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Where Taxpayers and Advisers Meet

VAT on materials provided by another company

lcliffo
Posts:4
Joined:Fri Jan 22, 2016 1:05 pm
VAT on materials provided by another company

Postby lcliffo » Fri Jan 22, 2016 1:29 pm

Hello,

We currently install boilers on behalf of another company, they supply us with the boiler but ask me to deduct it's cost from the installation cost I charge. - how do I invoice them & account for the VAT within our accounts? Both companies are VAT registered.

For ease of calculation let's assume the installation cost is £1,000 plus Vat & the net cost of the boiler they provide is £200
Am I correct to invoice as below?

Installation cost £1,000
Less cost of boiler (£200)
Sub-total £800
VAT £160
Total £960

If so, should I record the £1,000 as sales @ 20% & boiler as materials again @ 20%

Or alternatively, simply post the net of £800 to sales @ 20%

Would either of these be acceptable to HMRC since I have only an "internal" invoice for the materials purchased?
Thank you

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: VAT on materials provided by another company

Postby section 44 » Fri Jan 22, 2016 1:44 pm

So the other company sell you a boiler (goods) for £200 plus VAT of £40 and you sell that boiler (goods) to a customer and also install it for the customer (services), charging £1000 plus VAT of £200

So on your VAT return you would account to HMRC for VAT of £160, being output tax of £200 less input tax of £40
Would either of these be acceptable to HMRC since I have only an "internal" invoice for the materials purchased?
I have no idea what you mean by an internal invoice but the other company has a legal obligation to issue an invoice to you for £200 plus VAT of £40 and you need this to support your entitlement to recover the VAT.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: VAT on materials provided by another company

Postby section 44 » Fri Jan 22, 2016 1:45 pm

the other company has a legal obligation to issue an invoice to you for £200 plus VAT of £40 and you need this to support your entitlement to recover the VAT.
"VAT" invoice

lcliffo
Posts:4
Joined:Fri Jan 22, 2016 1:05 pm

Re: VAT on materials provided by another company

Postby lcliffo » Fri Jan 22, 2016 2:28 pm

By "internal" invoice I mean one I have raised myself I.e. Not from another VAT registered supplier

The other company is infact our customer - sorry, bit confusing........the boilers we are installing are funded by a government scheme, the other company has a contract to install these boilers & we undertake some of that work. Hence, I have to raise an invoice against them once an installation is completed.

I agree that they should raise an invoice but to minimise admin. Etc they want me to reduce the installation invoice I raise. Is there any way I can do this?

It is also worth noting that them sourcing the boilers is extremely beneficial to our cash flow - therefore I am keen to explore the options.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: VAT on materials provided by another company

Postby section 44 » Fri Jan 22, 2016 2:37 pm

Either:

1. You install their invoice for them, i.e. you provide an installation services and presumably you cannot claim the government funding or

2. They sell you the boiler and you sell it back to them with installation so as described above and clearly circular/risk of challenge

lcliffo
Posts:4
Joined:Fri Jan 22, 2016 1:05 pm

Re: VAT on materials provided by another company

Postby lcliffo » Fri Jan 22, 2016 3:00 pm

Sorry, don't understand that last post

Do you mean 1) install their boiler for them? - if so, correct, we cannot claim the government funding, they have the contract not us

2) if they sell us the boiler (And Raise an invoice) I would only need to invoice for the installation but they are reluctant to do this.

Is it possible for them to supply the boiler "free of charge" & I adjust the installation cost invoice by the equivalent cost of a boiler?

I know the figures at the end of this are correct but obviously want to ensure that I have adhered to VAT / accounting rules & have correct supporting paperwork.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: VAT on materials provided by another company

Postby section 44 » Fri Jan 22, 2016 3:28 pm

2) if they sell us the boiler (And Raise an invoice) I would only need to invoice for the installation but they are reluctant to do this.
No, if they sell you the boiler then you own the boiler ... unless you sell it back to them

lcliffo
Posts:4
Joined:Fri Jan 22, 2016 1:05 pm

Re: VAT on materials provided by another company

Postby lcliffo » Fri Jan 22, 2016 4:17 pm

But they are reluctant to do this as they are only sourcing the boiler on our behalf due to the long timescales between installation & payment from the scheme - basically helping our cash flow issues.

They are suggesting I can treat the boiler as being supplied as "free of charge" but then reduce the installation invoice for the equivalent cost.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: VAT on materials provided by another company

Postby section 44 » Fri Jan 22, 2016 5:39 pm

If they give you the boiler then it would be a business gift and they would still have to account for output VAT on the gift.

For you to recover the VAT, you would also have to account for out VAT either on a supply or business gift back to them.

If they give you the boiler for you to give them it back then clearly the circulatory and substance of this might be undermined.

jpcentral
Posts:924
Joined:Wed Aug 06, 2008 3:28 pm
Location:Loughborough
Contact:

Re: VAT on materials provided by another company

Postby jpcentral » Fri Jan 22, 2016 5:49 pm

Very confusing.

If I understand correctly (which I probably don't) you are installing their boiler. The boiler never actually belongs to you? Is there any reason why it should?

This is a bit like me buying a car battery from a friend then going to a garage and asking them to fit it. The battery doesn't belong to the garage and there is no reason to sell it to them so my invoice from the garage will only be for the labour.

Unless I am completely misunderstanding, that is the case here. They buy the boiler from wherever and pay you to fit it. They then invoice the whole amount to the relevant government scheme. The boiler never needs to be included in any invoice from you. You never take ownership of the boiler.

If my understanding is correct, your invoice only needs to be for the installation cost - £800 (+VAT). They reclaim VAT on the cost of the boiler and on your invoice.
John Perry
Central Business Services
Loughborough
http://www.centralbusiness.co.uk


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