Vat on employee Wages

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Hello Guys,

Hope you doing well!

Just wanted to ask,is VAT charged on employee wages if you are VAT registered.My accountant has my been making me pay the Vat on employee salary.

He is also calculating the Vat on the Vat transaction (the Vat we paid in previous quarter).

 

Replies (21)

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By Paul Crowley
19th Jun 2024 23:54

Either you are wrong or your accountant is a total prat.
I give clients a spreadsheet cash book that calculates VAT on payments and receipts, but tell them to write over the calculation if the VAT is nil or genuinely different.
Are you or his employee failing to overwrite the spreadsheet calculation, or if real accounting software are you setting all transactions to VAT inclusive?
One of you is messing up the recording.
What software is being used?
If you want to PM me and I will give you up to an hour of chat for free.

Thanks (6)
Replying to Paul Crowley:
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By Paul Crowley
20th Jun 2024 01:10

For the avoidance of doubt
If Vat is being claimed on wages payments then your VAT is lower
Vat on Vat paid means that your VAT is lower
That is a criminal level of error that you would be on the hook for. Deliberate and concealed means that HMRC can chase it up for up to 20 years.

If however you forgot to mention that you have two companies and VAT is being charged on the wages you charged the other company then I really will be exasperated.

Thanks (3)
Replying to Paul Crowley:
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By dreaminteriorsltd
20th Jun 2024 09:56

Hi,
Thank you for the reply!
I think I may not have asked the question correctly.
Actually I am paying VAT on wages and I am paying VAT on the VAT transaction I made in the previous quarter.
Hence my concern is that I am paying too much VAT.
Will be grateful if you can clarify this for me.
Thanks

Thanks (0)
Replying to dreaminteriorsltd:
By ireallyshouldknowthisbut
20th Jun 2024 10:10

Either you or your 'accountant' has got the wrong end of several sticks.

There cannot be VAT on your VAT payment.

Thanks (2)
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By FactChecker
20th Jun 2024 01:10

Take Paul's very generous offer ... and, once you've got your head around some basics (that no competent accountant could get as wrong as you've described), make a simple decision for the future:

- either listen more carefully to your existing accountant;
- or (if he/she is that rubbish) get a new and competent one!

Thanks (4)
Replying to FactChecker:
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By Paul Crowley
20th Jun 2024 01:23

That was quick
My second and your comment are timed the same.
You must have pressed the second thanks instantly on posting your comment.
Much appreciated.

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VAT
By Jason Croke
20th Jun 2024 08:33

VAT would be charged on wages when those wages are being recharged to someone else (ie, employee is paid £100 for a days work and the employer recharges that to a customer or another business and charges £100 + £20 VAT)

Not sure why you are declaring output tax on last quarters output tax.

Maybe time for a new Accountant or even a book-keeper, worth paying a fee to ensure things are right, else could be costing you loads of money (in paying over too much VAT, etc).

Thanks (2)
Replying to Jason Croke:
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By lionofludesch
20th Jun 2024 19:50

Jason Croke wrote:

VAT would be charged on wages when those wages are being recharged to someone else (ie, employee is paid £100 for a days work and the employer recharges that to a customer or another business and charges £100 + £20 VAT)

Not sure why you are declaring output tax on last quarters output tax.

Maybe time for a new Accountant or even a book-keeper, worth paying a fee to ensure things are right, else could be costing you loads of money (in paying over too much VAT, etc).

If the fella is paying VAT on his "wages", it sounds very much like this is not a supply of wages but supply of a service. A subcontractor, for example.

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By FCExtraordinaire
20th Jun 2024 09:10

Only if recharged, say in a group of companies but not a VAT group.
Sounds like the wages are being processed using a vat code, instead of maybe journal entries on a non vat code.
Wages and VAT payments are generally a non vat code, eg T9 in Sage software
Vat on the Vat transaction is a no, I have never heard of that.

