Paying VAT retrospectively
Discussion
I used the services of a scaffolder last July and August for two jobs I did and paid the invoice promptly.
Today I received an invoice from him for the VAT element (2 x £70) as he was made VAT regd retrospectively last
March 2016.
I can't now go back to my customers and ask them for an extra £70, so what are the legalities of me not paying it, and of him asking me for it?
I'm not VAT regd, so would be out of pocket.
Thanks.
Today I received an invoice from him for the VAT element (2 x £70) as he was made VAT regd retrospectively last
March 2016.
I can't now go back to my customers and ask them for an extra £70, so what are the legalities of me not paying it, and of him asking me for it?
I'm not VAT regd, so would be out of pocket.
Thanks.
I'm not a lawyer or accountant but my feeling is that if the original quotation and subsequent invoice did not mention or include VAT, then you should not be paying it.
If they have had to register for VAT and back date their VAT liability, then that is their problem / cost to deal with.
Whether or not the scaffolder might have a legitimate claim against you for the alleged VAT element, is best answered by others more knowledgeable than me.
If they have had to register for VAT and back date their VAT liability, then that is their problem / cost to deal with.
Whether or not the scaffolder might have a legitimate claim against you for the alleged VAT element, is best answered by others more knowledgeable than me.
You have no obligation to pay it. If he failed to charge VAT property on the original invoice, then he will just have to pay to HMRC the VAT element of the original amount he charged you.
As an example, say he billed you £1,000.00 with no VAT.
HMRC tells him she should have been charging VAT. He can ASK you to pay him the missing £200.00 VAT but you have no obligation to pay it. If you were a VAT registered trader yourself, you would just claim the £200 back on your next VAT return - so the £200 extra he is charging would be recovered by you.
If you are NOT a VAT registered trader, then the extra £200 he is charging you is a genuine extra cost - over and above what you had agreed with him previously. Therefore you do not have to pay it.
He will have to treat the original £1,000 invoice as a VAT inclusive invoice and pay the VAT content of £166.67 to HMRC. In other words, he didn't make as much money from the job as he thought he did.
As an example, say he billed you £1,000.00 with no VAT.
HMRC tells him she should have been charging VAT. He can ASK you to pay him the missing £200.00 VAT but you have no obligation to pay it. If you were a VAT registered trader yourself, you would just claim the £200 back on your next VAT return - so the £200 extra he is charging would be recovered by you.
If you are NOT a VAT registered trader, then the extra £200 he is charging you is a genuine extra cost - over and above what you had agreed with him previously. Therefore you do not have to pay it.
He will have to treat the original £1,000 invoice as a VAT inclusive invoice and pay the VAT content of £166.67 to HMRC. In other words, he didn't make as much money from the job as he thought he did.
Thanks all.
And thanks Eric.
That was my initial thought.
However, I now need to think this through from a business point of view.
He's a good scaffolder and has always been prompt and sometimes has done me a job at short notice.
With this in mind, and being the kind and generous chap that I am, I have to have a think about whether to pay it.
When you find a tradesman that does a good job (bookkeeping aside..) it's sometimes worth keeping on the right side of them.
And he's a bloody big barstard too...
Probably worth a phone call to him.
And thanks Eric.
That was my initial thought.
However, I now need to think this through from a business point of view.
He's a good scaffolder and has always been prompt and sometimes has done me a job at short notice.
With this in mind, and being the kind and generous chap that I am, I have to have a think about whether to pay it.
When you find a tradesman that does a good job (bookkeeping aside..) it's sometimes worth keeping on the right side of them.
And he's a bloody big barstard too...
Probably worth a phone call to him.
Did his original invoice make any reference to a VAT invoice to follow? I can't remember exactly what has to be stated but I had to do similar many years ago and it wasn't a problem... But then again my client was well aware there would be vat to pay.
Assuming it didnt then you need to advise him to jog on. Not a conversation I'd like with your average scaffolder!
Assuming it didnt then you need to advise him to jog on. Not a conversation I'd like with your average scaffolder!
Are you likely to use his services again?
You have a simple decision to make.
If he is a decent bloke and is not scamming you I would pay it, (through gritted teeth) good tradesmen are hard to find, there are a lot of cowboys out there, especially in the building trade.
Remember he is not making anything personally from this.
You have a simple decision to make.
If he is a decent bloke and is not scamming you I would pay it, (through gritted teeth) good tradesmen are hard to find, there are a lot of cowboys out there, especially in the building trade.
Remember he is not making anything personally from this.
might influence your decision somewhat.
Wacky Racer said:
Are you likely to use his services again?
You have a simple decision to make.
If he is a decent bloke and is not scamming you I would pay it, (through gritted teeth) good tradesmen are hard to find, there are a lot of cowboys out there, especially in the building trade.
Remember he is not making anything personally from this.
Pay it and make it clear you expect a big discount the next time you use him You have a simple decision to make.
If he is a decent bloke and is not scamming you I would pay it, (through gritted teeth) good tradesmen are hard to find, there are a lot of cowboys out there, especially in the building trade.
Remember he is not making anything personally from this.
A friend of mine was on the other side of this i.e. wasn't registered, took his eye off the ball and slipped over the registration threshold (only by a few hundred quid), all came to light about a year later when HMRC saw his accounts. They made him do the retrospective registration same as the scaffolder; charged him the full amount of VAT on all his sales, as if he had been registered from that date when his earnings crossed the threshold; and added a whopping great fine as well. They made it clear that HMRC didn't care where he got the money from, just that he would in no uncertain terms be paying them everything they said was now due. He was lucky in that most of the people he had invoiced in the offending period were themselves VAT registered so no skin off their nose to help him out and pay his new VAT-only invoice and then claim it back themselves, other than a temporary cashflow hit and a bit of their accountant's time, he explained to and asked them all nicely (not just send an invoice out!). But he was under no illusion that his customers didn't have to pay him the VAT if they didn't want to, they could well have refused and left him to find it himself.
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