Living Social / Groupon etc refunds and VAT, someone please HELP

~Jem~

I posted about this in another thread but thought it might do better in here....

I ran a Living Social deal last year (just like Groupon, KGB, Wowcher etc)

Shortly after I closed the business and contacted them to refund the customers that had bought. I thought it would simply mean taking my share of the money that they had paid me, deducting the amount for the people that had reddemed their vouchers, then giving the rest back.

But oh no, Living Social have instead raised an invoice for my share of the money, and are charging VAT on this, which has meant that I'm actually paying more back than I receieved in the first place!

I contacted HMRC about this and she said there would be no reason why an invoice would need to be created, and under Section 18 of Notice 700 there would be no VAT payable on this money (have no idea what any of that is)!

She advised me to contact Living Social, quote the reference number of the call and explain why VAT is being charged, but when I sent this info to LS, I got this emailed back....

'Our accounts department have confirmed that VAT should be charged as this is an invoice rather than a refund.'

Can they legally raise an invoice for money that in turn is getting refunded?! I just don't understand how they can work that way?
Also instead of asking me to pay the money back, they send any money owed straight to a debt collection agency of which follows another several balls-ups by them aswell, wrong address, wrong email, no phone calls/letters etc.

The lady at HMRC said as it's a refund there is no services or goods being provided therefore VAT is not payable. So why have Living Social put this on an invoice?!

Anyone with background in VAT or these types of deals that would be willing to help, it would be massively appreciated.

anniecave

What is the exact wording on the invoice for what the invoice is for?

Is it just a one-line entry, or is it a calculation for example made up of the original amount you received, less services you've provided, add or subtracting commissions or service charges or anything else?

blinko

This is unclear whether it is a refund or an invoice. I think that it the bigger issue not the VAT

~Jem~

Basically they have refunded the custmoers the whole amount they paid and then invoicing me for my half.

I told them I would be contacting both HMRC and the financial ombudsman and so wouldn't be paying anything until I heard back, in the meantime if they would like to accept my offer of XX (the net amount ie the money I actually owe) then it's on offer.

They accepted.

I put it this way to one of my friends. She has a 'cyber wear' website selling fluffy leg warmers that she makes herself. She buys the material for £10 + VAT (£12) and makes the fluffies and sells them for £20 + VAT (£24).
The material doesn't wash right/shrinks/whatever and so she refunds her customer.
She then contacts the material supplier for a refund. But she would be asking for £12 back, she wouldn't send them an invoice for £12 + VAT.

That's basically what this company has done here.

And I will never again buy from them and will slate them at every oppurtunity I get.

But thanks for comments folks x