Help with VAT please?

tom666

Hi there,

Last year I signed an agreement with a company that worked for an hourly fee and agreed on a fixed hourly rate. At the time the company was not VAT registered. They have since become VAT registered and my latest invoices now charge me for the hourly rate we agreed + VAT. The addition of VAT has obviously made a big difference to the amount I am being charged, and I was given no notification of this.

So my question is can they do it? If we agreed an hourly rate, can they then start charging me VAT on top?

Thanks in advance for any help, Tom

Tis

If the company has registered for VAT they have no choice but to include VAT on their invoices. If you are also registered for VAT you can claim the VAT back as input tax.
You have 3 choices -
1 - claim it back as input tax if you are also registered
2 - pay it and increase your outlay by 17.5% (at present)
3 - find someone else who is not VAT registed and start again

Sorry that's all you can do (I was a VAT inspector in a past life so have a little knowledge - bit out of date but some things don't change)

tom666

Thanks for the help Tis, unfortunately I'm not VAT registered and am almost finished with the work that I need from them but have been hit today with an invoice for much more than I was expecting because of the VAT. So it looks like it's only option 2 open to me

Thanks again

Ballymackeonan

You will get tax relief on the full amount you paid including VAT, against your profits since you're not VAT registered, so your tax bill will be lower -

johncarlton

Tis wrote: »

If the company has registered for VAT they have no choice but to include VAT on their invoices. If you are also registered for VAT you can claim the VAT back as input tax.
You have 3 choices -
1 - claim it back as input tax if you are also registered
2 - pay it and increase your outlay by 17.5% (at present)
3 - find someone else who is not VAT registed and start again

Sorry that's all you can do (I was a VAT inspector in a past life so have a little knowledge - bit out of date but some things don't change)

Sensible advice. There is absolutely nothing u can do about it.

Some companies who are VAT registered sometimes say they'll do it without the VAT if u pay them cash.

I always stand the VAT and get an invoice. This gives you some cover if a dispute arises!

Lifeisbutadream

Although the advice is sensible, I would suggest speaking to the company and asking them whether they will 'meet you half way' - they agreed a price at the signing of the contract when they were not VAT registered - why should you take the hit now they are? they are not losing a penny, but you are!

For instance - if the agreed amount was £20 per hour, which would now be £23.50 per hour - how about asking them to charge £21.61 per hour including VAT - (this works out at £1.61 extra for you, and £1.61 less for them per hour)

At the moment, you are the only one losing out, which seems unfair.

Lifeisbutadream

johncarlton wrote: »

Some companies who are VAT registered sometimes say they'll do it without the VAT if u pay them cash.

Against the law and not very sensible from either party - especially business to business.

DCodd

What was the agreement you signed? Does it state that the fee you agreed was inclusive or exclusive of VAT?

While the VAT rules are stringent, contract law usually takes precident as far as you would be concerned. If the agreement states a fee exclusive of VAT then you will have to pay the VAT but if the agreement states the fee inclusive of VAT then you only have to pay the fee you agreed. Your supplier will still be liable to pay the VAT across to HMRC but you should not be liable to pay your supplier the VAT content on the invoice.

If the agreement makes no reference to VAT, you could just pay the fee you agreed excluding the VAT and argue the toss (even via a court if it got that far), saying that the agreement was a fixed price and you assumed it would be inclusive of any future tax implications of your supplier.