VAT increase where do I stand?

[Participant]

Robbie G, do you work for them?

Who? Phil's suppliers? Nope . I even said 'it's a bit mean and you're being reasonable by requesting the refund of the extra VAT'.

I'm 100% in favour of the man reclaiming his VAT, just trying to arm him with some information in case they use this to deflect his request.

Pretty sure they'll see reason though.

 

[daz]

It depends whether they are cash accounting or invoice accounting.

If they are invoice accounting, the VAT payable is payable when the invoice is raised. If they are cash accounting, it will be when it is paid.

 

[Participant]

It depends whether they are cash accounting or invoice accounting.

If they are invoice accounting, the VAT payable is payable when the invoice is raised. If they are cash accounting, it will be when it is paid.

No, in this case it makes no difference, as the cash for the deposit was received last year and the cash for the balance will be received this year.

 

[Vonhelmet]

Vat is hard as nails, yo.

 

[Redman]

The tax point is when the work or service begins, as this work doesn't begin until VAT has risen to 17.5% then you pay VAT on the whole amount. Otherwise pre-avoidance would be rife, payment could have been made on December 31st for work to be carried out 10 years in advance.

If you, or the company charging you don't pay VAT on the whole amount you're committing VAT fraud I'm afraid. The deposit rule applies when work commences before the tax change, but full payment does not until completion after a tax change, then two different payments can be made.

 

[daz]

No, in this case it makes no difference

Yes, it does make a difference

 

[csmager]

The tax point is when the work or service begins, as this work doesn't begin until VAT has risen to 17.5% then you pay VAT on the whole amount. Otherwise pre-avoidance would be rife, payment could have been made on December 31st for work to be carried out 10 years in advance.

The tax point is the earlier of payment and goods or services provided. There are anti-forestalling measures, but these aren't broad enough to cover this situation. Payment now for work in 10 years would probably be fine by HMRC anyway - they get the cash now. It's worth less in 10 years.

If you, or the company charging you don't pay VAT on the whole amount you're committing VAT fraud I'm afraid. The deposit rule applies when work commences before the tax change, but full payment does not until completion after a tax change, then two different payments can be made.

The deposit rule doesn't have much to do with when the work commences. Even under HMRC's own guidance linked above, the deposit pre-1 Jan 2010 would be at 15% and the balance post-1 Jane 2010 would be 17.5%. There's even a couple of examples.

Yes, it does make a difference

HMRC's guidance above even says 'no it doesn't'. It says you will need to know when the service was provided to work out whether to charge 15% or 17.5% - i.e. the tax point is not affected by cash accounting.

Cash accounting has absolutely no bearing on the purchaser - it's just when the seller has to pay their money over to HMRC.

 

[daz]

Interesting... looks like we'll need to speak to our accountants again...

 

[Participant]

Yes, it does make a difference

Sigh. No, it doesn't.

 

[Vonhelmet]

The rate applied to a payment depends on the time of supply i.e. you apply the rate in effect at the time of supply. Section 6 VATA 1994 determines the time of supply.

So gather round, children, and let's all have a look at VATA 1994...

(tl;dr - see the bit in bold, they're wrong to charge the entire cost at 17.5%. Robbie G is right, daz is wrong.)

6 Time of supply

(1) The provisions of this section shall apply, subject to [sections 18, 18B and 18C], for determining the time when a supply of goods or services is to be treated as taking place for the purposes of the charge to VAT.

This is what we want to know.

(2) Subject to subsections (4) to (14) below, a supply of goods shall be treated as taking place—

(a) if the goods are to be removed, at the time of the removal;

(b) if the goods are not to be removed, at the time when they are made available to the person to whom they are supplied;

(c) if the goods (being sent or taken on approval or sale or return or similar terms) are removed before it is known whether a supply will take place, at the time when it becomes certain that the supply has taken place or, if sooner, 12 months after the removal.

Something is being supplied to you, so this applies. This is the general rule. The applicable rule is in part (b), which is to say that the time of supply is the time at which the goods are made available to you i.e. when the thing is fitted in your house.

(3) Subject to subsections (4) to (14) below, a supply of services shall be treated as taking place at the time when the services are performed.

This may apply to a degree, depending on the fitting services they're providing.

(4) If, before the time applicable under subsection (2) or (3) above, the person making the supply issues a VAT invoice in respect of it or if, before the time applicable under subsection (2)(a) or (b) or (3) above, he receives a payment in respect of it, the supply shall, to the extent covered by the invoice or payment, be treated as taking place at the time the invoice is issued or the payment is received.

The general rule is overridden where an invoice is issued or payment received prior to the time of supply found using the general rule. It sounds like you paid something back in 2009, so this will apply to the amount of money that you paid then.

(5) If, within 14 days after the time applicable under subsection (2) or (3) above, the person making the supply issues a VAT invoice in respect of it, then, unless he has notified the Commissioners in writing that he elects not to avail himself of this subsection, the supply shall (to the extent that it is not treated as taking place at the time mentioned in subsection (4) above) be treated as taking place at the time the invoice is issued.

