Partial Exemption

[sjbherself]

Hi,

I have a customer who is partially exempt, and they are asking us to give them an invoice which adds no VAT on the basis that they are partially exempt and are going to use the goods for an exempt supply (so hence they cannot claim the VAT back)

I personally think that we must add VAT, on the basis that our supplies are standard rated and it doesnt matter that they are partially exempt.

From their point of view I can understand why they dont want VAT to be added, as they cannot claim the VAT back as they are using our goods for an exempt supply to their customer.

Has anyone come across this before?

Thanks

[Kitty Kat]

Hi,

I have a customer who is partially exempt, and they are asking us to give them an invoice which adds no VAT on the basis that they are partially exempt and are going to use the goods for an exempt supply (so hence they cannot claim the VAT back)

I personally think that we must add VAT, on the basis that our supplies are standard rated and it doesnt matter that they are partially exempt.

From their point of view I can understand why they dont want VAT to be added, as they cannot claim the VAT back as they are using our goods for an exempt supply to their customer.

Has anyone come across this before?

Thanks

You have to charge VAT if you are registered and it is a taxable (SR) supply. Whether the customer can then reclaim it is none of your concern, HMRC will expect you to give them the 20% and will just not give it back to the customer.

I wonder if they have got anyone to actually do that...

Caveat: For once I am sure I am giving the right advice, but perhaps wait for someone to agree with me before you go laugh at the client

[les35]

I agree with Kitty Kat.
With VAT being 20%, it is a substantial additional cost in these circumstances. I have heard of similar examples; clearly the motive is cost-saving. Unfortunately it is the supplier who bears the cost!
You can laugh now!

[Generix]

Hi,

I have a customer who is partially exempt, and they are asking us to give them an invoice which adds no VAT on the basis that they are partially exempt and are going to use the goods for an exempt supply (so hence they cannot claim the VAT back)

I personally think that we must add VAT, on the basis that our supplies are standard rated and it doesnt matter that they are partially exempt.

From their point of view I can understand why they dont want VAT to be added, as they cannot claim the VAT back as they are using our goods for an exempt supply to their customer.

Has anyone come across this before?

Thanks

Best VAT avoidance scheme ever!!! Just confuse your customers with the words 'partially exempt' and ask them not to charge VAT. Wish I had thought of this when working in practice, I would have cleaned up!

As posters above suggest, unless there has been a misunderstanding and VAT has been charged in error -e.g. due to wrong POS rules or something being applied, then your client must charge VAT and this will be a cost to the customer if it relates to exempt activity - this is the price they pay for engaging in exempt activity.

What does the customer do? (i.e. what kind of business are they)?

[section 44]

Caveat: For once I am sure I am giving the right advice, but perhaps wait for someone to agree with me before you go laugh at the client

A small amendment:

You have to charge VAT if you are registered and it is a taxable (SR) supply.

You have to account to HMRC for VAT if you are rgeistered and it is a taxable supply.

[Kitty Kat]

Caveat: For once I am sure I am giving the right advice, but perhaps wait for someone to agree with me before you go laugh at the client

A small amendment:

You have to charge VAT if you are registered and it is a taxable (SR) supply.

You have to account to HMRC for VAT if you are rgeistered and it is a taxable supply.

This is why I don't flourish in VAT, I don't have the pedanticness to be laser precise in my answers

[section 44]

Many would consider that pedantry is common amongst tax lawyers.

[Generix]

Many would consider that pedantry is common amongst tax lawyers.

Defo agree with that! But it is much to their downfall a lot of the time when it comes to practicalities (within VAT at least). Although for things like Land and Property pendantry becomes more important, (which is part of the reason why I hate L&P).

[Kitty Kat]

Many would consider that pedantry is common amongst tax lawyers.

I agree, that's why I am finding VAT so hard, it is almost indistinguishable from law a lot of the time.

[section 44]

There's nothing wrong with taking a practical/commercial approach, it can be a good thing. Provided that is that it is done from an informed position - that is, based on a thorough understanding of the law. The problem is where you get people simply taking a practical/commercial approach from a position of ignorance and sometimes even considering the law to be pedantic. A good starting point is the law. With VAT, probably more so than other taxes, it is surprising just how poor some advisors knowledge of the law is and how much reliance is placed on HMRC's guidance - often to the extent of considering HMRC's view to be the law (something that I despise).