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Vat re-billed to 5%

How to account for vat on previous invoices being rebilled to a lower rate

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How would a charity account for our utility bills being re-billed to a lower vat rate? Origially we were charged 20% vat on our invoices but we should have been charged 5%.  The supplier no longer exists therefore hmrc repayed us the difference. But we already reclaimed it on the original invoice. How do we account for this? 

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17th Jul 2019 20:03

You repay it to HMRC. If you’ve already claimed the 20% as input VAT on your VAT return nothing further was due to you (and I’m surprised that HMRC gave a refund - it begs the question as to what information was provided in the claim).

Alternatively, if the correct rate was 5% that is all that should have been claimed in the return. The end-result is the same - you need to pay back the double claim to HMRC

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By Thendry
to Wilson Philips
17th Jul 2019 20:23

Also, how would we account for the repayment on the claim as we make no sales that attract VAT

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to Thendry
17th Jul 2019 20:42

Can you please explain how you originally claimed the VAT and from whom. If you don’t have any VATable outputs you should not be VAT -registered so should not have been filing VAT returns. So how was that VAT claimed?

Not that it should change the analysis- if you’ve already claimed the VAT any further refunds should be handed back. In fact, perhaps the analysis does change - if you’ve been claiming any VAT while incorrectly registered, that VAT should also be returned to HMRC.

I have a horrible feeling you’re in a bit of a mess and should think about taking professional advice as a matter of urgency.

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By Thendry
to Wilson Philips
17th Jul 2019 20:54

Well as a charity many of our "sales"/ donations do not attract vat. However, our purchase vat is still reclaimable therfore on a vat claim will our purchase vat just be negative in this instance?

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to Thendry
17th Jul 2019 21:10

You said above that you make NO sales that attract VAT. If you don’t make VATable supplies you should not be VAT-registered (and thus should not be claiming any VAT)

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By Thendry
to Wilson Philips
17th Jul 2019 21:22

I dont think that is true. Here is hmrc's guidence on the matter :

"If you sell goods or services that are VAT exempt

You’ll need to register if you only sell goods or services that are exempt from VAT or ‘out of scope’ but you buy goods for more than £85,000 from EU VAT-registered suppliers to use in your business."

We make alot of purchases that attract vat. Virtually no sales therefore the above is applicable.

Besides sales attracting vat has no bearing on your ability to voluntarily opt in

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to Thendry
17th Jul 2019 21:29

Quote:

I dont think that is true. Here is hmrc's guidence on the matter :

"If you sell goods or services that are VAT exempt

You’ll need to register if you only sell goods or services that are exempt from VAT or ‘out of scope’ but you buy goods for more than £85,000 from EU VAT-registered suppliers to use in your business."

We make alot of purchases that attract vat. Virtually no sales therefore the above is applicable.

Besides sales attracting vat has no bearing on your ability to voluntarily opt in

Unfortunately, you've misinterpreted the advice and are in a bit of a pickle here.

You can only reclaim input tax that relates to taxable outputs (that is, those that carry VAT at 20%, 5% or zero rated). Exempt outputs aren't the same as zero rated. You can't reclaim any VAT which relates to exempt outputs.

You need to take advice from a local firm of accountants as soon as possible and repay the VAT to HMRC before they pop round for a chat.

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to lionofludesch
17th Jul 2019 21:33

You’ll need to register if you only sell goods or services that are exempt from VAT or ‘out of scope’ but you buy goods for more than £85,000 from EU VAT-registered suppliers to use in your business.

Do you buy goods for more than £85000 from EU VAT-registered suppliers (that means outside the UK) ?

It seems unlikely to me but you know your charity better than me.......

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to Thendry
17th Jul 2019 21:41

So do you buy in goods worth more than £85k each year from other EU countries?

If you don’t, then you’ve got it quite, quite, wrong.

This part in particular is just nonsense:

“Besides sales attracting vat has no bearing on your ability to voluntarily opt in”

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By JoF
to Thendry
17th Jul 2019 21:36

Please provide the link for this guidance.

You stated 'no sales' have vat, then 'many' sales do not attract VAT. Which is it?

