of VAT Notice 701/49 and I look forward to receiving the modified invoice.  Then I got an entirely different invoice from a different person so I said again that they really should read the VAT Notice. 

 

I am awaiting their next reply!

 

Does it warrant a report or is that a little extreme do you think?

 

EDIT: In reply to your edit - no, it is a straightforward domestic supply of goods.

Thanks (0)
Replying to johngroganjga:
avatar
By robertcl
30th Jul 2015 11:37

Currys

Gem7321 wrote:

EDIT: In reply to your edit - no, it is a straightforward domestic supply of goods.

I would assume Currys then. Their tills don't produce VAT receipts either, much less their invoices. I have to ask them specifically before paying that I need a VAT receipt. They then punch another few keys and sometimes even have to call a manager in order to get the till to produce a VAT receipt (and I've never been able to quite work out how that VAT was calculated, as it doesn't match up with the purchases).

How hard can it be to have their systems produce VAT receipts and invoices by default? There is no reason whatsoever for withholding VAT details regardless of whether it is a consumer or business customer.

Thanks (1)
By mrme89
28th Jul 2015 16:19

Looks like you just have to sit tight and see what they come back with.

 

I don't think they are being deliberate or dishonest, so no report required. Though this isn't my area of expertise (not much is!).

Thanks (0)
avatar
By Gem7321
28th Jul 2015 16:25

I will keep you updated with the fiasco! At least it has made an otherwise dull Tuesday afternoon a little less dull.

Thanks (1)
avatar
By Scriptic
28th Jul 2015 16:26

Publish and be Damned

I would put this into social media, naming the company concerned and perhaps someone in its upper echelons will respond by encouraging the dimwit you're corresponding with to get their act together.

Thanks (1)
avatar
By Gem7321
28th Jul 2015 16:31

So far it's been three dimwits so I am starting to think this could be a company-wide 'misunderstanding' of VAT.  A company with UK turnover c£19m!

 

I have also asked to speak to someone directly in the accounts department and I've been told that the accounts department does not deal with VAT invoices. 

 

Flogging a dead horse perhaps.

Thanks (1)
RLI
By lionofludesch
28th Jul 2015 16:32

HMRC?

Suggest that you refer it to HMRC for a decision.

Maybe they'll pop round for a chat.

Thanks (3)
avatar
By Gem7321
28th Jul 2015 16:37

And a cuppa.

Thanks (1)
By stratty
28th Jul 2015 16:50

Disbursement

Thought.

Perhaps they are treating the CC processing fee as a disbursement?

Thanks (1)
avatar
By landscaper
28th Jul 2015 16:56

Funnily enough....

I have spent most of my day today chasing VAT invoices and it drives me mad.  By the nature of our business we pay quite a few suppliers on pro-formas and trying to get the VAT invoices afterwards is so time consuming.  Anyone got any tips?  I've tried being nice, I've tried being 'orrid; my latest is to say we have a VAT inspection due and I need to tidy up paperwork - even that doesn't always work as quickly as I'd like.  As most of the companies we deal with are fairly larege and using software of some sort how difficult can it be? 

Whilst we're on the subject , quite a few come back and say that their pro-forma has the VAT number on it but in my experience, VAT inspectors don't like picking up non-invoiced items.  Any thoughts/comments on that?

 

 

Thanks (1)
Replying to Paul Crowley:
avatar
By Gem7321
28th Jul 2015 16:59

Get on their nerves

landscaper wrote:

I have spent most of my day today chasing VAT invoices and it drives me mad.  By the nature of our business we pay quite a few suppliers on pro-formas and trying to get the VAT invoices afterwards is so time consuming.  Anyone got any tips?  I've tried being nice, I've tried being 'orrid; my latest is to say we have a VAT inspection due and I need to tidy up paperwork - even that doesn't always work as quickly as I'd like.  As most of the companies we deal with are fairly larege and using software of some sort how difficult can it be? 

Whilst we're on the subject , quite a few come back and say that their pro-forma has the VAT number on it but in my experience, VAT inspectors don't like picking up non-invoiced items.  Any thoughts/comments on that?

 

 

 

I feel your pain. I chase and chase until I get on their nerves so much that they send it to me.

 

This is my tried and tested method but it is not working in this instance.

Thanks (1)
Replying to Paul Crowley:
avatar
By robertcl
30th Jul 2015 11:29

Pro-forma

A pro-forma invoice is just that - an instruction to pay. It is not an invoice, certainly not a VAT invoice and is not a receipt for payment. Some companies over-use pro-formas in to avoid having to pay VAT until they have actually received payment. When they later send out the invoice (IF they do), it tend to be dated on the date of payment and not on the date of the actual purchase/sales transaction, thus effectively turning accruals-based accounting into cash accounting. Many suppliers lose interest in following through on documentation (e.g. the real invoice) once the money is in their bank account. It is not right.

