Incorrect charging of VAT by local authority?

theblindman

HI, i was wondering if there is anyone out there that is familiar with VAT rules
I run a small business and the local authority provides me a wheelie bin for an annual charge. They send an invoice with a prompt payment discount, I forgot to pay so could not claim the discount, they are now claiming payment of the discounted amout plus VAT and the discount plus VAT.
It was my understanding that VAT is not applicable to the discount,
IE Bill for £100 but offered discount of £20 if I don't pay within 30 days bill should therefore be £80 +VAT plus £20 not £80 +VAT plus £20 plus VAT,
when I pointed this out to them I was treated as an imbicile passed from department to department and 3 days later am waiting for a response despite them still threatening court action over £10.23 I refused to pay regarding the overcahrged VAT.

martindow

Not sure of the answer but phone the VAT people
0845 010 9000 or 029 205 0126 (according to say no to 0870). They are very helpful and you will get a definitive answer. They will ask for a VAT number if you have one or if not your postcode. At the end of the call you can ask for a reference number to confirm the call.

Savvy_Sue

I agree with Martin you should ring the VAT people, but surely the bill is for £100 plus VAT, so I am not sure why you think you shouldn't have to pay VAT on the £20 that you didn't get as a discount by not paying early?

Now, if the bill was for £80 plus VAT, and there was a £20 penalty for not paying on time, that might be a different matter: VAT might not be due on the penalty.

But mercifully I've never had to get my head round VAT so what seems logical to me may be quite wrong ...

Encantador

Also don`t quite see where you are coming from here. They can only charge VAT on the price they charge you.
Does`nt really matter how they get to that figure. You either pay £80 + VAT within 30 days or £100 + VAT after 30 days.

Where is the confusion?

motorguy

Encantador wrote:

Also don`t quite see where you are coming from here. They can only charge VAT on the price they charge you.
Does`nt really matter how they get to that figure. You either pay £80 + VAT within 30 days or £100 + VAT after 30 days.

Where is the confusion?

Yup. i agree fully. they are charging you £100+VAT for the service.

Labman_2

To use your own example:-

The bill was £100 + VAT.....you didn't pay early enough for a discount....so the bill is £100 + VAT...simple!

motorguy

theblindman wrote:

when I pointed this out to them I was treated as an imbicile passed from department to department

:rolleyes2

martindow

I think the OP may be right - I can remember being told there is a quirk with VAT and discounts. Didn't note it as it would not apply to me. Whether it's worth going to much trouble over it is debatable. The VAT on 20 pounds is only 3.50 - doesn't justify too many phone calls or letters.

theblindman

having spoken to the VAT advice line, they tell me I am correct.

notice 700 section 7.3.2.b

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_CL_001596&propertyType=document#P566_46035

'If you offer a discount on condition that the customer pays within a specified time

Then the tax value is based on the discounted amount even if the customer does not take up your offer.'

the actual invoice was for 191 less discount for prompt payment, the £100 was for simplicities sake,
therefore if I have an invoice for goods of £100 with a discount of £20 for payment within 30 days the invoice is for £114 but I only pay £94 if I pay within 30 days or £114 afterwards not £117.50

check your invoices people!

Savvy_Sue

I did say that what seemed logical to me (and apparently a few other people too!) might be quite wrong! :rotfl:

theblindman

I cant wait to call the council tomorrow morning, I know its only £10 and I could have saved myself much more by paying on time, but these people get paid a good salary, pension etc to handle our services, the attitudes stank,
I rang them saying I think I've been overcharged, the response was 'give me your VAT number and ill get in touch with the VAT office its down the road' which actually came across as a veiled threat, why did the council need my VAT number?
' But I dont have an invoice showing the additional VAT' response ' Ill send you one then!'
And I had a visit from the VAT man a couple of months back so havn't got anything to hide
Got me wound up and doubting myself but determined now to get situation right, could mean anyone in Shropshire who paid an invoice late is entitled to a refund of the overcharged VAT