What is it that you sell?

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By Thendry
to JoF
17th Jul 2019 21:45

Here is the hmrc guidence link: https://www.gov.uk/vat-registration/when-to-register

We sell space in a village hall and also receive donations.

Here is a charity specific hmrc guidence page that specifys the ability to opt in regardless of turnover: https://www.gov.uk/vat-charities

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to Thendry
17th Jul 2019 21:53

Crumbs. You are a perfect example to others of the dangers of taking a DIY approach to tax and VAT. You have completely grasped the wrong end of the stick. In fact, you’ve barely managed to grasp it at all. You need paid-for advice - first thing tomorrow, I would suggest.

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By Thendry
to Wilson Philips
17th Jul 2019 22:01

Are you saying that due to our low income level we arent elligable to register for vat?

I don't quite see the logic there. We are well within our right to opt in for vat in order to reclaim vat on purchases

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to Thendry
17th Jul 2019 22:06

You need to answer the question already asked a couple of times. Do you make ANY sales subject to VAT (including 0% VAT)? You have said both that you make NO sales that attract VAT and that MANY of your sales do not attract VAT. Which is it?

But since you think that you know more than someone with a professional qualification in tax this will be my last attempt at trying to help you.

Good luck in your dealings with HMRC.

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By Thendry
to Wilson Philips
17th Jul 2019 22:13

Truthfully it is both some quarters we make vat applicable sales other we receive only donations. Therefore on some vat returns the sales figure is zero.

Appreciate the help. Im soery you took my questioning as some sort of "challenge" and got defensive i was merely trying to understand.

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to Thendry
17th Jul 2019 23:25

The challenge was in trying to get you to provide useful information. What you fail to understand is that there is a crucial difference between “little” and “no” VATable sales.

You can’t do both. You either make VATable supplies, perhaps low in volume/value, or you do not.

My previous comments were based on your statement that you make no such sales. Your confirmation that you do make some VATable sales changes things. In that case you are indeed entitled to be registered. However, that doesn’t mean that you can reclaim all VAT charged to you. I could well be wrong but I would guess that you have been overclaiming.

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By JoF
to Thendry
17th Jul 2019 22:06

When did you register? How many returns have you done? How did you get the difference back from HMRC between the 5% and 20% on the invoices you mentioned? Who was the original supplier?

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By Thendry
to JoF
17th Jul 2019 22:16

It was a utility bill from a supplier that no longer exists. As we were not able to reveive credit notes and rebills at the correct level (due to the supplier no longer existing) hmrc sent us the difference (15%)

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to Thendry
17th Jul 2019 21:57

Quote:

We sell space in a village hall and also receive donations.

Bless me - and you import goods in excess of £85,000 ?

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By Thendry
to lionofludesch
17th Jul 2019 22:02

No we dont import in excess of 85k but that is just the threshold hmrc set for mandatory vat regestration not voluntary.

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to Thendry
17th Jul 2019 22:19

Quote:

No we dont import in excess of 85k but that is just the threshold hmrc set for mandatory vat regestration not voluntary.

No, it isn't. You need to read the sentence carefully.

Moreover, the provision is about COLLECTING extra VAT through a procedure called Reverse Charge. It's not some relief for small traders (or charities).

Contact HMRC before they contact you.

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By Thendry
to lionofludesch
17th Jul 2019 22:26

I think the eu quote was a poor choice on my part. Our original decision to become vat registered was based on the ability to reclaim vat on our purchases. Something hmrc advises charities to opt in to despite their turnover on this page: https://www.gov.uk/vat-charities

It is on this basis that we are able to reguster for vat and therefore reclaim the original 20% on the first uk supplied energy bill.

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to Thendry
17th Jul 2019 22:47

Quote:

I think the eu quote was a poor choice on my part. Our original decision to become vat registered was based on the ability to reclaim vat on our purchases. Something hmrc advises charities to opt in to despite their turnover on this page: https://www.gov.uk/vat-charities

It is on this basis that we are able to register for vat and therefore reclaim the original 20% on the first uk supplied energy bill.

