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Where Taxpayers and Advisers Meet

Customer VAT query

alig31
Posts: 23
Joined: Wed Nov 10, 2010 11:29 am

Customer VAT query

Postby alig31 » Fri Jan 10, 2020 3:46 pm

Hi,
we provide a 3rd party service for a customer (a company) who provide a service to the general public. The company charge the general public a fee for the service and then we provide the service. The company charge the general public £X for the service which includes VAT. The company then pays us £X-Y for providing the service.

I had an email from the company saying.... We split the VAT with you, so we pay VAT on our portion, and you pay the VAT on yours. We don't charge you VAT.

Please can someone advise how I should account for this.

Thanks in advance.

Allan

robbob
Posts: 2879
Joined: Wed Aug 06, 2008 4:01 pm

Re: Customer VAT query

Postby robbob » Fri Jan 10, 2020 4:10 pm

This is sounds like one of those silly puzzles where the answer isn't what you would expect - whats a half divided by a half being my favourite :)

Lets go back to first principles here

Are you billing the "the third party" for your services ? i am presuming you are?

If that is the case it's fairly simple.

If you are no vat registered you bill the third party what you expect to be paid and they pay you that amount - if they are not paying you that amount you need to discuss that with you as there is come confusion as to how you are calculating your bill.

If you are vat registered unless your customer or you know of a reason why not you should add vat to your bill - the amount you charge before vat will be as agreed between you and the third party on the proviso vat will be added to that calculated vat and be paid across. The vat shouldn't be the issue here - its agreeing the net value to be billed that could be the issue.
We don't charge you VAT.
It seems like they are stating the obvious here - its reasonably obvious (to me) they don't mean what they say here despite being correct in what they are saying.

I.e I am presuming you are billing them and they aren't billing you anything - that being the case they obviously won't charge you vat as they aren't billing anything - so their comment is somewhat nonsensical unless i am misunderstanding the how the setup should work - it is possible they are just talking gibberish as they may be as confused as as i am

alig31
Posts: 23
Joined: Wed Nov 10, 2010 11:29 am

Re: Customer VAT query

Postby alig31 » Fri Jan 10, 2020 4:24 pm

Hi,

thanks for the swift reply, guess I need to revisit the contract to see what the net payment needs to be. I don't bill them per se after the customer pays them and we provide the service the just transfer the money to us. The devil will be in the contract detail I guess.

Best Regards
Allan

Trevor S
Posts: 37
Joined: Tue Jan 01, 2019 12:37 am

Re: Customer VAT query

Postby Trevor S » Sat Jan 11, 2020 10:04 am

Generally I'd agree that you always need to start by reading the contract detail. This should help map out the true supply chain, and identify the various transactions. Each can then be considered for its correct VAT treatment. Bear on mind that the route actually taken by the money may be less important - an organisation collecting payments could be doing so as the agent of another organisation.


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