can I claim back VAT on recent hmrc photobook judgement?

falc_2

Hi I'm a photographer and create luxury albums for my clients. I am too small to pay VAT myself, but my suppliers do charge it on the albums that they print for me, which can cost £100s to print. A recent legal judgement has ruled that hmrc did not have the right to charge VAT on photobooks, as they fall under the book category, and books are VAT free (and long may that last as you only have to go to Italy to see what it does to a country to have to pay VAT on books!). One of my suppliers has mentioned that they may be refunding VAT on previous orders as the judgement predates back to 2006, the others are saying they will not charge VAT in future but not offering a refund. Does anyone know whether I can claim back the VAT paid from my suppliers, and if so how?

JasonLVC

You can only make a claim for a refund against your suppliers.

Whether or not they agree to refund you will be down to their discretion. For good business relations, it would be unusual for a supplier not to assist a client in seeking a VAT refund/credit.

I guess a supplier just may not want the hassle of having to raise thousands of credit notes to thousands of customers for zero gain to them (as the VAT they are refunding you wasn't there's, it went straight to HMRC - you may get a better response from the supplier if you pull together all the invoices yourself and a covering letter thus taking all the effort out of it for them and so less resistance to helping you).

The supplier will have to be sure you are entitled to a refund, the photobook case didn't make all photobooks zero rated, just most types. The full judgement is in the below link, the types of book that can be zero rated are in the outcome near the end.

So suggest you write to your supplier, quoting the case number/name and asking for a refund becuase in your view you believe the things you purchased from them previously fell into the same category as the case. If it is clear cut/straight forward then I'm sure they'll refund you, but if what they supplied you is not described as per the case, then they would be right to be cautious to refund you as the judgement only applies to the case facts, so if your type of thing you purchased from them is not listed in the case then whilst on probabilities it could be treated as a zero rated book, the supplier may be reluctant to treat as such and expose themselves to an attack from HMRC for zerpo rating something that shouldn't be.

If you were VAT registered and a customer asked you to zero rate something and you weren't sure if that was right, would you zero rate it anyway, seek clarification or play it safe and charge VAT anyway?

If they agree to a refund it may take some time as they would likely want to get the refund from HMRC first before then handing it on to you and as most businesses operate a quarterly VAT return then you may have to wait upto 3 months for it.

http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKFTT/TC/2011/TC01562.html&query=truprint&method=all

jimmo

I don’t know much about the technical issues on VAT but if you successfully claim a VAT refund from your suppliers and pass on the refund to the people who actually paid it, your customers, all will be well.

However, if you successfully claim a VAT refund from your suppliers and don’t pass on the refund to your customers you will need to reflect the VAT refund in your business accounts and pay Income Tax on the additional profit generated.

falc_2

that was extremely helpful. As it's hundreds of pounds I think I will claim... I"m only a small business and I made virtually no profit on some of those albums because I forgot to charge the VAT to start out with. That was a mistake I didn't make twice...

tidydan24

Hi I am a part time wedding photographer and have sold a few high quality photo books over the last few years.
After reading your posts I wrote to my supplier (sim2000imaging) quoting the case number etc and enquired as to if I will be able to claim back VAT on previous orders.
I have just received a reply
"Hi Dan,
We have not been instructed to back-date the vat change on previous orders before the 14th of Feb. If the time comes when we have been instructed to do so by HMRC then we will inform our customers that the vat will be refunded back. We cannot obviously do this until they have confirmed that this is ok to do so.

Regards"

does Anybody know what I should do next and if the suppliers are actually going to become obligated to pay back the vat.
thanks

JasonLVC

tidydan24 wrote: »

Hi I am a part time wedding photographer and have sold a few high quality photo books over the last few years.
After reading your posts I wrote to my supplier (sim2000imaging) quoting the case number etc and enquired as to if I will be able to claim back VAT on previous orders.
I have just received a reply
"Hi Dan,
We have not been instructed to back-date the vat change on previous orders before the 14th of Feb. If the time comes when we have been instructed to do so by HMRC then we will inform our customers that the vat will be refunded back. We cannot obviously do this until they have confirmed that this is ok to do so.

Regards"

does Anybody know what I should do next and if the suppliers are actually going to become obligated to pay back the vat.
thanks

Whether to refund the VAT is nothing to do with HMNRC, VAT is a self-assessed tax and it is the responsibility of the taxpayer (the supplier in this case) to determine the correct VAT treatment. The supplier is never going to get an "instruction from HMRC" as it is not HMRC's job to instruct taxpayers on individual transactions.

The only exception where HMRC can "instruct" a supplier is if the supplier has submitted a request for a "written clearance" on the situation, so ask the supplier if they've done this and ask for an update - a clearance from HMRC takes about 30 working days, but I bet they've not done this at all and just fobbing you off.

What they are effectively saying is "no refunds" and blaming it on HMRC, which is a bit unfair.

HMRC have already published their guidance/view following the case which can be found here :- http://www.hmrc.gov.uk/briefs/vat/brief0412.htm which basically states that if the items your supplier sells falls into the same description as the court case then they are zero rated. If they are zero rated now, then they should have been zero rated all along (pre-case law) and so the supplier should refund you the VAT it overcharged you in error.

The only issue the supplier will have is a thing called "unjust enrichment" which means HMRC will not refund the overcharged VAT directly to the supplier unless the supplier can prove they will pass on the refund to the customer, but provided you have asked for a refund then this means there is no unjust enrichment as the supplier isn't going to keep the refund, they will refund it back to you.

Ultimatley though, if the supplier doesn't want to play ball there is little you can do other than vote with your feet and use another supplier if possible in the future and make your views known to the Directors of the obstinate supplier.

tidydan24

Thanks
I shall email them again armed with your information.