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Wierd VAT invoicing questions

I've been asked to do a lot of wierd things recently that I am uncomfortable doing as a business

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I've been in business for fourteen years, and I'm married to an accountant. But this year I've been asked to do some things by some of our suppliers that I'm not very happy about, and I really want to check for legality.

1) I have a major event that we are committed to running a tournament at. This tournament has a ticket price that is being paid to a third party. I have been asked by that third party to invoice them for the entire cost of the tournament ticket, including the VAT, and they will then counter invoice me for their table charge ex VAT. And then pay the difference. This seems to give me a disproportionately high VAT charge which I would incur, which they will subsequently claim back, while the amount of goods I am in fact supplying is substantially less than the amount I am being asked to quote. To me this sounds odd, as they'll be essentially making several hundred pounds at my expense that I do not believe they are entitled to, purely by claiming VAT back on products that were overcharged. This really doesn't feel like it should be legal.

2) A supplier recently quoted me a 40% margin on a product that they also sell direct from a website. That website has a VAT number. When they produced an invoice, that 40% margin was discounted from the MSRP, but then VAT was added onto my invoice which reduced the margin to 28%. This seems to imply that the MSRP they sell direct from their website at does not include VAT. And yet they are VAT registered. They fake confusion whenever I bring the matter up - I mean, its not like I don't handle margins and VAT every single day. But in our industry they are supposedly one of the biggest mail order companies, and I am becoming increasingly convinced that they are simply defrauding VAT, and the employee I am speaking to is too stupid to understand that. I mean, quoting a 40% margin has to be either all exVAT or incVAT, surely? 

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RLI
By lionofludesch
28th Feb 2018 07:28

Are you using a VAT Flat Rate Scheme, by any chance ?

Or traditional input/output accounting ?

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By WhichTyler
28th Feb 2018 08:24

I'm not sure I understand what you are describing in #1, but it is possibly an agent/principal question. If you are effectively selling the tickets to the public, then the output VAT is correct. they are then charging you a marketing fee based on sales, and if they are not VAT registered then they don't charge VAT. In this scenario they wouldn't claim back the VAT, you would have to account for it on your return. If they are registered then they may issue a self billing invoice to you

But it's impossible to be certain without seeing the agreement between you and them. As usual with VAT, asking 'who is supplying what to whom?' is the best starting place

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RLI
By lionofludesch
28th Feb 2018 09:00

In 1, I'm wondering whether the other party is VAT registered at all. If not, it would be entirely proper to exchange invoices for each party's services.

I don't really understand 2 - perhaps some example numbers would help.

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By paulwakefield1
28th Feb 2018 09:05

I assume in Issue 2 that if the MSRP is, say, £120 (gross) then you are saying they have invoiced you £72 plus VAT. It would certainly be an unusual way of calculating a margin.

I can't see that it is defrauding VAT; that would depend on it being properly accounted for and there is nothing in your example that says that is not happening.

You may well have been stitched up - it depends on exactly what was meant by 40% margin. Did they actually say they would sell it to you at 40% less than MSRP for instance? It may of course be that the person who was asked to raise the invoice to you simply hasn't understood.

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By andy.partridge
28th Feb 2018 10:08

Are you and your spouse not speaking? This isn't a place for marriage guidance.

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By Paul Hawes
28th Feb 2018 16:49

Are you sure the price on the website includes VAT? They might add it at point of sale instead.

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By Brend201
01st Mar 2018 11:45

And what's weird is that it is i before e except after c - except for weird. Not sure how to explain that.

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Replying to Brend201:
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By whopkinscom
01st Mar 2018 12:06

And have you ever noticed wierd looks weird when you mis-spell it!

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Replying to whopkinscom:
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By whopkinscom
01st Mar 2018 12:07

As I just noticed in the original title!

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By tonycourt
02nd Mar 2018 09:43

GamesIndustry - if you want a full response to your questions you'll need to explain the position better. An example (with numbers), of each point would help to show: in the first instance, how you are losing out and how the other party is gaining at your expense; and in the second instance to show how your margin is being reduced.

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