PPCs Accounts

peter_the_piper

So if a landowner "pays" this money to the ppc does the landowner not have to pay vat for the service, or is it collect? I give up its too complicated for me.

bazster

Absolutely VAT is payable, that was the whole point of HMRC vs. VCS: HMRC wanted their taxes! And although I'm no VAT expert, isn't it the seller/supplier's responsibility to charge the VAT and hand it over to HMRC? Hence HMRC going for VCS and not the landowner.

The_Slithy_Tove

And surely, if bazter's post #11 is followed through, the landowner should be putting the VAT through their books, even though it's a zero-sum-game (PPC's invoice should include VAT which is offset against VAT collected from the parking charges... or something).

taffy056

So if you are vat registered can you offset the invoice against that if you paid ? Which leads to if there is no vat number on the invoice can you demand that from the ppc ?

bazster

Ah, but it's not a zero-sum game! According to the ruling the monies extorted from the punters are damages for trespass or breach of contract (this was a tax tribunal, it didn't concern itself with whether the damages were in fact unlawful penalties) and as such they were not VAT'able.

So the landowner (in effect) collected no VAT, but has to pay it. Oh dear. £100 collected = £120 payable to PPC. Or, more likely when the landowners figure out this catastrophe, they will screw the PPC's to the floor and tell them that they cannot keep all the money they collect.

Oh dear, how sad, never mind.

The_Slithy_Tove

Oh yes. As you stated, "Such payments are outside the scope of VAT." :silenced:

Nice one!

antrobus

bazster wrote: »

Ah, but it's not a zero-sum game! According to the ruling the monies extorted from the punters are damages for trespass or breach of contract (this was a tax tribunal, it didn't concern itself with whether the damages were in fact unlawful penalties) and as such they were not VAT'able.

So the landowner (in effect) collected no VAT, but has to pay it. Oh dear. £100 collected = £120 payable to PPC. Or, more likely when the landowners figure out this catastrophe, they will screw the PPC's to the floor and tell them that they cannot keep all the money they collect.

Oh dear, how sad, never mind.

I think you've misunderstood VCS v HMRC. Whilst the tribunal concluded that VCS collected the various parking charges as agent for the client and that these charges were 'outside the scope of VAT'; because the client was allowing VCS to collect and retain the charges itself (as opposed to handing over them to the client) the charges represented consideration to VCS in return for its parking control services and was thus standard rated for VAT.

Hence it's VCS that has to pay the VAT. The landowner was not effected by the tribunal decision in any way.

antrobus

AltheHibby wrote: »

...
Antrobus, I am an accountant and that's why the thought struck me. If I were an auditor for a PPC I could not accept these invoices being accrued as I know they are not legitimate debts. I am not suggesting cash accounting for a second..

Your're confusing legitimacy with enforceability. The PPC business is perfectly 'legitimate', as evidenced by the fact that the authorities are eager to ensure to that PPCs pay their taxes as opposed to closing them down. The fact that their business model might also involve debts that are unenforceable at law would be neither here nor there from an accounting point of view. After all the likes of Ladbrokes had a business model that was once entirely based on unenforceable gambling contracts, but that never stopped them getting a quote on the LSE.

bazster

antrobus wrote: »

I think you've misunderstood VCS v HMRC. Whilst the tribunal concluded that VCS collected the various parking charges as agent for the client and that these charges were 'outside the scope of VAT'; because the client was allowing VCS to collect and retain the charges itself (as opposed to handing over them to the client) the charges represented consideration to VCS in return for its parking control services and was thus standard rated for VAT.

Hence it's VCS that has to pay the VAT. The landowner was not effected by the tribunal decision in any way.

I understand the case perfectly well. What you are failing to do is to look at the wider implications. The landowners who are VCS' "clients" were not party to the case, but nonetheless the case lays down certain principles about the PPC/landowner relationship that will affect all PPCs and their "clients".

(i) If, as the tribunal ruled, PPC collects its ill-gotten gains as agent, then the money belongs to the landowner. And if the money belongs to the landowner it needs to appear in the landowner's accounts, firstly as revenue and secondly as payments to PPC. I'm pretty sure that no landowner will be doing this right now, so they will need to get to grips with it, including finding out exactly how much money PPC are getting from the scam, which may come as something of a shock to them!

(ii) As regards VCS' historical revenue, doubtless HMRC is treating 20% of it as VAT and demanding that VCS coughs it up. But going forward VCS and all the other PPC's will need to handle this properly i.e. they will need to show that they invoiced the landowners for VAT - and conversely the landowners will need to show in their accounts that they have paid it.

Little of this was expressly ruled by the Tribunal, but it all follows logically from its ruling that the PPC is merely the landowner's agent.

This is all going to come as one hell of a shock for the landowners and possibly cause them to re-evaluate their need for, and relationship with, PPC's.

antrobus

bazster wrote: »

(i) If, as the tribunal ruled, PPC collects its ill-gotten gains as agent, then the money belongs to the landowner. And if the money belongs to the landowner it needs to appear in the landowner's accounts, firstly as revenue and secondly as payments to PPC.....

Not really. What a VAT tribunal has to say on the legal aspects of a particular transaction doesn't determine its accounting treatment. Nothing the VAT tribunal had to say on the matter of PPC contracts effects the commercial substance of the relationship between the PPC and the landowner, and it is the commercial substance that determines the accounting treatment.