Ah well. You know best. And, to be fair, we haven't much in the way of hard facts as you've played a dead bat to any attempts to get any.

Which begs the question of why you came here to ask for advice in the first place.

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By JoF
to lionofludesch
17th Jul 2019 22:29

Oh dear. I fear you learned folk may as well speak in Swaheli, as the OP is not reading anything and understanding it, nor actually answering all the questions asked, which lets face it have been asked for a reason (albeit two of mine were out of morbid curiosity!)

Someone needs to contact both HMRC and probably the charity commission.

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By JoF
to Thendry
17th Jul 2019 22:02

You need to read this again.

Do you understand the difference between exempt supplies and zero supplies?

Do you know which relate to your supplies?

Do you understand what is meant by the £85k EU threshold? Do you think this includes UK supplies?

Out of interest, are you doing this role to get some experience prior to getting a PC? If so, where exactly are you up to with your studies?

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By Thendry
to JoF
17th Jul 2019 22:10

Yes i understand the sales are a mixture of standard rated and donations which are not elligable for vat but are neither zero rated or excempt.

I do understand the difference my argument, is that it isnt relevant. we can opt in to be vat registered providing the majority of our sales are not vat excempt. Which they arent we simply make very little/no sales.

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to Thendry
17th Jul 2019 21:44

Eh dear ..... is there a properly qualified Independent Examiner ?

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By Thendry
17th Jul 2019 20:17

Is this still applicable if the original incorrect 20% invoices were issued years ago?

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to Thendry
17th Jul 2019 20:27

Yes.

It didn't matter that you were charged too much VAT as you've already claimed back the full amount.

So any refund you've received has been incorrectly sent to you and should be repaid.

But - feel free to tell us more if you disagree.

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By Thendry
to lionofludesch
17th Jul 2019 20:37

No, I agree. It makes sense. Thank you!

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By JoF
17th Jul 2019 21:39

How far back does this vat registration issue go? Pre last accounts filing? Might not just be the VAT man that needs to be sorted

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18th Jul 2019 10:08

Coming to this thread for the first time, I'm concerned by the statement that "some quarters we make vat applicable sales other we receive only donations. Therefore on some vat returns the sales figure is zero."

If I've read correctly, the charity operates a village hall. So does it stand empty for a whole three months for you to have no VATable sales?

If someone is using the village hall, and the charity receives money in return, that income is subject to VAT. Dressing it up as a donation doesn't take it outside the scope of VAT. And, to be clear, it doesn't matter whether the user is a private individual, a business, or another charity or community organisation.

It sounds to me like you potentially have a problem and could owe quite a lot of VAT.

As other posters have said, you really need an accountant who can gather the full facts rather than trying to rely on advice from a web forum. There may even be someone in your village who will give you an hour of their time to ascertain whether there is in fact a problem.

And to focus the mind a little, the trustees and/or committee could end up being personally liable.

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to paul.benny
18th Jul 2019 10:30

Quote:
If someone is using the village hall, and the charity receives money in return, that income is subject to VAT.

Is it? I'm not sure that I saw anything in the question that tells me they've opted to tax, or that tells me that the use they put it to is something other than an exempt right over land.
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to spidersong
18th Jul 2019 11:28

Possibly - we're light on facts here.

In my experience, village halls may have facilities such as kitchen and equipment, stage and lighting, furniture, all of which are made available as part of the rental - which arguably work against it being an exempt right over land.

We do, however, know that there are some taxable supplies - and it's not obvious what they might be if they're not hall rental.

All of which underlines the point that the OP needs advice which is based on the full facts and not the crumbs posted here.

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to paul.benny
18th Jul 2019 12:36

Quote:

We do, however, know that there are some taxable supplies - and it's not obvious what they might be if they're not hall rental.


More correctly, we've been told that there are some taxable supplies. Given the querist's apparent lack of understanding of VAT there's no certainty that such supplies, whatever they are, are in fact taxable.
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By jcace
18th Jul 2019 10:32

You could do a lot worse than contact Les Howard, a regular and helpful contributor on this forum, at http://vatadvice.org/
He is a VAT Consultant, working mainly with charities.

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