(6) The Commissioners may, at the request of a taxable person, direct that subsection (5) above shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of 14 days there were substituted such longer period as may be specified in the direction.

(7) Where any supply of goods involves both—

(a) the removal of the goods from the United Kingdom; and

(b) their acquisition in another member State by a person who is liable for VAT on the acquisition in accordance with provisions of the law of that member State corresponding, in relation to that member State, to the provisions of section 10,

subsections (2), (4) to (6) and (10) to (12) of this section shall not apply and the supply shall be treated for the purposes of this Act as taking place on whichever is the earlier of the days specified in subsection (8) below.

(8) The days mentioned in subsection (7) above are—

(a) the 15th day of the month following that in which the removal in question takes place; and

(b) the day of the issue, in respect of the supply, of a VAT invoice or of an invoice of such other description as the Commissioners may by regulations prescribe.

(9) . . .

(10) The Commissioners may, at the request of a taxable person, by direction alter the time at which supplies made by him (or such supplies made by him as may be specified in the direction) are to be treated as taking place, either—

(a) by directing those supplies to be treated as taking place—

(i) at times or on dates determined by or by reference to the occurrence of some event described in the direction; or

(ii) at times or on dates determined by or by reference to the time when some event so described would in the ordinary course of events occur,

the resulting times or dates being in every case earlier than would otherwise apply; or

(b) by directing that, notwithstanding subsections (5) and (6) above, those supplies shall (to the extent that they are not treated as taking place at the time mentioned in subsection (4) above) be treated as taking place—

(i) at the beginning of the relevant working period (as defined in his case in and for the purposes of the direction); or

(ii) at the end of the relevant working period (as so defined).

(11) Where goods are treated as supplied by an order under section 5(5), the supply is treated as taking place when they are appropriated to the use mentioned in that section.

(12) Where there is a supply of goods by virtue only of paragraph 5(1) of Schedule 4, the supply is treated as taking place when the goods are transferred or disposed of as mentioned in that paragraph.

(13) Where there is a supply of services by virtue only of paragraph 5(4) of Schedule 4, the supply is treated as taking place when the goods are appropriated to the use mentioned in that paragraph.

(14) The Commissioners may by regulations make provision with respect to the time at which (notwithstanding subsections (2) to (8) and (11) to (13) above or section 55(4)) a supply is to be treated as taking place in cases where—

(a) it is a supply of goods or services for a consideration the whole or part of which is determined or payable periodically, or from time to time, or at the end of any period, or

(b) it is a supply of goods for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose, or

(c) there is a supply to which section 55 applies, or

(d) there is a supply of services by virtue of paragraph 5(4) of Schedule 4 or an order under section 5(4);

and for any such case as is mentioned in this subsection the regulations may provide for goods or services to be treated as separately and successively supplied at prescribed times or intervals.

[(14A) . . . this section and any regulations under this section or section 8(4) shall have effect subject to section 97A.]

None of this appears to apply.

(15) In this Act “VAT invoice” means such an invoice as is required under [paragraph 2A] of Schedule 11, or would be so required if the person to whom the supply is made were a person to whom such an invoice should be issued.

This would only be relevant if we were in any doubt about whether an actual invoice had been issued.

 

[phill]

Got a call from the head of their accounts department this afternoon. They are basically refusing to pay me any money back. He said "their system treats the deposit simply as a holding deposit and the proper invoice gets raised near time of install (Jan)"..

I've asked to speak to a director at the company to fight my case.. Not sure what else to hit them with....?

From what vonhelemt and Robbie G are saying the deposit should be at 15%..

;(

 

[Vonhelmet]

Not sure if you've told us yet, but how much money is at stake here?

 

[Dark88]

Woot tax debate!

tbh I'm sure their system treats it however is best is for them, doesn't make it right though.

 

[Participant]

Got a call from the head of their accounts department this afternoon. They are basically refusing to pay me any money back. He said "their system treats the deposit simply as a holding deposit and the proper invoice gets raised near time of install (Jan)"..

I've asked to speak to a director at the company to fight my case.. Not sure what else to hit them with....?

From what vonhelemt and Robbie G are saying the deposit should be at 15%..

;(

The head of accounts, and his argument was basically 'computer says no'?

A holding deposit? What other kind of deposit is there?

Write them a letter. There is no good reason why they should be charging you 17.5% on the whole lot, there's just doing it for their own simplicity and nobody at there end has the nouse to resolve the issue.

That said I don't know what your rights are in this situation. Did you receive a full written quote?

 

[Chabsy]

I work for a window company we took deposits in 2009 for work, some jobs were fittted before the end of 2009 some went into 2010.

I have spoken to our accountant about this his answer was the deposits taken in 2009 was liable for vat @ 15% any work invoiced after 1/1/2010 was liable for vat @ 17.5% , we could not pass on the increase because our agreements showed a gross amount, if they stated vat @ applicable rate than we could have passed the increase on, we didn,t so we are having to swallow the increase.

If i as a customer was asked to the foot the bill for the increase then i would be pretty miffed if i had already agreed a price