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Where Taxpayers and Advisers Meet

VAT invoice / % Based Fee and VAT registration timing

bobpies
Posts:1
Joined:Mon Aug 22, 2016 2:28 pm
VAT invoice / % Based Fee and VAT registration timing

Postby bobpies » Mon Aug 22, 2016 2:32 pm

So this is a tricky one,

Just by way of introduction - I'm a long time reader on these forums but this is the first time I've needed to actually chime in, so apologies for coming straight in with a question :oops:
I'm also not sure i'm posting this in the most relevant area, so please feel free to move this. Its more customer to business transaction advice i'm looking for here but hopefully you guys will be able to help me.

I am doing a house extension and i employed an architect to work on the plans. When I hired him he was not VAT registered and we signed a contract that he would receive 9% in fees of the total cost of the build.

We worked out the initial budget of 150k as an estimate and so was able to deduce how much I was likely to end up paying in the end. Things are broken into stages, A, B, C, D etc. and to date, I have paid for stages A to D based on the cost estimate of 150k.
These invoices for stages A - D were invoiced with no VAT as he was not VAT registered at the time of completing the work / nor at the time of invoicing for the work.

Now, since then he has become VAT registered. Also since then, the cost estimate of the build has increased to 250k - So the money I paid for stages A - D are now, in fact, short of the actual amount required for stages A - D because of the % scale.

To try to be as clear as possible

@150k cost estimate stages A - D cost = £4,725
@250k cost estimate stages A - D cost = £7,875

Now he invoiced me for stages A to D when he was NOT VAT registered and I paid for those services, however, as it's a percentage and it fluctuates with the cost, he has re-invoiced me for the now shortfall in this area, but crucially has invoiced + VAT.

My argument here is that even though he is now VAT registered and must charge VAT - the work that he did in stages A to D were done before he was VAT registered. So where does this leave me? Is he right to be charging VAT here? It doesn't feel right that i should have to pay VAT because of a revised invoice on work completed and invoiced before he was VAT registered?

Hopefully, someone can help me out with this one!

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: VAT invoice / % Based Fee and VAT registration timing

Postby les35 » Tue Aug 23, 2016 8:43 am

Fair question. But it is a matter of the contract between the Architect and yourself. What price did he quote? Does his contract refer to VAT in the price?

eionmac
Posts:3
Joined:Sat May 23, 2009 5:31 pm

Re: VAT invoice / % Based Fee and VAT registration timing

Postby eionmac » Thu Sep 01, 2016 5:25 pm

The critical question is "are YOU VAT registered?" . if so VAT in/outs sort it out ; he charges you VAT, You charge your customer VAT.
If YOU are not VAT registered he must charge you VAT and it becomes a cost to you. II understand the historic points, but the increases are agreed AFTER he is VAT registered and he should only be issuing an invoice for the increase plus VAT, not for VAT on whole invoice percentage pay stage. He should NOT issue a revised invoice , but a new invoice only for increase.


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