Energy provider - VAT charged incorrectly, who is liable?

[Louis Balfour]

Our businesses have around 100 energy accounts with Eon. They are resi properties where we pay the bills, so the VAT is due at 5% and there is no Climate Change Levy. Eon has had the business for 11 years.

We submitted VAT declarations to get the reduced VAT around 10 years ago. Periodically, we've noticed a 20% charge creeping in and queried it, whereupon it has been refunded.

Our bookkeeping and accounting is outsourced, so all the bills go to the accountant via the office. We only query them if the total due is out of the norm.

The problem, basically, is that Eon has been charging VAT on some sites at 20%. They want only to refund the error going back 4 years, we want it refunded going back to inception.

They are saying, and I quote, "it is the customer's responsibility to ensure VAT is paid at the correct rate". Our response has been "we submitted VAT declarations, we have corrected you when we spotted an error and each time we have signed a new fixed term we have asked you to check that all VAT decs are in place. What more help would you like?"

If we were a bigger business and employed our own accounts staff to check every invoice we may have spotted the error. But I think we should be able to entrust accurate billing to our energy provider. They were given the correct paperwork originally and they have been reminded every two years.

I think it boils down to who is liable to ensure that VAT is charged at the correct rate, the energy company or the customer?

[Mr Pointy]

I'd say you need to be asking some questions of your accountant. There's no-one better placed to know about your VAT arrangements.

[Louis Balfour]

Mr Pointy said:

I'd say you need to be asking some questions of your accountant. There's no-one better placed to know about your VAT arrangements.

We have. But our accountants are a bit close to the issue. I am chewing over whether they should have spotted the error themselves.

[Mandat]

At the end of the day, does it really matter?

Unless VAT works differently on business energy bills, I presume that as a business you will be offsetting the input and output VAT amounts which ever rate is charged, therefore the end effect being nett zero?

[Eric Mc]

In most situations, it is the entity which is creating the VAT invoice who should ensure that they are charging VAT at the correct rate.

As someone has said, if you are a VAT registered entity, then it doesn't matter to you as you will be reclaiming the VAT they charged you, whatever rate they were using. If you are NOT a VAT registered entity, then it does make a difference.

[Louis Balfour]

Mandat said:

At the end of the day, does it really matter?

Unless VAT works differently on business energy bills, I presume that as a business you will be offsetting the input and output VAT amounts which ever rate is charged, therefore the end effect being nett zero?

We aren't VAT registered in those businesses because we cannot charge VAT.

[2 sMoKiN bArReLs]

Louis Balfour said:

Mr Pointy said:

I'd say you need to be asking some questions of your accountant. There's no-one better placed to know about your VAT arrangements.

We have. But our accountants are a bit close to the issue. I am chewing over whether they should have spotted the error themselves.

I'd be worried if the accountants have not spotted such a basic & fundamental error, what else have they done/not done?

HMRC say it's the responsibility of the supplier to correct the situation. I can't see a mention of time limits.

I guess in many years of error, maybe the end user should have noticed the error. How are invoices authorised for payment?

[2 sMoKiN bArReLs]

Looking again:

4.6 The time limit for correcting errors
You cannot adjust your VAT Return, or make an error correction notification, for any errors that arose in accounting periods that are outside the time limits at paragraph 4.6.1 and paragraph 4.7. You may however be able to correct tax point errors, where you have declared an amount of VAT on the return that immediately precedes or follows the return for which the amount was due, provided the later return remains in time under the 4-year capping provisions.

[2 sMoKiN bArReLs]

Although I'm not sure the four year thing is relevant in this context. I think it may refer to accounting error, rather than correctly processing an incorrect invoice.

[CaptainSlow]

Eric Mc said:

As someone has said, if you are a VAT registered entity, then it doesn't matter to you as you will be reclaiming the VAT they charged you, whatever rate they were using.

Only if you're making 100% taxable supplies, if you're not then it will matter.

[Louis Balfour]

2 sMoKiN bArReLs said:

Although I'm not sure the four year thing is relevant in this context. I think it may refer to accounting error, rather than correctly processing an incorrect invoice.

I think the woman at Eon is making up much of what she sends me.

On your other point. Invoices are paid by fixed DD in accordance with our agreement with them.

[2 sMoKiN bArReLs]

Louis Balfour said:

On your other point. Invoices are paid by fixed DD in accordance with our agreement with them.

I thought you'd say that. Even invoices paid by DD should be signed off though? (To avoid situations such as this)

[BlackTails]

It sounds like you have a fairly straightforward claim in restitution (if there is such a thing as a straightforward restitution claim) but you will only be able to go back 6 years from the date you issue proceedings. I wouldn’t mess around with Eon: just go to you solicitors and get them to issue proceedings.

[Louis Balfour]

BlackTails said:

It sounds like you have a fairly straightforward claim in restitution (if there is such a thing as a straightforward restitution claim) but you will only be able to go back 6 years from the date you issue proceedings. I wouldn’t mess around with Eon: just go to you solicitors and get them to issue proceedings.

