Beat the January VAT price hikes

JasonLVC

martastik wrote: »

Say you've got builders doing a job for you, where the contract price is already agreed. If some installments are paid this year and a few of them next year (as the job is probably due to be finished early next year), does the VAT rate stay at 15% for any remaining installments paid in 2010 (if there are any then)?

If you pay in installments then the VAT rate at the time of payment will apply. So if you pay 50% in December that'll be at 15% and if you pay 50% in January that'll be at 17.5%.

Contractually, did you agree a fixed price of £5k for the job or was it £4.5k plus VAT as if the latyter, then the builder is within their right to charge you the higher VAT and not be breaching his contract with you. if, however, you shook on £5k all in, then the builder will have to absorb the 2.5% increase within his £5k price.

JasonLVC

tenuissent wrote: »

I engaged......

HMRC published guidance on this but have since incorporated it into Notice 741 (Place of Supply). here is an extract from the original guidance which is no longer available to the public :-

VAT INFORMATION SHEET 07/05

HMRC clarification of the place of supply rules for legal services, particularly those supplied to individuals who do not have a right to remain in the UK (such as asylum seekers). HMRC say it does not represent a policy change.

HMRC say that residency can only be applied to one place at any given time, and that resident status is not applicable to transitory visitors such as tourists, but can be applied to overseas forces personnel or students working/studying in the UK.

In the case of services supplied to an individual resident elsewhere in the EU, standard-rated VAT would be applicable under the ‘basic rule’. However, where the individual is a resident of a non-EU country, the legal services are outside the scope of UK and EU VAT.

HMRC say that supplies of legal services to individuals who are located in the UK, but who do not have a legal right to remain here, should be treated as belonging in their country of origin. This would make the supplies free of VAT. Where the individual has a right to remain that has since been revoked or has expired, he should continue to be treated as a UK resident until such time as the issue is concluded. This will make the services subject to standard-rated UK VAT. On the rare occasion that an individual is deemed to have no identifiable country of origin, they should be treated as UK resident until such time as the situation changes.
(end)

So basically, if person x is living in the UK but doesn't have a legal right to remain here (ie, student visa, etc) then they are deemed to live where they come from originally and if that is outside of the UK then it is outside the scope of VAT. If however, the person already had a right to remain here and your legal fees were in relation to extending or changing that status then person x will be considered to be from the UK and therefore be subject to UK VAT.

Also, it is arguable that if the supply is being made to YOU and you are UK resident then the solicitor is making their supply to YOU and so is subject to VAT whereas if they were invoicing the customer who is person x then that may be outside the scope of VAT. So who is the invoice addressed to you or her?.



As for paragraphs, you need to press enter/return key twice to start aa new paragraph.

With regard being charged VAT, the solicitor should charge you VAT based on the VAT rate at the time you made your payments to him or when he raised an invoice to you. So if you were to pay the VAT not previously charged, solicitor would have to raise a VAT only invoice at 15% for the work he did in 2009 and a VAT only invoice for 17.5% for the work he did and invoiced in 2007/2008 years. Even if these are raised in February 2010, they relate to a previous period and that is what matters most.

More importantly, the charging of VAT is the suppliers responsibility. If they have failed to charge VAT at the time and then try and charge it at a later point, it is at the discretion of the customer whether to accept it or not.

Normally, the supplier would take the hit, but seeing as the supplier is a solicitor, they may well have the manpower and resources to take you to court over the VAT and you need to decide if the court will see it your way or theirs. They made a mistake and are trying to correct it.

At the end of the day, whether VAT was included or not, I dare say you would still have used the solicitor to achieve your goal. The goal has been achieved and if you needed to spend another 2 years and another £15k then I'm sure you would find the money - so don't lose sight of the fact that you got what you paid for and so maybe pay the solicitor as you may need to use them again in the future for other immigration matters and if you've got a good solicitor best not annoy them.

attar_uk

OK, so this isn’t going to be popular, but it would be good to hear people’s opinions...

VAT was introduced in 1973 at a time before the mass production of goods in places like India and China. Clothes weren’t looked upon as much as fashion statements, and kids clothes cost a lot more (as a percentage of a family’s income) than they do now. The same goes for books... We weren’t swamped by the glut of cheap coffee table glossy’s and tabloid tat celebrity nonsense that we have filling the shops now.

So I say it’s time to add VAT on kid’s clothes and books!

The economy is in a state and I think it's time we stopped giving special financial favours to the parade of kid’s fashion and Katy Price biogs.

I appreciate that many families are finding it hard to make ends meet and that kids clothing can cost a lot of their weekly/monthly budget. This would also be a good time for clothing suppliers to look at the obscene profit margins added to clothing and drop their prices too.

Let’s not forget that there is no VAT payable on second hand items...

whatmichaelsays

As mentioned above, all of these example prices work on the basis that a retailer has passed on the cut. The reality is that very few have.

The cut led to a number of prices that were not "retail friendly". Lots of research has been done on this but the gist of it is that consumers find it "unusual" and in some cases "uncomfortable" to deal with prices that do not end in .99 and similar formats. Hence, prices were rounded up or down to the nearest "retail friendly" price point.

