Am i right or wrong here?
Discussion
I am an electrician, and used to also do CCTV, all under one Ltd company.
Due to the high turnover from the CCTV i had to register for VAT, In order to stay competitive i had to reduce my labour rate by 20%, so my total labour rate was the same as before, just 20% went to HMRC rather than my pocket!
A little while ago i decided CCTV was not for me and stopped doing it, my turnover is now below the threshold, so have just de-registered for Vat, so have essentially now increased my labour rate by 20%. However i now can't reclaim the Vat on tools/van consumables/fuel etc, so I'm not 20% better off!
I quoted for a job 6 months ago for a domestic customer, this included Vat as i was registered at this time.
I have just completed this job, and just pointed out that the invoice will be the same total amount as quoted, but there will be no Vat as i am now not registered.
He is now adamant that he does not need to pay the Vat, as i am now Vat registered. I tried explaining several times that my rates have now increases by 20%, but its made absolutely no difference to the quoted price.
So am i right or wrong here? I don't see what bloody difference it makes to the domestic customer?
Due to the high turnover from the CCTV i had to register for VAT, In order to stay competitive i had to reduce my labour rate by 20%, so my total labour rate was the same as before, just 20% went to HMRC rather than my pocket!
A little while ago i decided CCTV was not for me and stopped doing it, my turnover is now below the threshold, so have just de-registered for Vat, so have essentially now increased my labour rate by 20%. However i now can't reclaim the Vat on tools/van consumables/fuel etc, so I'm not 20% better off!
I quoted for a job 6 months ago for a domestic customer, this included Vat as i was registered at this time.
I have just completed this job, and just pointed out that the invoice will be the same total amount as quoted, but there will be no Vat as i am now not registered.
He is now adamant that he does not need to pay the Vat, as i am now Vat registered. I tried explaining several times that my rates have now increases by 20%, but its made absolutely no difference to the quoted price.
So am i right or wrong here? I don't see what bloody difference it makes to the domestic customer?
I am with you here. tell him fine, just remove 20% of the work you have done and tell him he can have it back when he pays the bill for the amount he agreed too regardless of whether vat was applicable or not.
Or for peace sake, have a deal, meet him half way so he gets a 'discount' move on with your life and next time stay schtumm and just present the bill for works carried out.
Or for peace sake, have a deal, meet him half way so he gets a 'discount' move on with your life and next time stay schtumm and just present the bill for works carried out.
If you quoted, say, £1200 with no mention of VAT, I'd expect to pay it. If I was quoted £1000 plus VAT and the trader de-registered, I'd expect to pay the ex-VAT price.
It's best to discuss this at the point the customer takes up the quote, IMO. Might be one to chalk up to experience.
It's best to discuss this at the point the customer takes up the quote, IMO. Might be one to chalk up to experience.
Quoted 6 months previous.......did you re-quote and advise no Vat but 20% rate increase?
If not then I am with the customer I'm afraid as contract was for X + V.A.T. Just my opinion but word of mouth is the best advertising you can get and can also do a lot of damage to a small business.
If not then I am with the customer I'm afraid as contract was for X + V.A.T. Just my opinion but word of mouth is the best advertising you can get and can also do a lot of damage to a small business.
I agree with those two ^^^, and the customer. You've invoiced a certain rate and price for a job and that's what I'd expect to pay. If you've de-registered for VAT then that element must be removed from the invoice, but I wouldn't expect to have to pay a rate increase at the same time.
Essentially you're asking for 20% more for the job as you'll be pocketing the cash.
Essentially you're asking for 20% more for the job as you'll be pocketing the cash.
Magic919 said:
If you quoted, say, £1200 with no mention of VAT, I'd expect to pay it. If I was quoted £1000 plus VAT and the trader de-registered, I'd expect to pay the ex-VAT price.
It's best to discuss this at the point the customer takes up the quote, IMO. Might be one to chalk up to experience.
^^^^ this if I was a personal buyer. Slightly different if it was my VAT reg LTD payingIt's best to discuss this at the point the customer takes up the quote, IMO. Might be one to chalk up to experience.
Technically, I think that your customer is correct, insofar as the quotation included VAT, which you now don't have to account for with HMRC, and which was never your money in the first place. Consequently, the customer should not be paying the VAT element of your bill if you are no longer VAT registered.
