No VAT registered...showing VAT in quote, NOT in invoice

dktreesea

ValHaller wrote: »

He is not charging for VAT. I agree that this would be a dodgy practice if he is not registered for VAT and does not account to HMRC for VAT.

His turn of phrase means that when the sum agreed is paid, there is no further VAT liability.

"Including VAT" usually means the price, plus the VAT applicable, as in 20% on top of the price.

If the tradesman isn't registered for VAT, then why mention it on the invoice? He's neither registered nor required (always assuming his annual revenue is under the threshold) to collect it.

keystone

dktreesea wrote: »

Yes, I read the whole thread. The invoice, as I understood it, said one lump sum, presumably including the tradesman's labour, "including VAT". I'm also an accountant, and 100% certain he is not allowed to charge VAT on his labour, not withstanding that he may just be including the VAT on the parts he bought to do the job.

Of course he's not allowed to do that. But where does it say that he has charged VAT on his labour? VAT on parts is 20% which he has had to pay to the merchant. His labour is zero rated because he trades below the threshold so the breakdown might be as follows (just for example):

Parts 1,000.00
VAT on Parts 200.00
Labour 900.00
VAT on labour 0.00

Total Quote 2,100.00 Inclusive of VAT.

Total Invoice 2,100.00 How do you draw the conclusion that he has charged VAT on his labour?

Why on earth is that so difficult for anybody (let alone an accountant) to understand?

Remind me not to ask you to review/check my accounts for me later in the year.:D

Cheers

keystone

dktreesea wrote: »

"Including VAT" usually means the price, plus the VAT applicable, as in 20% on top of the price.

What does "usually mean" mean. Eveyone else on this thread except you and OP understands the situation - including at least two accountants.

If the tradesman isn't registered for VAT, then why mention it on the invoice?

Thats just the point - he DIDN'T mention it on the INVOICE!!!

Cheers

keystone

dktreesea

Would you be happier if his quotation (NOT the invoice once again) had said

"including VAT where applicable"

because thats what he meant even if clumsily expressed.

Cheers

ValHaller

dktreesea wrote: »

"Including VAT" usually means the price, plus the VAT applicable, as in 20% on top of the price.

????? That does not make sense.

dktreesea wrote: »

If the tradesman isn't registered for VAT, then why mention it on the invoice? He's neither registered nor required (always assuming his annual revenue is under the threshold) to collect it.

Note that by saying that VAT is included, the trader is not representing that any part of the quote or invoice is specifically charged as VAT and accounted to HMRC.

The reason for mentioning VAT as inclusive is that for this sort of work, householders are dealing with both VAT registered and non VAT registered traders. The non registered traders obviously desire to make it clear that their price will not have a further 20% slapped on top so that their price can be compared on a level playing field with other traders regardless of whether they are VAT registered or not. If they are silent about the matter of VAT they will have a not unreasonable concern that the customer will interpret silence about VAT as deceit by omission and mentally load the quote by 20%.

I think you really need to understand WHY the trader is making the statement on his quote. Granted, there is some potential confusion, but essentially the statement tells the customer how to compare the quote with quotes from other traders. Not mentioning VAT one way or the other does not help the customer. As such, although there is room to criticise the precision of the statement 'VAT included', there is still a need for terminology to allow the trader to set the expectation of the customer as to whether VAT will be charged on top of the bill.

It does not help either the customer or the non VAT registered trader for the quote not to mention VAT at all.

keystone

and furthermore it is a convention that if a quote doesn't make any mention of VAT at all it is automatically deemed that any VAT payable is included in the quoted price.

Cheers

dktreesea

keystone wrote: »

Of course he's not allowed to do that. But where does it say that he has charged VAT on his labour? VAT on parts is 20% which he has had to pay to the merchant. His labour is zero rated because he trades below the threshold so the breakdown might be as follows (just for example):

Parts 1,000.00
VAT on Parts 200.00
Labour 900.00
VAT on labour 0.00

Total Quote 2,100.00 Inclusive of VAT.

Total Invoice 2,100.00 How do you draw the conclusion that he has charged VAT on his labour?