The same principle is likely to apply in January. There might be a small period when prices increase slightly, but I'm guessing that the majority will either absorb the increase or introduce a larger increase to meet the next nearest retail price point.

Zimacs

I am ordering a car in december that won't be delivered until March 2010. Some garages say that if I pay in full before end december the VAT will be 15%. Others say VAT point will not be till 2010 so VAT 17.5%. Who's right?

jenniewb

JasonLVC wrote: »

Lets assume the average household spends £20,000 per year. This is made up of :-

£5,200 (£100 per week food bill),
£5,000 (petrol, equivalent of 2x cars doing 20k a year each)
£1,800 (gas/eletric/water for average house for a year)
£8,000 (everything else - TV's, Sky subs, one UK holiday, etc)
=£20,000 in total

If we assume that £20k includes VAT at 15% then the VAT fraction of 3/23 (15%) equates to £20,000 x 3 / 23 = £2,608.70 VAT

If we assume that the the same £20k includes VAT but at 17.5% then the VAT fraction of 7/47 (17.5%) equates to £2,978.72 VAT

The difference between the old and new VAT rates is therefore £2,608.70 less £2,978.72 = £370.02

Most food is zero rated so that £5,200 food bill, I'm assuming there's VAT on, when in reality that is not the case....but let's assume the food bill consists entirely of chocolate and beer!.

The utility bills are charged at 5% VAT and so didn't change then or from January. So that £370.02 saving could be halved to account for food and utilities down to £185.

The major outgoing for households will be rent/mortgage - which are VAT exempt, so the 'average' person spending £20k this year as next year will see a saving of just £185 (approximate).

It is STILL a saving of course and this is a Money Saving website :money: - but just don't panic buy, thinking you're making a saving, in the grander scheme of things, it'll make very little difference.

Hmmm, being thatunless its from ebay, I only seem to buy food and utility stuff- d'ya think I could panic buy electricity...:rotfl:

Have to say, my bank balance didn't notice the 2.5% drop, I doubt I'll notice the 2.5% increase. On the (very) rare occassion I did buy anything, the drop was pennies (primark, where a £10 top became £9.75 and I cannot think of any one object that costs as little as 25p that I'd actually buy- maybe half an apple) so no real sving there. I did buy a pair of boots not to long ago- took an age to save for them, they had no vat decrease but the store was having a 20% off day- had they not had that 20% off I would not have purchased them- store discounts always will be better then the vat decrease so no real loss there either).
Oh and I bought a microwave from Comet about a month ago- again, no vat discount unless it was already within the price tag of £40.

Am actually not very worried about this increase (aside from the gas and electric stuff) is anyone else in the same boat?

clarejep

You pay the VAT rate on the car when it comes into the UK so paying up front doesn't make a difference. I bought a car in October for December but it has been delayed until Jan. When I bought it I specifically agreed with the dealer that if it was delayed they would pay the increased VAT cost. Might be worth a shot.

JasonLVC

Zimacs wrote: »

I am ordering a car in december that won't be delivered until March 2010. Some garages say that if I pay in full before end december the VAT will be 15%. Others say VAT point will not be till 2010 so VAT 17.5%. Who's right?

They are both kind of right. If you pay in full in December then the tax point is set in December which sets the VAt rate at 15%.

If you make any payment of money in january 2010, the tax point will lock the VAT rate at 17.5%.

The problem will be many dealers will not allow you to pay in full before they have the car (especially if being purchased on finance), if paying cash....do you trust the dealer to deliver when they say they will or will they keep putting back your delivery to service other customers?

pelirocco

Premier wrote: »

Last year, MSE Martin was quoted as saying:

http://www.timesonline.co.uk/tol/money/tax/article5780752.ece

Surely it's just as much hassle to increase prices as decrease them for such a small amount? Time will tell!

Also HMV promised to pass on the VAT saving in full, even if it's price labels in store didn't reflect that.
http://www.audioscribbler.co.uk/news/5893

So hopefully that £10 DVD will still only cost £10 in the new year (although you could buy it for £9.79 currently if they are still good to their word!)

Its a huge hassle for us ( not a shop ) we will for a while be dealing with an overlap , having to raise credits with the old rate , while invoicing new jobs at the 17.5% rate , and non of the programmes we use will let us have the 2 vat rates on the go at once . And as a business , we are just a ( free) tax collector for HMRC

A_fiend_for_life

jenniewb wrote: »

Am actually not very worried about this increase (aside from the gas and electric stuff) is anyone else in the same boat?

I guess so. I can't say I noticed a difference.

Gas and electricity makes no difference as you suggest.

I don't drive and what little public tranpsort I use is not vatable.

Food was affected more by fuel costs than VAT. There has been no price changes in the local shops. I don't buy crisps, pop, takeways and ready meals so don't know if there was a change there.

What I have noticed in terms of food is processed cereals are now more expensive than muesli.

Can't say there is a difference on clothes, books and CD's either but then I haven't bought any this year. If I do they will be from charity shops.

Fuel prices are more a concern than VAT imho but from what I see, at least on the surface, they should push people towards healthier, more affordable options.