Ok looks like I'm on my own here....
Personally if i was a customer, all i would look at is the total price(and my thoughts on the trader), I wouldn't give a damn if there was vat or not, as it makes no difference, all that matters is the price i pay.
perhaps would be best to try to strike a deal then.
And just a domestic customer, if it was a business customer i would of definatly made it clear.
TBH the Vat element (or my increase in rates) on labour was only around £60 so not end of the world, but surely he should still pay the full amount for materials as i can no longer claim this back?
Personally if i was a customer, all i would look at is the total price(and my thoughts on the trader), I wouldn't give a damn if there was vat or not, as it makes no difference, all that matters is the price i pay.
perhaps would be best to try to strike a deal then.
And just a domestic customer, if it was a business customer i would of definatly made it clear.
TBH the Vat element (or my increase in rates) on labour was only around £60 so not end of the world, but surely he should still pay the full amount for materials as i can no longer claim this back?
When you quoted him, you should have specified the net and vVAT seperately (assuming he is VAT registered)
If he's not VAT registered, then his cost would have been your gross quote. If he is registered, then his cost would have been your net figure.
Either way, you shouldn't expect him to accept an increase of 20% (not actually 20%, but that's maths for you) without negotiaton. Whether or not it actually makes any difference to him depends upon his registration status, and upon whether your new, higher labour rate is actually competitive, VAT notwithstanding.
If he's not VAT registered, then his cost would have been your gross quote. If he is registered, then his cost would have been your net figure.
Either way, you shouldn't expect him to accept an increase of 20% (not actually 20%, but that's maths for you) without negotiaton. Whether or not it actually makes any difference to him depends upon his registration status, and upon whether your new, higher labour rate is actually competitive, VAT notwithstanding.
R1 Indy said:
To put this into simple terms:
I used to charge £25/Hour (going rate for a spark)
When i had to register for Vat, I reduced my fee to £20.83 + Vat to remain competitive, but this hurt me financially!!
I have now reverted to £25/Hour, the going rate.
So someone comes along tomorrow you quote £25/hr.I used to charge £25/Hour (going rate for a spark)
When i had to register for Vat, I reduced my fee to £20.83 + Vat to remain competitive, but this hurt me financially!!
I have now reverted to £25/Hour, the going rate.
You don't tell the guy you quoted £20.83/hr a week ago that he now has to pay £25.
R1 Indy said:
To put this into simple terms:
I used to charge £25/Hour (going rate for a spark)
When i had to register for Vat, I reduced my fee to £20.83 + Vat to remain competitive, but this hurt me financially!!
I have now reverted to £25/Hour, the going rate.
No offence but I think, and most others fully understood so no need to make it simpler.I used to charge £25/Hour (going rate for a spark)
When i had to register for Vat, I reduced my fee to £20.83 + Vat to remain competitive, but this hurt me financially!!
I have now reverted to £25/Hour, the going rate.
In the scheme of things I would suck it up. As a guess it's about £100....really not worth the upset to be honest, (not to mention dodgy comments on f
kbook etcExplain to them that you can no longer claim vat back on the materials hence they will be more expensive than the previous pre-vat price given.
Stick to the pre-vat labour price and add the vat from the materials onto the bill, the customer still gets a cheaper job overall than they first agreed to and you don't get shafted for the vat on the materials.
Stick to the pre-vat labour price and add the vat from the materials onto the bill, the customer still gets a cheaper job overall than they first agreed to and you don't get shafted for the vat on the materials.
BrownBottle said:
Explain to them that you can no longer claim vat back on the materials hence they will be more expensive than the previous pre-vat price given.
Stick to the pre-vat labour price and add the vat from the materials onto the bill, the customer still gets a cheaper job overall than they first agreed to and you don't get shafted for the vat on the materials.
Which could open another potential "can of worms".... did he separate Lab & mats in quote?.... Did he mark them up himself? If so by how much?...will they ask for sight of the invoices?Stick to the pre-vat labour price and add the vat from the materials onto the bill, the customer still gets a cheaper job overall than they first agreed to and you don't get shafted for the vat on the materials.
FWIW I would forget the VAT but, subtly, point out that you have, in effect lost that money.........customer may make an offer but if not then put it down to experience would be my honest advice.
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