Advice Please!

clg86

Hey Guys,

Just a quick one...

We are trying to get our deposit back off the company we rented from, but we think they may be ripping us off!

If a company is VAT registered, does that mean they can add VAT on to charges that they want us to pay?

For instance, I asked for a copy of the cleaning invoice from the company they used and it came back £50 including VAT, but they have said even though the cleaning company don't charge it, they are a VAT registered company so we have to pay it...?

Is this right?

DVardysShadow

'Tis a good question. If they are providing the service to you, having subcontracted it to the non VAT registered outfit, then they should add VAT [I think]. You must pay whatever the landlord has had to fork out, so if the agent engaged the subcontractor, VAT would be correctly added to the bill to the landlord and you would have to pay. Only if the Landlord engaged the subcontractor, landlord not being VAT registered, would you not have to pay.

But this requires a VAT expert.

JasonLVC

VAT is all about who supplys what to whom.

So from what I understand here, your agent brings in a cleaner who charges £50 with no VAT. That is a supply between the cleaner and the agent.

Then the agent invoices you at cost (£50) but it is making a new supply (an onward supply) to you of the cleaning and so they must add VAT to their bill if they are VAT registered.

Can you confirm, is this a residential or a commercial rental?

I'll assume it is residential for now.

A security deposit is not a supply for VAT purposes and so VAT should never be charged on a deposit (when you pay it over or when they give it you back).

If this is a residential supply, are the cleaners bills for communal areas? Any services supplied ancillary to that of the residential rent MUST follow the VAT status of the rent, for a residential let, this is exempt and so the agent cannot recharge you VAT on things like insurance, cleaning, mainteance, etc.

If this is a commercial let, if the rent has VAT on it then the agent must charge VAT on all the ancillary services. if the comemrcial rent doesn't have VAT on it, then as before, VAT cannot be charged on the extra services.

So if you can confirm - residential or commercial property, whether you paid VAT on the security deposit and finally what the cleaners actually do for you?

clg86

Well, there is a guy that owns the apartment, but it is the company that deal with all the issues/deposit/payments...so I'm not too sure whether it would be residential or commercial. Sorry if I sound a bit thick...

We paid a £550.00 deposit to the company, (not the guy who owns it) which is the amount of rent we paid each month and got a receipt which I do have but not to hand at the minute, so I'm not sure whether this included VAT.

The company we rented off sent me an email telling me what charges they would be taking off our deposit before returning it to us. This included a "call out fee" of £25+VAT from this cleaning company (which has nothing to do with them, it's just a third party they use), plus whatever the cleaning charges were, which apparently came to £50+VAT. Totalling £88.13 inc VAT.

I asked for the invoice from this company as I thought this was alot of money for a "light clean" which we were told was all that the apartment needed. (dusting of 3 radiators and the bedroom floor needed hoovering - to be exact...) and a break down of what work had been done.

They forwarded a hand written invoice from a company and all that was written on it was:

From cleaning company name
To letting agent name

Apt 329 SGI

Light Clean

Cost £50.00
VAT none
Total £50.00

It didn't list a break down of the work that had been done as I had asked for, had no call out fee on it, and no VAT. Which is why I questioned the cost again. I got an email back saying because they are a VAT registered company, they have to add the VAT on. I must add that it took them nearly a week to forward this receipt to me and I have tried to call this company several times to 'enquire' how much they charge for a call out and work etc... but I cannot get an answer and they are nowhere to be found on the internet.

But back to the VAT side of things. If the £550 we paid included VAT, they have to charge us VAT on work that was done by another company?

Sorry, I'm useless when it comes to things like this, I need it breaking down in 'idiot talk' to me...

Thanks

JasonLVC

No worries, you've answered the questions needed.

The rent then is for a residential property (an apartment). Whether you rent from a bloke or a company, residential rent is always exempt from VAT.

The invoice for the final clean. If it is somthing that you cannot avoid as part of exiting the lease agreement then it should be invoiced onto you as being exempt as it is ancillary to the main supply.

If the final clean is optional (ie, if the landlord decides a final clean is not needed) and/or you can elect your own cleaner to do the job then the invoice recharged to you by the agent would have to have VAT on.

Everything sounds okay to be fair. In future, you to avoid the VAT charge on the cleaner you need to engage them directly yourself and to bill you (but to report back to the agent) and this way they are supplying you directly and so no VAT charged but keeps the landlord sweet.

This set-up works in any scenario. A VAT registered builder is doing your patio. He has to get in a subbie to do some works. The subbie is not VAT registered so he'll charge the builder for his time with no VAT. When the builder comes to charge you for all his costs (including the subby), he has to add VAT onto everything he does so he charges VAT on top of the subby cost to you - does that example help explain this pecularity of VAT?

clg86

Yes thank you, that makes sense.

But where do I stand on the call out fee? That isn't on the invoice, and we were never given the option to get our own cleaner in so do we have to pay that? At the minute there is no proof of any call out fee so am I in my rights to refuse to pay that?