We are a vat registered company, and I think we have been doing some of our invoices to customers wrong.
We put our costs on the invoice with vat, so thats ok, but we often also use the services of a garage.That garage invoice us with VAT added, which we pay (& claim vat back I think), and then we charge our customer this garage fee, and send them a copy of that invoice, when we send ours.
I assume the correct way would be to show(as well as our charges plus vat), the net amount fromgarage,& then add the VAT.
However, Ive just been putting the gross amount from the garage on & then no VAT, which I think means we have been charging too much to our customers.
To make it even more confusing, our book keeper reckons we should just put the net on and no vat.
Hi, i only put this plainly to avoid confusion. If the garage has nothing to do with your end customer then nothing to do with the garage should concern the end customer. Come back to us. best regards
It would depend on the service the garage is supplying, whether you are adding a mark up, or if you are just acting as a go between and paying the garage on behalf of your customer.
For example, if they are supplying an MOT test, and you are not adding any additional mark up then in most cases there is no VAT as the test is outside the scope of VAT.
If it is a normal supply of goods or services, then you need to look at the net cost and either add a mark up then recalculate the VAT, or add no mark up and calculate the VAT on this amount.
In any case I would do as Tim has said, and not send the garage invoice with your own.
Hi Tim & Bill. We have to send the garage invoice with our bill, as we are paying the garage on the customer's behalf, and we are not adding a mark up. We just charge for the job we have done (plus vat), then the garage invoice.
So do you mean we should put the net & then vat (like on the garage's invoice) on ours?
I've been putting it like this, but the total is still the same, In future I will lay it out as you have done. Hopefully the past invoices done like this will be ok, do you think??
Your own works................................450.00
Garage works (as per attached photocopy)......120.00 (INC VAT)
Sub total.....................................570.00
VAT @ 20%..................................... 90.00 Only on the 450
Peasies way of doing it is certainly better. How has the bookkeeper then recorded the transaction, have they said the customer has given you £90 vat or £120?
__________________
Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
I assume he records the vat as the 90 & also 20 from the garage, and then claims the garage vat back. Just hoping we are not going to be in trouble with the vat people.
I don't think the customer can claim the VAT back as they are a finance company. All the customers need the garage bill (to show what we have paid), and the garage bill is always made out to us.
So in conclusion, is it still correct to show, on our invoice, the garage charge plus vat (plus our charges & vat)?
Brewsie - yes I looked at disbursement & it seems we meet the requirements, but as we (I think) claim vat back, we couldn't do that.
The only regular transaction reminiscent of this is in the event of a road accident where a motor insurance company pays the repair bill net and the end user pays the (your) Vat element.
You haven't said if this is similar circumstances but if you're simply 'sub-contracting' a particular kind of work for the convenience of your own operation, say electrics or paint spraying, to general customers then this seems like re-charging rather than disbursements.
Are there some unusual circumstances as in my example above? If not, then I wouldn't routinely pass on a copy of the bill and if I listed the sub-contract work separately then it would be listed net of VAT; your firm having reclaimed the Vat element.
We pick up vehicles from pounds for finance companies, and sometimes have to pay garage fees or recovery wagon costs, but we are really just paying them for the finance company, even though the recovery/garage do their invoice to us, then we invoice the finance company (with garage or recovery charges( and then we add our charges.
I'm not familiar with it but what you've described seems to fit within the definitions given in Brewsies link. In addition, it seems that at some point you received advice (perhaps from a finance company) that this was a disbursement and the difficulty is purely one of incorrect VAT invoicing.
How many times do you think the incorrect VAT treatment has been made, and what does this amount to?
but hopefully your bookkeeper will be able to tell you what the likely repercussions are as to the amounts of under/over payments of VAT before you do so.