Why on earth is that so difficult for anybody (let alone an accountant) to understand?

Remind me not to ask you to review/check my accounts for me later in the year.:D

Cheers

I can appreciate one would want the quote to state "including VAT" regardless of whether the tradesman is registered or not to avoid the situation where VAT might become returnable by the vendor prior to invoicing the job, e.g. if the tradesman registers between quoting and invoicing.

But going back to the first post, I understood the OP to say that on the invoice it states:
I have just received the invoice for the above job and there is no mention of VAT anywhere in the invoice. When contacted, the tradesman wrote me: "I am not a VAT registered company so cannot include the VAT breakdown. I include the phrase 'all prices include VAT' to avoid confusion."

Yes, if this is not the case, i.e. the first part is true, that the word VAT is not mentioned at all on the invoice, then the tradesman is not at fault. But if, on the invoice, it states "all prices include VAT" then I would think CH91350 applies.

This from the HMRC:
"Mark is the sole proprietor of a garage. He is not registered for VAT because his turnover is below the registration threshold but he includes VAT on the invoices he issues to customers. Because Mark is not registered for VAT he is an unauthorised person. He makes an unauthorised issue of invoices when he issues invoices that include an amount purporting to be VAT. He is liable to a penalty."

dktreesea

keystone wrote: »

and furthermore it is a convention that if a quote doesn't make any mention of VAT at all it is automatically deemed that any VAT payable is included in the quoted price.

Cheers

Can be tricky relying on that, because there is a circumstance where that wouldn't apply.

If someone agrees to a quote, but by the time of supply the tradesman has registered for VAT, e.g. because he has moved over the revenue threshold, the supplier can then change the contracted price to reflect the VAT that was not taken into account when the contract was signed.

If I were receiving a quote, I would want it to say the words "including VAT" whatever the status of the supplier, just to safeguard against them registering for VAT prior to carrying out the work, and then lumping the VAT on top of the original quote.

System

dktreesea wrote: »

I can appreciate one would want the quote to state "including VAT" regardless of whether the tradesman is registered or not to avoid the situation where VAT might become returnable by the vendor prior to invoicing the job, e.g. if the tradesman registers between quoting and invoicing.

But going back to the first post, I understood the OP to say that on the invoice it states:
I have just received the invoice for the above job and there is no mention of VAT anywhere in the invoice. When contacted, the tradesman wrote me: "I am not a VAT registered company so cannot include the VAT breakdown. I include the phrase 'all prices include VAT' to avoid confusion."

Yes, if this is not the case, i.e. the first part is true, that the word VAT is not mentioned at all on the invoice, then the tradesman is not at fault. But if, on the invoice, it states "all prices include VAT" then I would think CH91350 applies.

This from the HMRC:
"Mark is the sole proprietor of a garage. He is not registered for VAT because his turnover is below the registration threshold but he includes VAT on the invoices he issues to customers. Because Mark is not registered for VAT he is an unauthorised person. He makes an unauthorised issue of invoices when he issues invoices that include an amount purporting to be VAT. He is liable to a penalty."

so you only managed to read half the op?

The quote shows (in short):

"[FONT=&quot]For the above work to be completed, including supplying all labour, materials, and a xyz combi boiler - £2100.00" and the quote ends with "[/FONT][FONT=&quot]All quoted prices include VAT.[/FONT] "

I have just received the invoice for the above job and there is no mention of VAT anywhere in the invoice. When contacted, the tradesman wrote me: "I am not a VAT registered company so cannot include the VAT breakdown. I include the phrase 'all prices include VAT' to avoid confusion."

sunshinetours

Sounds like a regular small trader getting confused over what to include with respect to VAT, rather than attempted VAT fraud

The only question OP needs to ask trader is does your labour charge include a VAT charge of 20% on top of your quoted hourly/daily/job rate.
If the answer is yes then it is VAT fraud, if no then no crime of the century committed especially as no VAT is mentioned on invoice which is the important bit

And yes OP that is from an accountant who does understand VAT better than you and better in most cases than the VAT helpline

Now pay the trader - its tough out there