VAT Question - not the 15% rate

[mk1fan]

Right,

Now I think I can assume the answer to this but I'd like one of you Tax guys to confirm it to me.

I was chatting to a friend today who is having some (on going) work done on their home. They employ, by the hour, a local VAT registered sparks and they asked me about the recent VAT change and getting an invoice out of the sparks.

During this conversation they mentioned that the first invoice they had out of him - a yearish ago - had VAT at 22.5%. His explanation was that he was Self Employed. His subsequent invoices have been at 17.5%. Now, in my mind, his explanation of using 22.5% is rubbish and he was pulling a fast one. But, before I put my foot in it can anyone confirm his story as being true?

[anonymous-user]

Can't say i've ever heard of anything other than 0 rated, 5% and 17.5%(now 15%).

[mk1fan]

Same here. He's messing about over splitting his invoices to show the different VAT rate too - He did work in Novemeber and December that he wants paying for.

[Eric Mc]

What was his explanation of the 22.5% VAT rate?

There was and is no such rate and it is illegal to charge non-existant VAT rates.

If your friends paid him the excess amount, they should ask him to repay the overapid money to them, or, if they are due to pay any more of his invoices, they should work out the excess they paid him and deduct it from what they owe him.

[mk1fan]

Well, that was my initial thoughts (asking for the overpayment back).

His long and technical sounding explanation (I wasn't there) relayed to me by my friend was summerised to 'because he was Self Employed the VAT rate was 22.5%'. And - I am not a VAT Expert - my thoughts were VAT is either Zero, reduced or 17.5% (now 15%).

I'm not going to push it as my friend is currently under great stress over other, more important, things.

[Simpo Two]

It is indeed true nonsense - VAT is VAT regardless of business status.

I can't believe that he read it anywhere so he's either very misguided or dishonest.

[mk1fan]

It turns out he was adding Income Tax to the bill. Sounds even fishier to me now. I certainly don't break down my Fee Accounts in such a way.

[sgrimshaw]

1. Stop paying him until job finished.

2. Pay final invoices deducting the overpayments.

3. Report him to HMRC (anonymously if desired) - 0800 595 000

[anonymous-user]

I hope his work is better than his grasp on accounting!!

[henna777]

Simpo Two said:

It is indeed true nonsense - VAT is VAT regardless of business status.

I can't believe that he read it anywhere so he's either very misguided or dishonest.

Perhaps he had been working abroad and became confused, 22.5% is Dutch rate

[chrispitman]

If he has charged 22% vat then ask for the money back, or report him to HMRC he would be stupid not to refund the money and get involved in a vat investigation. If you report him deduct the refund off the final bill.

[Mrs Trackside]

mk1fan said:

It turns out he was adding Income Tax to the bill. Sounds even fishier to me now. I certainly don't break down my Fee Accounts in such a way.

I was going to say it sounds like Income Tax. I assume he is CIS registered? It sounds like he was confusing VAT and Income Tax.

IT shouldn't be shown on his bills, that should come out of his own pocket (and isn't applicable to private work anyway AFAIK).

[Eric Mc]

He needs a better accountant.

Edited by Eric Mc on Thursday 11th December 14:12

[Simpo Two]

Eric Mc said:

He needs a better accountant.

He needs an accountant, full stop!



The idea of adding projected income tax liability onto the bill is certainly novel!

[Eric Mc]

Good job he's not a Higher Rate taxpayer.

[2 sMoKiN bArReLs]

He's muddling up CIS methinks