Is it right that vat is charged on budget plan amount rather than actual usage?

Bluebirdman_of_Alcathays

I can't agree with Westondave or Keith. VAT is charged on the billed usage (even if it's estimated) not the payment amount - or at least it has been with every supplier I've ever been with. From an accounting perspective it makes much more sense than performing a balancing off exercise later in the year when they will owe you money.

They're selling you energy, and should only be collecting VAT on what they're selling you, not on the money they're holding on account.

Who is the supplier?

JHB_2

Bluebirdman_of_Alcathays wrote: »

I can't agree with Westondave or Keith. VAT is charged on the billed usage (even if it's estimated) not the payment amount - or at least it has been with every supplier I've ever been with. From an accounting perspective it makes much more sense than performing a balancing off exercise later in the year when they will owe you money.

They're selling you energy, and should only be collecting VAT on what they're selling you, not on the money they're holding on account.

Who is the supplier?

Thank you, that's what I was thinking and couldn't understand why it didn't work that way and I hence pay more VAT despite giving monthly meter readings and being in credit. It's the Utility Warehouse

thenudeone

Bluebirdman_of_Alcathays wrote: »

I can't agree with Westondave or Keith. VAT is charged on the billed usage (even if it's estimated) not the payment amount - or at least it has been with every supplier I've ever been with. From an accounting perspective it makes much more sense than performing a balancing off exercise later in the year when they will owe you money.

They're selling you energy, and should only be collecting VAT on what they're selling you, not on the money they're holding on account.

I am afraid such common sense approaches do not apply to VAT law.

VAT is charged depending on tax point dates - usually this is rather academic unless there are changes in VAT rates (of which there have been several in the last decade).

There are many pages on the HMRC site explaining when a tax point occurs, but generally - A Tax point is created at the earlier of the invoice, goods / services being delivered, or a payment being made. (unless an invoice is raised within 14 days in which case the invoice date is used). This is the most relevant page: http://www.hmrc.gov.uk/manuals/vattosmanual/VATTOS3600.htm

The supply of continuous services is a special case, but payment alone still creates a tax point date, even if the service hasn't yet been provided.

Many years ago when the 5% VAT rate on utilities was first introduced, many astute people made a large advance payment to their utility supplier just before the change, which created a tax point date, meaning the VAT applicable to that payment was 0%, rather than 5% which it would have been if it had been invoiced later when it was used:):)

Obviously a later refund should have added on to it any VAT which was originally charged when the payment was made, so the eventual VAT paid matches the amount of the purchase.

Stharay

As I have the same issue, am I correct in assuming that when I leave Utility Warehouse I will be entitled to a refund of any overpaid VAT? As it stands at the moment, I have paid utility warehouse monthly direct debits that total £844.00, of which £803.76 has been credited to my budget account and £40.24 has been deducted for VAT @ energy rate of 5%. Over the last 6 months my energy bills have been £544.00, including daily standard charge but excluding any VAT. This leaves me £259.76 in credit.....BUT, if I decided to (theoretically from this point) immediately stop having my energy supplied by utility warehouse my actual energy spend would be £544.00 plus 5% vat = £571.20, which when deducted from the amount I have paid utility warehouse (£844.00) should leave me with £272.80 credit on the account. This means there is a difference of £13.04 that I will more than likely have to spend many hours trying to reclaim back from the company as technically it is not there?????? It may only be a small amount but better in my pocket...

matelodave

I'm with FU and pay them a monthly amount of £85.

When they issue a statement every month it's got my monthly energy charge which comprises my energy cost in kwh, standing charge and 5% VAT on top. That's the amount that gets taken from my £85 and the balance (if any) is carried forward to the next month.
My monthly dd isn't chopped up into payments and vat - well not on the statement it isn't.

Perhaps FU isn't as clever as your lot who seem to be stashing your cash away and funding their VAT payments with it (or perhaps they are and just not being open about it!)

lstar337

I just pay the monthly budget amount. The VAT and usage is taken out of the built up credit each quarterly bill.

Isn't this how they all work?

Putting VAT on the monthly budget amount seems completely ludicrous!