VAT help (since the increase in January)!

CICC

I just have 1 question (this is my 1st time using this forum):

I ordered bridesmaids dresses in October last year (I paid 50% of the agreed price) to place the order. This agreed price was inclusive of VAT at 17.5%. I have been told that the dresses arrived into the shop last week; and that I have to pay a 2.5% levy on the balance due to complete payment of the dresses. My understanding is that I shouldn't have to pay this 2.5% levy on the remaining balance as the order was placed pre-January for an agreed price (which was inclusive of 17.5% VAT)! Please help me with this! I spoke to the shop assistant and she referred me to the Customs & Excise website which confirm this is so; although I have had no luck in finding out the answer to this! Please help, as I think I do not have to pay this? Thanks.

JasonLVC

I'm afraid the shop is quite correct.

VAT is charged at the time the goods are physically supplied to you. So if the goods are being supplied to you today, then the current VAT rate will apply, which is 20%.

When you paid the deposit last year, the deposit is subject to VAT and so the shop will have (should have) charged VAT on that deposit at the VAT rate at that time, which was 17.5% so that you are left with the balance to pay at 20%.

If you agreed a VAT inclusive fee, the VAT will be contractually subject to change. Your mobile phone bills went up, your sky subsrcriptions went up as well even though you had a contract for say £10 p/month, if the VAT goes up (or down), then the contract value goes up/down also, so the exact same thing is happening here with your wedding dress. If VAT had gone to 15%, then the shop would charge VAT on the bal;ance owed at 15%.

It's all explained here by HMRC :- http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-rise-guidance.pdf

Read paragraph 2.6 :-

"The normal rule is that you should account for VAT on a deposit or pre-payment at the rate in force when you receive it. If you receive a deposit before 4 January 2011 for goods or services that you will supply on or after that date the 17.5 per cent rate of VAT will apply to the deposit and 20 per cent will apply to the balance."


Sorry that's not the news you wanted, but take consolation that the supplier isn't ripping you off, they are just doing what they have to do by law.

.......and all the very best for your special day (even it may cost you an extra 2.5%!;))

NeilF3485

I actually thought the VAT was charged when you paid for the item rather than when they were physically supplied. So if the OP had paid in full last year @ 17.5% the shop couldn't then demand an additional 2.5% this year? In the same way that in the reverse situation, a shop would not refund you the 2.5% if VAT went down after you had paid in full?

Otherwise I agree entirely, 17.5% on the payment last year, and 20% on the remaining balance due to increased rate.

Anyway, don't let it ruin your day - enjoy!

Mark_Hewitt

17.5% on the 50% you paid in 2010
20% on the remaining 50% you are due to pay.
Simples.

hcb42

THe hotel will almost certainly also charge this - if you are having a hotel reception...

JasonLVC

NeilF3485 wrote: »

I actually thought the VAT was charged when you paid for the item rather than when they were physically supplied. So if the OP had paid in full last year @ 17.5% the shop couldn't then demand an additional 2.5% this year? In the same way that in the reverse situation, a shop would not refund you the 2.5% if VAT went down after you had paid in full?

Otherwise I agree entirely, 17.5% on the payment last year, and 20% on the remaining balance due to increased rate.

Anyway, don't let it ruin your day - enjoy!

You are correct, just didn't want to complicate the matter for the OP.

If she had paid in full last year and collected this year, no additional charges due.