VAT not charged on certain payment types?

A taxi/courier firm say that they don't charge VAT if a courier booking is paid by cash or card

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I used a well known London based taxi firm to book a bike courier for an urgent delivery. I thought that courier services are subject to VAT and asked for a VAT invoice so my company can reclaim it.

I was surprised to receive the following response:
"Please be advised that we don't charge VAT on journeys paid by cash / card / Apple Pay or PayPal."

It seems very odd to me that the payment method determines whether a courier booking is VAT exempt or not and I'm wondering if the implication is that the firm treats courier bookings the same as taxi bookings, and so exempting them. A firm like Hermes would issue a VAT invoice for a courier booking so I'm confused as to why the service I booked is exempt.

Is there any issue here I need to be cautious of? The value is low - £16 - so I'm not going to make millions out of this. I just want to be sure I treat the transaction correctly and have the right paperwork.

Replies (6)

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paddle steamer
By DJKL
17th Aug 2020 13:05

Maybe they believe you are contracting with the individual courier who is below the vat registration threshold, the taxi co merely being, in their eyes, an "introducer"?

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Replying to DJKL:
RLI
By lionofludesch
17th Aug 2020 13:58

DJKL wrote:

Maybe they believe you are contracting with the individual courier who is below the vat registration threshold, the taxi co merely being, in their eyes, an "introducer"?

Maybe DJKL is right.

Though there is a possibility that the individual courier is himself registered.

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Replying to DJKL:
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By fluffymitten
17th Aug 2020 15:13

It turns out this is the reason. I went back to clarify and they confirmed that payments made by those methods are directly passed to the individual providing the service.

Another mini adventure.

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Replying to fluffymitten:
paddle steamer
By DJKL
17th Aug 2020 15:35

The hairdresser's chair, so to speak. Not sure I would ,if I had all the information, agree with their analysis, I tend to be somewhat sceptical re these sorts of arrangements, but it is on their head so no need for you to worry.

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By paul.benny
17th Aug 2020 14:16

Whatever the rationale for not charging VAT, it's the supplier's obligation to charge VAT.
In general, there is no risk to you if the seller gets it wrong: if you have a valid VAT invoice, you can recover the input tax suffered; if you don't, you can't.

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By Calculatorboy
18th Aug 2020 01:41

They need water time agency agreement , see a lawyer , and put his name in the frame

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