Thanks (1)
Replying to jonharris999:
avatar
By Gem7321
30th Jul 2015 11:33

This is correct

robertcl wrote:

Some companies over-use pro-formas in to avoid having to pay VAT until they have actually received payment. When they later send out the invoice (IF they do), it tend to be dated on the date of payment and not on the date of the actual purchase/sales transaction, thus effectively turning accruals-based accounting into cash accounting. Many suppliers lose interest in following through on documentation (e.g. the real invoice) once the money is in their bank account. It is not right.

 

This is correct, if payment is received before the supply/invoice then the tax point is the date of the payment.

 

I do agree that it's not right that suppliers often fail to issue VAT invoices following receipt of the proforma payment and I do have to spend a lot of time chasing suppliers. It seems this is not unusual!

Thanks (1)
Replying to tom123:
avatar
By robertcl
30th Jul 2015 11:40

Our clients tend to have a lot of dealings with EU-based suppliers, and luckily this pro-forma and withholding of VAT details craze appears to be limited to the UK and Ireland. The others send real VAT invoices from the outset, stating payment terms and payment details.

Thanks (1)
avatar
By Gem7321
28th Jul 2015 16:56

This is possibly their thinking, but isn't this still incorrect? I don't think a card processing fee can be considered a disbursement? 

 

The charge is not shown on the invoice as a disbursement, it is shown as follows:

 

Goods: £100

VAT £*pick a number!*

Credit card charge: £5

Gross: £x

Thanks (1)
avatar
By shaun king
28th Jul 2015 18:27

Misguided.

I guess this goes back to what we used to call the Debenhams scheme where it was argued that the CC fee was exempt as a financial service. I won't bore people with the detail but it could have worked if implemented correctly, but as usual it wasn't so it fell at the first hurdle.

I have seen business argue that as the CC fee to them is exempt it must be exempt by them.

Amazing what businesses get away with nowadays once HMRC went to risk assessed visiting!!

Thanks (1)
avatar
By cbp99
28th Jul 2015 18:34

Auditors

With that level of turnover perhaps you should write to the auditors

 

Thanks (2)
avatar
By Gem7321
29th Jul 2015 13:15

I am still awaiting a reply from them and I have chased them again this morning. Funnily enough I know one of the offices of the audit firm so I've had a quiet chat with them and they have also suggested writing to the auditor who is responsible for the client to ask them to clarify the position on this.

 

Thanks for all your help.

Thanks (1)
RLI
By lionofludesch
29th Jul 2015 16:50

If I remember right ......

If I remember right, credit card charges were originally exempt and the law was changed to stop traders switching standard rated sales into exempt credit card charges.

Thanks (2)
avatar
By Gem7321
29th Jul 2015 16:54

Any idea when it was changed? For my curiosity only

Thanks (0)
RLI
By lionofludesch
29th Jul 2015 16:58

Pfffft !!

More than thirty years ago..........

 

Thanks (0)
avatar
By Gem7321
29th Jul 2015 16:59

Ah!

Ah.

 

That would be why I wouldn't remember then!

Thanks (0)
Portia profile image
By Portia Nina Levin
29th Jul 2015 17:08

WTF?

We are not here to sort out the rest of the world's problems. The second invoice receieved was perfectly adequate for recovering a perfectly adequate amount of VAT. Claim the VAT, and move on. There is no need to put the world to rights.

@ lion the position changed after the decision in Everything Everywhere, which followed the CPP decision, and that in relation to the Debenhams PITA scheme.

Thanks (4)
RLI
By lionofludesch
29th Jul 2015 17:32

I knew ...

I knew it was summat.

Thanks (0)
Replying to sarah douglas:
avatar
By Robjoy
30th Jul 2015 11:06

Do VAT inspectors know this?

I know you're right, gem7321, but I've had VAT inspectors - twice - get in a stew because my (correct) posting was not the same as a supplier's invoice. If memory serves the difference in the VAT amount was a princely £2.56 on one occasion! It followed a similar tedious business of what I refer to as "Doing other people's bookkeeping for them", and I was able to show my communications with the supplier to the inspector, but still she complained! I politely suggested she should complain to the supplier, since they were the ones getting it frigging wrong!

