Vat on goodwill from supplier to customer

Goodwill VAT

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HI

I have client that I do the bookkeeping for who is a builder. He has been given £400 goodwill credit from a supplier because they supplied a kitchen to someone on their account.  Is there VAT on this goodwill?

Thank you.

Replies (15)

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Ivor Windybottom
By Ivor Windybottom
22nd Jul 2022 12:53

Who supplied what to whom?

In other words, did your builder make a supply to the kitchen company? If not then there is no VAT-able supply and VAT is not in point.

I would recommend you look for a VAT invoice if thinking of reclaiming VAT. Presumably there is a paper trail of some sort?

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Replying to Ivor Windybottom:
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By ZMBookkeeping
22nd Jul 2022 13:05

Hi, kitchen company supplied a kitchen to a client of the builder. The kitchen company then gave the builder a goodwill thank you of £400 that looks like a credit to the account. No invoice number or anything. Hope that makes sense.

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Replying to Ivor Windybottom:
RLI
By lionofludesch
22nd Jul 2022 16:26

Ivor Windybottom wrote:

Who supplied what to whom?

Thank you, Ivor.

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By Paul Crowley
22nd Jul 2022 13:05

' because they supplied a kitchen to someone on their account.'
This sounds like builder ordered on his trade account, in his name, for his own client and the the client paid the account balance

I would be asking questions and considering what else there is to this, and whether this was really a trade discount that the client did not get
Is it really commision and did the builder really do the work for cash

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Replying to Paul Crowley:
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By ZMBookkeeping
22nd Jul 2022 13:07

Yes i think that's what happened. Hmm not sure if he did the work for cash! I may need to ask.

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Danny Kent
By Viciuno
22nd Jul 2022 14:02

Agree with the above. You need to see exactly what has happened here - it is not always clear.

Howdens for example get customer in, price the job using the trades account but then you can either add a mark up on recharge to customer at cost.

For example kitchen costs 5k but you say to Howdens tell the customer it is £6k, customer pays £6k to Howdens which is credited to your account and they raise an invoice for £5k to your account leaving you with £1k credit which you can either leave there or take out cash. Customer is none the wiser that the tradesman is making a mark up on the kitchen.

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Replying to Viciuno:
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By doubletrouble
22nd Jul 2022 21:22

If it’s the builder pricing the job for labour and materials why would Howdens be giving a price to the client?
If Howdens were, as the client I would expect to see the invoice, which would show 5K not 6k

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Replying to doubletrouble:
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By Hugo Fair
22nd Jul 2022 21:45

FWIW Howdens are 'trade only' ... they won't allow someone who is not registered on their system as a tradesperson onto their premises, let alone issue any sort of quotation (even a mere verbal one).

What I wasn't aware of (and am surprised by) is Viciuno's assertion that (although definitely only contracting with the tradesperson) they will issue some paperwork to the client after the event. As what (hardly an invoice)?

The scenario as set out sounds more like a contract to purchase (between Howdens and the tradesperson) for £6k + a separate 'commission' agreement that earns the tradesperson a £1k credit against future purchases.
That sounds to me like the 'loyalty card' in which I accrue points when I buy my food at the Co-Op.

None of which necessarily helps OP with the VAT question that I leave to others.

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Replying to Hugo Fair:
RLI
By lionofludesch
22nd Jul 2022 21:57

Hugo Fair wrote:

FWIW Howdens are 'trade only' ... they won't allow someone who is not registered on their system as a tradesperson onto their premises, let alone issue any sort of quotation (even a mere verbal one).

Definitely not Howdens. They won't fit your kitchen. They just supply units and appliances.

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Replying to lionofludesch:
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By Hugo Fair
23rd Jul 2022 11:27

Confused.
I never said it was Howdens in OP's scenario, I was merely responding to Vicunio's and doubletrouble's sub-thread. And anyway, my made-up example didn't suggest that Howdens were fitters (quite the opposite in fact).

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Replying to Hugo Fair:
RLI
By lionofludesch
23rd Jul 2022 11:38

No. I'm agreeing with you.

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RLI
By lionofludesch
22nd Jul 2022 21:55

It sounds like an introductory commission to me.

Taxable, but I'd be surprised if the input tax was irrecoverable.

The caveat to all that is the paucity of hard facts.

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By ZMBookkeeping
23rd Jul 2022 11:40

I'll need to ask the builder for more information!
Thanks everyone for your help.

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By ZMBookkeeping
23rd Jul 2022 11:40

I'll need to ask the builder for more information!
Thanks everyone for your help.

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By ZMBookkeeping
25th Jul 2022 12:24

Apparently the customer (who i presume is the builder's customer) bought a kitchen directly from the kitchen company. The kitchen company then gave my builder a £400 credit as goodwill which is shown on the my builder's statement from the kitchen company. I have no paperwork - it just has a minus figure. So still unsure re VAT.

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