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VAT - How hard is it?

VAT - How hard is it?

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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?

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By Brend201
30th Jul 2015 13:24

It's a can of worms for sure!

A few years ago, I was working for a large firm of accountants that had a VAT inspection (in Ireland). The inspector was intrigued at the concept of "requests for payment" that the firm issued.  These were fairly similar to pro-forma VAT invoices but without the VAT number so the VAT was accounted for only on date that payment was received.  In effect, it allowed the firm to account on a cash receipts basis where there were often long delays in obtaining payment.  (To be fair to them, they were careful about sending out formal VAT invoices when payment was received.)  The inspector didn't seem to be aware of the RFP concept previously but he insisted that the firm give a commitment that it would cease the practice.  I noticed subsequently that most of other accounting and legal firms also used the RFP approach.  

Separately, within recent weeks, I have become aware of a UK company selling goods on Amazon (but not to Amazon) which, when asked for a VAT invoice, issued a document showing:

Goods  £10.00;  VAT £2.00;  Amazon fee £3.00.  Total paid £15.00.  

Same approach as the OP's supplier.  Customer (not me) came back twice before he got satisfaction.  

So obviously there is more than one business out there that has this problem!

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RLI
By lionofludesch
30th Jul 2015 16:13

NCA

It's not material but you may need to consider making a report to the NCA.

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By DMGbus
31st Jul 2015 13:35

Credit card handing fees VAT exemption

I know that in the recent past I have bought goods as a "consumer" from at least one national retailer and noticed a reference on the till receipt to me entering into TWO contracts - one with the retailer for goods and one with a credit card handling company.  

This, in certain circumstances, is lawful in creating a VAT exempt supply in respect of the small percentage fee for the card handling services.  There is in fact specific guidance currently from HMRC on this point.

The VAT position would, example figures, then be as follows:

£   2.50 Credit Card handling fee - not liable to VAT

£ 97.49 VAT inclusive supply of goods

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£  99.99 Total paid

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So the VAT accountable to HMRC by the retailer is not 20/120 x £99.99 = £ 16.66 but rather a lower amount of £ 16.25.     There is no VAT underdeclaration provided that the rules are followed.

There is another situation in retailing where the VAT accountable to HMRC is less than 20/120 x price paid for VATable goods [+ delivery], specifically in a mail order context where a special computation of VAT due on delivery charges is allowed - I recall seeing this illustrated / discussed / overlooked on a website for mail order customers (RMweb from memory) who were wrongly accusing a reputable retailier of underpaying VAT on delivery charges as the customers were unaware of specific guidance on the subject matter.

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By BarbaraW
03rd Aug 2015 14:35

Large companies....

While we all believe a large company should be able to get this right, the larger the company the more likely it is that a junior member of staff (or three) with little or no knowledge of VAT was given the job of raising the invoice(s).  Perhaps retain correspondence, forgive and move on?

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