Thanks (1)
Portia profile image
By Portia Nina Levin
29th Jul 2015 18:30

@ Basil

The second invoice was not correct (from the supplier's point of view). Following the Everything Everywhere decision a credit card fee follows the liability of the main supply, just like postage/packing/carriage.

However, you are correct that if the supplier had (incorrectly) not charged VAT on the credit card fee, then the OP had the right invoice to recover the input VAT that had been charged.

The subsequent suggestions of reporting it to the auditors got my goat. It is not your problem. Make sure you are doing things right and just move on.

Why people feel the need to police the whole world, just because they once got a bookkeeping badge free with a packet of cornflakes is beyond me.

Thanks (2)
avatar
By Gem7321
29th Jul 2015 22:24

I appreciate your comments, but I do now feel better having written to the auditor in the hopes they will educate their client accordingly.  I used to work in practice and decided that if it was my client I would prefer to hear about it this way, rather than through an HMRC investigation.

 

If I do not receive a response from the supplier I'm going to use the closest invoice I have received to being correct.  But as their customer, I would still like to understand how four different people can send me four entirely different VAT invoices.  

 

I don't expect I'll get a response from the auditor but my conscience is clear.  

Thanks (1)
By The VAT Doctor
30th Jul 2015 07:52

Auditors

My long association with auditors tells me they will take no notice because this simply won't be material. I think these fees should be exempt as a separate fee charged for handling money, but the courts don't agree, so there you have it.

Somewhat uniquely, I am with PNL on this one - sign of our times that people feel they cannot just shrug their shoulders and walk away and consider that they need to 'shop' people - probably the same cranks who write 1000 word Amazon reviews etc.  Imagine if they had a Trip Advisor type service for regular businesses?!

Thanks (3)
Replying to SEYATES.BTCONNECT.COM:
blue sheep
By Nigel Henshaw
30th Jul 2015 08:26

another platform for angry people

The VAT Doctor wrote:

 Imagine if they had a Trip Advisor type service for regular businesses?!

Now THAT is a good idea!

Thanks (0)
Replying to SEYATES.BTCONNECT.COM:
avatar
By Gem7321
30th Jul 2015 08:42

Materiality

The VAT Doctor wrote:

My long association with auditors tells me they will take no notice because this simply won't be material.

 

On UK turnover of £19million a year?  And substantial EU turnover also, some of which I'm assuming will be to private individuals. And I'm assuming we are not their only customer who pay by credit card. 

 

Maybe I have a different idea of materiality to everyone else.

Thanks (0)
avatar
By Roland195
30th Jul 2015 09:49

Hold your horses

The company is very likely accounting for VAT perfectly correctly but is not used to producing full VAT invoices. They must be producing them manually and this is not likely what their system has accounted for.

Why would you even consider writing to the auditors?  

 

 

Thanks (0)
avatar
By Gem7321
30th Jul 2015 10:03

The supplier has told me that they do not charge VAT on credit card fees.

 

As I've explained earlier in the thread I know the staff in one of the auditors other offices well enough to discuss with them and as already suggested here they also suggested I write to the auditor responsible for the client.  I also feel that if it was my client I would prefer to find out in this way than through an HMRC inspection. 

 

If the auditor decides to pursue it and finds that they are accounting for VAT correctly but not showing it on their invoices then there is no harm done (apart from witholding VAT from their customers), otherwise they can address the issue as they see fit, or throw my letter in the shredder.

 

Thanks (0)
By cheekychappy
30th Jul 2015 10:08

Make your mind up everyone

Everyone seems to jump on members who don't do things by the book. We finally have someone trying to do things by the book and they are criticized for it.

Thanks (11)
Portia profile image
By Portia Nina Levin
30th Jul 2015 10:41

I disagree

I think there is a difference between doing it properly (making sure you have a valid VAT invoice to support your VAT claim), and being a busybody (making it your business to get another company to do something right).

I recall a former colleague trying to phone somebody, finding that he could not get through, and then taking it upon himself to phone BT to report the fault, only to get an automated system:

System: "Please tell me the nature of your call."

Colleague: "I want to report a fault."

System: "I am sorry, I did not catch that."

Colleague: "I... want... to... report... a... FAULT!"

System: "You want to puchase broadband? Is that correct?"

Colleague; "NO I WANT TO REPORT A FAULT!"

I had to leap over the desk, and punch him repeatedly, explaining as I did so that IT WAS NOT HIS FRIGGING PROBLEM, AND HE COULD JUST SEND AN EMAIL TO THE OTHER PARTY, ASKING THEM TO CALL HIM, AS THEIR PHONE LINE WAS NOT WORKING.

