VAT question, possibly being charged twice.

typk · 10 Jan 2015 at 11:33

All resolved. See the post here A bug in their portal was showing wrong values.

I have a question about VAT. I have started using a fulfilment warehouse to send parcels to my customers as the orders have grown beyond what we can handle.

The fulfilment system works by topping up the account then charging for the services I use. (E.g. goods in, Royal Mail 24/48)

The problem I have noticed is that they are charging VAT on the top up. (£25 credit I have to pay £30) Then I am getting charged VAT on the postage or services. For example goods in is £2.10. I seem get charged VAT on that as well. So £2.52 is being deducted from my top up balance. I am basically being charged VAT twice.

Now this company I am using seems quite small and has had a few bugs, but this really doesn't seem right?

I am not yet VAT registered as I am just under the required turnover, if this is correct this will really impact me.

My thoughts are when you top up a gift card, mobile phone or PayPal you don't get charged VAT as this is a credit, but you do get charged on your purchase or calls.

Can anyone shed some light on this?

Tefal · 10 Jan 2015 at 11:34

would the VAT for the top up not be the VAT for the service of the warehouse and the VAT on the postage the VAT on the service of RM etc?

[TW]Fox · 10 Jan 2015 at 11:35

There is no VAT due on face value vouchers purchased at the face value (ie, a £25 voucher you buy for £25 which gives you £25 to spend).

I'd imagine the credit you purchase classes as a face value voucher for VAT purposes and therefore should not attract VAT.

typk · 10 Jan 2015 at 11:36

Tefal said:
would the VAT for the top up not be the VAT for the service of the warehouse and the VAT on the postage the VAT on the service of RM etc?

You see I am not sure about that, but by topping up my account I have not actually purchased anything, I am just adding credit to enable me to purchase.

Tefal · 10 Jan 2015 at 11:38

Tizzer said:
You see I am not sure about that, but by topping up my account I have not actually purchased anything, I am just adding credit to enable me to purchase.

might be worth asking them for their explanation of their system then you can check if its legit/makes sense as without any info i doubt the informed on here could actually help you.

got a contract/terms and conditions (maybe on thier site if you go as a "new customer") that explains the charges?

[TW]Fox · 10 Jan 2015 at 11:39

It seems straight forward enough to me - when adding credit to the account there is no purchase or supply of VAT rated goods or services therefore surely no VAT is due.

Tefal · 10 Jan 2015 at 11:40

[TW]Fox;27460089 said:
It seems straight forward enough to me - when adding credit to the account there is no purchase or supply of VAT rated goods or services therefore surely no VAT is due.

yeah i'm just wondering if its how they simply their billing ie rather than charging on each service they just do it at once on top up?

memyselfandi · 10 Jan 2015 at 11:41

Are you sure that the first charge is actually VAT and not some form of service charge for using their system?

mattyg · 10 Jan 2015 at 11:41

Tizzer said:
I am not yet VAT registered as I am just under the required turnover, if this is correct this will really impact me.

Their is NO required turnover to become VAT registered.

You have to Register for VAT if your turnover is or will be over £81000 in a 12 month period.

However you can register for VAT even if you only turnover £1. Its voluntary upto £81000

typk · 10 Jan 2015 at 11:44

memyselfandi said:
Are you sure that the first charge is actually VAT and not some form of service charge for using their system?

It is definitely VAT or disguised as VAT see the screenshot below:

IMAGE REMOVED - RESOLVED

Then the goods in invoice:

IMAGE REMOVED - RESOLVED

Am i missing something here?

Tefal · 10 Jan 2015 at 11:46

certainly looks like their screwing you.

got the terms an cons?

typk · 10 Jan 2015 at 11:52

Tefal said:
certainly looks like their screwing you.

got the terms an cons?

TERMS & CONDITIONS REMOVED - RESOLVED

Here are the terms and conditions referring to the payments and credits. Since they refer to the top up as a credit surely they cannot charge VAT on it?

horrorwood · 10 Jan 2015 at 12:08

Seems right to me.

You top up £50 ex vat which is £60 inc.

If the price to send a parcel is £2.50ex vat / £3 inc vat you can send 20 parcels which comes out of your credit.

You've only paid once, you've not paid vat more than once.

typk · 10 Jan 2015 at 12:15

horrorwood said:
Seems right to me.

You top up £50 ex vat which is £60 inc.

If the price to send a parcel is £2.50ex vat / £3 inc vat you can send 20 parcels which comes out of your credit.

You've only paid once, you've not paid vat more than once.

Problem being how can you get charged VAT on a top up or credit? You don't get charged VAT on a gift card, Skype credit or when moving funds to PayPal. You only get charged VAT when you make a purchase.

I might as well use a direct payment.

mattyg · 10 Jan 2015 at 12:18

How many VAT invoices do you get.

Do you get a VAT invoice for the topup and then a VAT invoice for the useage.

Are they "charging" you twice or are they just providing a breakdown

Kenai · 10 Jan 2015 at 12:21

horrorwood said:
Seems right to me.

You top up £50 ex vat which is £60 inc.

If the price to send a parcel is £2.50ex vat / £3 inc vat you can send 20 parcels which comes out of your credit.

You've only paid once, you've not paid vat more than once.

From the sound of it though, as he described it in the first post, £3 is being deducted from the £50 using your example.

typk · 10 Jan 2015 at 12:23

mattyg said:
How many VAT invoices do you get.

Do you get a VAT invoice for the topup and then a VAT invoice for the useage.

Are they "charging" you twice or are they just providing a breakdown

I get two VAT invoices, one for the top up and one for the services.

Topup

IMAGE REMOVED - RESOLVED

Services:

IMAGE REMOVED - RESOLVED

That gross is what gets taken out of my account balance.

weringo · 10 Jan 2015 at 12:25

horrorwood said:
Seems right to me.

You top up £50 ex vat which is £60 inc.

If the price to send a parcel is £2.50ex vat / £3 inc vat you can send 20 parcels which comes out of your credit.

You've only paid once, you've not paid vat more than once.

Clearly this isn't correct. If you top up for £50 ex VAT which £60 inc VAT you have £50 credit with the company, not £60 as the company would have declared £10 output VAT and paid this to HMRC. So you could only buy 16 parcels with £2 change.

However if you bought the parcels directly without purchasing credit in advance you could buy 20 parcels.

As already stated you shouldn't be charging VAT on credit sold at less than or at face value.

Kenai · 10 Jan 2015 at 12:26

The crux of it comes down to what is being reduced from your credit balance, in horrorwoods example, if you have paid £60 inc. VAT, this is presenting you with a balance of £50. When you use the service, do you get deducted 2.10 from that balance or 2.52? The latter would mean you are getting double charged I think.

Destination · 10 Jan 2015 at 12:31

He hasn't CLEARLY stated if in his £30 top up, he is being credited with £30 or with £25, and he hasn't stated what happens this balance when the £10 transaction goes through, if he gets £10 removed, or £8 removed.
Until then we can't advise.

Showing those two invoices doesn't help, as they are broken down, and there is no summary of deductions from account.