I would suggest getting a second opinion from another accountant to ensure compliance with VAT as it does sound that there is too much reclaim going on.
This would be an ongoing error which could result in repaying the overclaimed VAT.

Thanks (2)
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By cinnamint
20th Jun 2024 10:28

I don't think your accountant is a real accountant if this is true. If you need a proper bookkeeper, get in touch with me. :)

Thanks (2)
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By Tax Dragon
20th Jun 2024 11:09

There is an obvious related question... are you paying enough PAYE and NIC? There's also AE.

If you an employer (as opposed to buying in labour from outside) then something has gone horribly wrong.

So horribly wrong that it's hard to believe it's as you describe.

And so horribly wrong that a chat with a solicitor might not be amiss. (But first, call Paul.)

Thanks (2)
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By Tax Dragon
20th Jun 2024 11:26

Or are you a worker providing your services via an intermediary (your company), and just very confused?

Is Paul allowed to report back (without breaching confidence)? Probably not - but it goes to show (yet again) how very ambiguous outline descriptions can be.

Is it two faces or a vase?

Thanks (2)
Replying to Tax Dragon:
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By FactChecker
20th Jun 2024 12:26

I once proposed that (the image of your final sentence) as the new corporate logo for a software company ... and the MD gleefully took it ('shows how we can help people focus on what is real').
Only once I'd left, shortly afterwards, did he cotton on to my intention ... but by then they were known as the 'two-faced company'!

Thanks (5)
Replying to Tax Dragon:
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By dreaminteriorsltd
20th Jun 2024 18:29

Hi,
Thanks for reply!
As I mentioned I am the employer and the reason why I asked the question here, because of all the experience people on this form.
So basically before going to my accountant and asking him why I am paying VAT on my employee wages,I wanted to have enough amount.
Again thanks for the response.

Thanks (0)
Replying to dreaminteriorsltd:
RLI
By lionofludesch
20th Jun 2024 21:17

dreaminteriorsltd wrote:

Hi,
Thanks for reply!
As I mentioned I am the employer and the reason why I asked the question here, because of all the experience people on this form.
So basically before going to my accountant and asking him why I am paying VAT on my employee wages,I wanted to have enough amount.
Again thanks for the response.

Are you billing these wages to a customer?

I'm struggling with the scenario here and I'm not getting much from you besides "I'm paying VAT on my wages".

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By lesley.barnes
20th Jun 2024 14:25

Is this an employee ie - on the payroll, tax deducted and employers NIC's paid or is this someone paid gross. It is very unusual for an employee to be VAT registered if they are just an employee. They could of course be self employed or also have a limited company. Its not someone who is caught within IR35 who is VAT registered is it and you do the deductions?

Thanks (0)
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By HL86
20th Jun 2024 18:09

New accountant might be an idea on this one!!

Thanks (1)
Replying to HL86:
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By FactChecker
20th Jun 2024 18:26

Trouble is ... a bit like Trigger's Broom, it's hard to tell from what we've been told whether it's the head or the handle that needs to be replaced!

Thanks (7)
RLI
By lionofludesch
20th Jun 2024 22:57

OP - tell us a proper story.

Are you trading as a company?

Are you a subbie?

Are you the only employee?

When you say "paying VAT on wages", is this wages you're charging to others or wages you pay to your employees?

I suspect that this will be a straightforward WISWTW? question, if only we could establish some facts.

Thanks (0)
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By Lisa R
21st Jun 2024 15:59

Are you sure he's not just charging you VAT on the work he is doing to calculate and submit the wages and VAT return?

Thanks (0)
Replying to Lisa R:
RLI
By lionofludesch
21st Jun 2024 16:08

OP's last question was about an asset worth over £100k, which suggests that this is a sizeable business.

There's not enough information to perform a WISWTW? analysis so, unless, the OP can come up with some detail, the solution will remain a mystery to all of us.

Thanks (1)