Poor fellow suffered a heart attack that same morning, and never did email them. Their phone line may still not be working.

Thanks (5)
avatar
By Gem7321
30th Jul 2015 10:46

Being a busybody, or asking genuinely whether it warranted a MLR based on their level of turnover? 

Thanks (0)
Portia profile image
By Portia Nina Levin
30th Jul 2015 10:51

Money laundering
Dealing with something incorrectly is not a crime.

Thanks (0)
Replying to WhichTyler:
avatar
By lexi
30th Jul 2015 11:04

It can be if you're negligent about making it right.

Thanks (0)
avatar
By Gem7321
30th Jul 2015 10:59

I thought VAT evasion was though

Thanks (0)
avatar
By Gem7321
30th Jul 2015 11:13

And does me sending them the guidance five times and them still confirming 'they do not charge VAT on credit card fees' constitute negligence?

 

@Robjoy I thought it was a big no-no to claim more VAT than is shown on an invoice? I have accepted the 'least incorrect' VAT invoice from the supplier and I will only claim the amount of VAT shown, not the correct amount.

Thanks (0)
Replying to psimonparsons:
avatar
By Robjoy
31st Jul 2015 11:18

Not more

It was all a long time ago, but I had a sales order with the right VAT codes on it, then a partial invoice with the right ones and a final balance one with the wrong ones. The gross totals were correct. My communications with the supplier included them admitting there was a problem, but they couldn't seem to create a piece of paper with the right numbers on it! 

Thanks (0)
avatar
By Gem7321
30th Jul 2015 11:50

Speculating

I'm not prepared to disclose who the supplier is! 

 

I am never too worried about our EU and Overseas suppliers as we only deal with VAT-registered supplies in the EU so there is no VAT to claim anyway and never on Overseas suppliers. But it does seem that EU suppliers prefer to issue a VAT invoice from the outset.  I do however receive proformas from overseas suppliers then have some difficulty obtaining a final invoice, normally I only receive a commercial invoice with the goods.

Thanks (0)
avatar
By john hextall
30th Jul 2015 11:54

Don't do it

I believe your responsibility is to pay the bill and process the invoice correctly. By pushing it as far as you have, you now have 3 invoices and have to decide which one to use. Imagine how much more complicated it could get by reporting them. They are supposed to be professionals and, however tempting it is, it is not your job to educate them (unless they ask for help, of course).

Thanks (0)
avatar
By Gem7321
30th Jul 2015 12:00

I have confirmed with the supplier today which invoice I am using (the least incorrect one).

 

Does it matter how complicated it gets if I'm acting ethically?

Thanks (0)
By The VAT Doctor
30th Jul 2015 12:24

overkill

Have not for some time seen a better example of the sledgehammer/nut theory

Thanks (0)
avatar
By justsotax
30th Jul 2015 12:41

there is a lot to be said for

taking a pragmatic approach...

Thanks (0)
avatar
By Gem7321
30th Jul 2015 13:13

As I've already said the VAT in our case is negligible, but potentially on 2% of £19million I consider that to be material. 

 

I have accepted the invoice and I have written a polite letter to the auditor so that they are aware when they complete their next audit.  I thank you all for your comments and advice and I'm glad of all your interest and input but I cannot go back in time.  I feel I have acted professionally and ethically and dare I say helpfully so I will no longer be defending my actions on this. 

Thanks (1)
Replying to quintenbartell:
avatar
By neileg
30th Jul 2015 16:07

Materiality?

Gem7321 wrote:

As I've already said the VAT in our case is negligible, but potentially on 2% of £19million I consider that to be material. 

1/6 of 2% is 0.33%. Wasn't material when I was an auditor in short pants.

Thanks (0)
Replying to SXGuy:
By mrme89
30th Jul 2015 16:13

Is this

neileg wrote:

Gem7321 wrote:

As I've already said the VAT in our case is negligible, but potentially on 2% of £19million I consider that to be material. 

1/6 of 2% is 0.33%. Wasn't material when I was an auditor in short pants.

 

a ghost I'm seeing? :)

Thanks (1)
Replying to ireallyshouldknowthisbut:
avatar
By neileg
30th Jul 2015 16:39

Just a last whiff of ectoplasm

mrme89 wrote:

neileg wrote:

Gem7321 wrote:

As I've already said the VAT in our case is negligible, but potentially on 2% of £19million I consider that to be material. 

1/6 of 2% is 0.33%. Wasn't material when I was an auditor in short pants.

 

a ghost I'm seeing? :)

Thanks (0)

Pages

Share this content