Thanks. Six years was my next question, though I wondered whether because the loss was "continuous" so to speak and we're pursuing it within six years whether the loss could be calculated from the start of the relationship.

Also, I am hoping that jaw jaw will avoid the need for war war. Eon used to be good at sussing out when they had messed up and put it right. Not so much latterly.

[Mr Overheads]

Lot's of questions:
1) Are they 01/02 meters or 03/04?
2) What name are the bills in? e.g. is each in a separate legal entity or all one big account? Is it LLP, Sole Trader or Ltd?
3) Would you qualify as a microbusiness under OFGEM regs? https://www.ofgem.gov.uk/key-term-explained/micro-...
4) Why have you never switched (not relevant to the claim issue), unlikely E-on has been the most competitive every single year for 11 years.
5) Are all 100 odd supplies on a single contract end date? That puts you at massive risk of an energy spike if you are liable for the change in rate not the tenants (I'm assuming rent includes all energy costs), you want a mix of contract end dates and contract lengths.
6) Are you on spreadsheet billing from E-on which makes it easy to notice differences?

[Creg]

For individual usage of under 12k kwh per annum for electricity and under around 53k kwh for gas, you should be being charged the lower rate of VAT by your supplier. This should really be happening without you having to make a declaration.

Those figures are considered the de minimis usage levels for calculating vat.

https://www.gov.uk/guidance/vat-on-fuel-and-power-...

4.2 and 5.2 of the above link cover both fuels.

Edited by Creg on Wednesday 12th May 23:55

[Louis Balfour]

Mr Overheads said:

Lot's of questions:
1) Are they 01/02 meters or 03/04?

Don't know, what's the difference?. They are ordinary domestic meters

2) What name are the bills in? e.g. is each in a separate legal entity or all one big account? Is it LLP, Sole Trader or Ltd?

In a partnership, and two limited companies.

3) Would you qualify as a microbusiness under OFGEM regs? https://www.ofgem.gov.uk/key-term-explained/micro-...

I'd have to add up the consumption, but I imagine so.

4) Why have you never switched (not relevant to the claim issue), unlikely E-on has been the most competitive every single year for 11 years.

Because we used to use other firms and it was a nuisance (British Gas Business springs to mind). Eon is a local firm, the service is (used to be) good and the price difference has not been massive.

[5) Are all 100 odd supplies on a single contract end date?

Yes

6) Are you on spreadsheet billing from E-on which makes it easy to notice differences?

No. We get multiple paper bills, per site, per annum. We have asked repeatedly for a better system but it hasn't happened. There's a longer answer, but that is the gist of it.

[Mr Overheads]

Louis Balfour said:

So based on what you've said they should absolutely refund 4 years and that's their published policy too i.e. they'll backdate VAT claims by 4 years. However if you have evidence you submitted correct claims and they haven't applied them you can go back 6 years under Statute of Limitations to correct billing errors.

Secondly it sounds like you need someone better managing your energy supplies to reduce admin, save money, reduce risk and make it easy to spot these errors too. Guess what, we can offer that service ;-)

[Louis Balfour]

Mr Overheads said:

Secondly it sounds like you need someone better managing your energy supplies to reduce admin, save money, reduce risk and make it easy to spot these errors too. Guess what, we can offer that service ;-)

I've had another email exchange with the lady from head office. I sent her an email from 2012 in which we refer to the VAT decs that had been submitted and our request that they check all accounts to make sure they were in place. So "you never submitted decs" doesn't wash and wouldn't wash if it went to court, I don't think.

I know that you manage energy accounts for customers. But whilst I genuinely believe you personally are very good, the two people we've dealt with from your firm were both (and I am pulling my punches here) dishonest. The latter of the two I "set up" to see whether the first chap was an outlier. He wasn't. It doesn't inspire confidence.

All of which said, I might ask you to take a look at our situation depending upon the outcome of this bother.

[Mr Overheads]

Louis Balfour said:

Mr Overheads said:

Secondly it sounds like you need someone better managing your energy supplies to reduce admin, save money, reduce risk and make it easy to spot these errors too. Guess what, we can offer that service ;-)

I've had another email exchange with the lady from head office. I sent her an email from 2012 in which we refer to the VAT decs that had been submitted and our request that they check all accounts to make sure they were in place. So "you never submitted decs" doesn't wash and wouldn't wash if it went to court, I don't think.

I know that you manage energy accounts for customers. But whilst I genuinely believe you personally are very good, the two people we've dealt with from your firm were both (and I am pulling my punches here) dishonest. The latter of the two I "set up" to see whether the first chap was an outlier. He wasn't. It doesn't inspire confidence.

All of which said, I might ask you to take a look at our situation depending upon the outcome of this bother.

Can you pm me please with the names of the 2 dishonest people you've dealt with. Hopefully they've long left us.