An unusual situation re VAT
Discussion
I have a VAT registered company and an individual/sole trader owes the company some money, which includes 20% VAT.
This individual is not VAT registered and is doing some work for us.
Is there anything wrong with crediting him instead of payment for the work? The benefit to him being that he will save 20% which is the VAT element of our invoices.
This individual is not VAT registered and is doing some work for us.
Is there anything wrong with crediting him instead of payment for the work? The benefit to him being that he will save 20% which is the VAT element of our invoices.
blindswelledrat said:
I have a VAT registered company and an individual/sole trader owes the company some money, which includes 20% VAT.
This individual is not VAT registered and is doing some work for us.
Is there anything wrong with crediting him instead of payment for the work? The benefit to him being that he will save 20% which is the VAT element of our invoices.
Yes there is something wrong..it's not allowedThis individual is not VAT registered and is doing some work for us.
Is there anything wrong with crediting him instead of payment for the work? The benefit to him being that he will save 20% which is the VAT element of our invoices.
You can credit him in terms of asking him to invoice you for the work he has done. You can't raise a credit note against your sale to him to reflect the work he has done.
eta
on second thoughts...removed
eta
on second thoughts...removed
Edited by CaptainSlow on Wednesday 18th January 16:53
Edited by CaptainSlow on Wednesday 18th January 17:02
blindswelledrat said:
What am I missing. If I issued a credit to him, it would be for X plus VAT.
Or is your point that I am not allowed to issue a credit note of X plus VAT ?
You can't raise a credit note.Or is your point that I am not allowed to issue a credit note of X plus VAT ?
In your OP you stated that he would save the VAT on your charge, consider who would be losing out and then you'll understand why not.
I assumed that would be the ultimate answer for the reason you implied but I cant quite understand why not.
All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
blindswelledrat said:
I assumed that would be the ultimate answer for the reason you implied but I cant quite understand why not.
All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
Netting off is a pretty complex area, I don't have enough knowledge to answer more detailed questions. All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
I would however suggest that the what you describe would be considered tax evasion for VAT and also potentially other taxes (Income and/or Corp Tax) depending on the circumstances.
CaptainSlow said:
blindswelledrat said:
I assumed that would be the ultimate answer for the reason you implied but I cant quite understand why not.
All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
Netting off is a pretty complex area, I don't have enough knowledge to answer more detailed questions. All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
I would however suggest that the what you describe would be considered tax evasion for VAT and also potentially other taxes (Income and/or Corp Tax) depending on the circumstances.
blindswelledrat said:
I assumed that would be the ultimate answer for the reason you implied but I cant quite understand why not.
All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
No, because there'd be no invoice to have a VAT element.All the time we issue credit notes as a company in the course of business for various reasons but largely 'goodwill' but for whatever reason we are withdrawing our invoice as such.
Would your answer be the same if we had agreed prior to any invoicing to simply exchange services for free without any invoicing?
As it is, you're invoicing him for <say> £1,200 - which is made of £1,000 + £200 VAT. The customer pays £1,200 whether they're VAT reg or not, and £200 goes to your VAT account. He's invoicing you for £1,000 - which is £1,000 + £0 VAT. You pay £1,000, and "take out" £0 from your VAT account. So your VAT account should have that £200 in it, but if you try to just balance the £1,000 against each other, it's £200 short. If neither of you invoice the other, then there's no £1,000 invoice to have £200 VAT on it. You've just done a freebie for somebody, in return for them doing a freebie for you.
Just to throw this one into the mix .....
What if you decide to treat the debts between you as a series of bad debts?
The debt can be written off, along with the VAT ... so the VAT man doesn't get anything and nor does the OP.
You in turn refuse to pay his invoice and he in turn has to write off his debt with you.
Would this be considered VAT evasion?
Is it specifically not allowed?
What if you decide to treat the debts between you as a series of bad debts?
The debt can be written off, along with the VAT ... so the VAT man doesn't get anything and nor does the OP.
You in turn refuse to pay his invoice and he in turn has to write off his debt with you.
Would this be considered VAT evasion?
Is it specifically not allowed?
mel said:
Thanks for that. I searched but couldn't find anything.Gassing Station | Business | Top of Page | What's New | My Stuff