VAT - 20% or 17.5%

BigBananaFeet

We got a lot of work done to our house last year and paid the builder all but a retainer percentage to be paid in a years time (now!). The builder gave us an invoice last year for the amount of the retainer with an amount + VAT (not specified).
He has just sent us a new invoice for the amount + VAT of 20%.
Is this correct as the work was completed and the invoice was issued last year when VAT was 17.5%?
I have looked at various posts on the forum but can't find anything regarding retainers. I have also looked on HMRC site and my understanding is that it possibly should be charged at 17.5%......but I'm not sure.... hence my question to someone who may know.

Horseunderwater

BigBananaFeet wrote: »

We got a lot of work done to our house last year and paid the builder all but a retainer percentage to be paid in a years time (now!). The builder gave us an invoice last year for the amount of the retainer with an amount + VAT (not specified).
He has just sent us a new invoice for the amount + VAT of 20%.
Is this correct as the work was completed and the invoice was issued last year when VAT was 17.5%?
I have looked at various posts on the forum but can't find anything regarding retainers. I have also looked on HMRC site and my understanding is that it possibly should be charged at 17.5%......but I'm not sure.... hence my question to someone who may know.

Ring the customs excise people and explain this to them. They are very helpful people.

real1314

Tax Point:

The date the goods or services were supplied.
Or an invoice issued within 14 days (easement usually allowed to month end) of this date.
(it can be an earlier date if payment is made before supply, in which case it's the date of payment).


No way on earth it's 20%; it's 17.5%.
:cool:

timpavitt

They could not issue an invoice which stated an amount for goods "plus VAT", the invoice must show the value of the VAT, therefore if they are now issuing a VAT invoice this would be @ 20%

www. hmrc.gov.uk / vat/ managing/ returns-accounts/tax-points. htm

"Time of supply for goods and services
For transactions where there is a VAT invoice - the time of supply is normally the date of the invoice, even if this is before or after the date the supply physically took place"

AIFOP

I was just typing a reply, and I deleted it by mistake. However, in the meantime timpavitt has replied with essentially what I was about to post.

You can not 'back date' an invoice for as long as a year.

VAT will be payable @ 20%.

molerat

From http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-increase.htm#3

Sales that span the change in rate

There are special rules for sales which span the change of rate. If you provided goods or services before 4 January 2011 and raised a VAT invoice on or after that date you can choose to account for VAT at 17.5 per cent. You don't need to tell HM Revenue & Customs (HMRC) if you do this.
Services you started before 4 January 2011 but finished afterwards

If you started work on a job before 4 January 2011 but finish afterwards you may account for the work done up to 3 January 2011 at 17.5 per cent and the remainder at 20 per cent. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.

MarkyMarkD

Lots of replies, but none quoting the correct HMRC guidance:

2.1.2 Retention payments

You apply the same VAT rate to retention payments as that applied to previous payments made under the contract. Further information on retention payments can be found at paragraph 22.1.2.

From http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&propertyType=document&id=HMCE_CL_000513

So, it must be 17.5% if the original amount was at 17.5%.

BigBananaFeet

Thank you for your replies and opinions. I've been looking at the various links provided. One section on the HMRC site says one thing and another seems to say the exact opposite!

real1314

The Basic Tax Point (which dictates the rate of VAT) was created when the service was performed/completed. The builder can then extend that on the basis below, but none of these have been met, hence 17.5% should apply.

This covers the initial payment, which, based on your OP, the builder has now invoiced at 20% in addition to the Retention at 20%.

MarkyMarkD has then given the specifics for the retention, which should also be at 17.5%.


"If…
you issue a VAT invoice more than 14 days after the basic tax point without approval to extend the 14 day rule

Then…
tax will be due at the basic tax point.

If you have already issued a VAT invoice (for a part payment) or received a payment before the basic tax point, this will have created a tax point under (a) above for the amount invoiced or received.

If…
you want to apply the 14 day rule to certain types of supplies only

Then…
you must write to the VAT Business Centre for your area giving your reasons."


http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_001596&propertyType=document#P964_81216

Para 14.2.2 - see table

olly300

BigBananaFeet wrote: »

Thank you for your replies and opinions. I've been looking at the various links provided. One section on the HMRC site says one thing and another seems to say the exact opposite!

Ring the VAT people up.

They are very helpful.

If you do make a note of who you are speaking to etc.

As the builder will need to do the same.

AIFOP

MarkyMarkD,

Whilst you have the correct HMRC guidance, I believe you have mis-interpreted it.

When HRMC refer to the 'same VAT rate', they are refering to 'zero', 'reduced' or 'standard'. Not the actual percentage paid.

If the VAT invoice has recently been raised, then it will be at the current standard rate, therefore, 20%.