I have a client who sells zero rated food. But they also sell cold drinks and snacks that are for take away. Can anyone advise if VAT has to be paid on these sales of standard rated purchases.
You should be aware that the Courts are currently hearing a significant test case relating to the VAT position of sales from sandwich shops, etc. It is in your interest to submit a claim to benefit should this case go in the taxpayer's favour.
Hi Les Thats a good point - I will keep my eyes out! Hope you dont mind me hijacking this to pose a VAT related query.
I raised this on the forum last week:- Ive just started to look after three restaurants, 2 of which are based close together in Manchester. They are run through separate limited companies and mostly keep all the paperwork separate, apart from:-
1) Some of the food ordering to a couple of suppliers is done by the out of town restaurant and the food used by the city centre restaurant. The owner wants me to split the invoices 40 / 60 in the books. They are both VAT registered so my initial thoughts are we shouldnt do it. Then I wondered if we could do so by copying the invoices and claiming 40 / 60 from the business, so claiming VAT in these ratios - although then I wouldnt have a VAT invoice in the correct company name so that worried me. I then wondered about processing it through the out of town/VAT claim as usual and then creating sundry debtors/creditors each month to split out per the above ratio, but this wouldnt work as the Director is looking for more accurate Gross Margin figures for each restaurant and this latter option wouldnt provide that.
2) The staff are paid under separate payrolls for each company dependent on the restaurant they work for (hourly paid/part timers). On occasions the staff may have to work at the other 'branch' due to staff shortages etc. Again the Director is looking to apportion the cost out to the company that it relates to. Suggestions are possibly putting the payroll through the holding company and apportioning it out (with the holding company making a loss!) or do we do some kind of internal transfers between the companies?
Want easy/transparent/non messy methods if possible.
Anybody have any ideas? If you cant answer both question then would still appreciate your assistance with the one you can answer!! ------------------- Was suggested re (1) that I process invoices as presented in normal way and then recharging the costs via amonthly invoice between the 2 or 3 companies? this will remove any issues surrounding the VAT. I think this is a good option
Suggestion was re (2) Same applies to the Wages, effectively a recharge of costs between the 2, think that VAT would still apply - there are better tax experts on here than me so they can confirm / correct if required.
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As a VAT expert - can you confirm please? (especially re the second point)
Thanks in advance
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
1. I am concerned at an arbitrary 60:40 split. If the client wishes to identify zero rated sales, then he must have a proper method of doing so. He can use one of two schemes: the Point of Sale scheme, where the VAT applicable to each transaction is determined at the time; or the Catering Adaptation, which uses a sample of sales over a representative period, and applies it to the whole Return.
HMRC PN 727 chapter 8 explains the Catering Adaptation, and PN 727/3 for the Point of Sale Scheme.
I suggest HMRC will not be happy with such a low percentage of standard rated sales, and are likely to assess.
2. with regard to cross-charging of wages, this can be a tricky area. If there is only one VAT number for all the businesses, then that is no problem. You could set up a Group registration as that would avoid the problem as well.
But, if there is one VAT number for each, then I would consider having joint contracts of employment. See customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal for guidance on this point.
Do PM me for further assistance.
1) The 60:40 split is on his purchases. Its only on a small percentage of the invoices - the ones one member of staff orders through one of the restaurants. I did suggest he get that member of staff (his Mum!!) to do two orders in the proper manner although it went down like a lead balloon.
2) Re the Group VAT - I will need to research this as I havent used it before. Im a bit concerned as the companies all seem to have different year ends/VAT dates and Ive only just started working there last week!! I will have a dig around and will certainly review your link. I have no doubt I will be PM'ing you (might be next week as Im out for next few days) so thanks for the offer.
Great help - as ever!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Joanne
the client cannot use a purchases-based split when he is doing meals/takeaways, etc. This is because food bought at the zero rate is sold at the standard rate. This renders the proportion incorrect. I appreciate the 'lead balloon' but the client is running a severe risk of HMRC action.
Ah right! So essentially he must split his ordering, or do you know of another work around?
What is worrying is that the previous guy who did the books has 'moved' some wine purchases (if my memory serves me correctly by putting the invoice through the correct company in the correct way, but then adjusting via journal entry through purchases and sundry debtors - although I would need to check this!) Although at least wine is standard rated.
Im not afraid of having the awkward conversation with him, but wouldve just liked it if I had been there a week or two longer! Not helped by not being able to get his Accountant behind me - he hasnt got one!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
HMRC guidance would suggest that almost all his sales are standard rated. The only exception is some zero rated takeaways. I would consider a multi-button till, to highlight those items which are properly zero rated. Or could you do a sample exercise, perhaps one day per month, to give a more accurate percentage?
And I hope you are able to impress on him the potential risks should he continue with the current 'system.'
Ive obviously not explained myself very well - All of his sales for all of his restaurants are standard rated, all done on a point of sale system and reconciled/balanced daily. It was the just some of the purchase invoices for food that he wanted splitting. His staff order a range of things at one restaurant (the out of Town one) from a food/general supplier but then some of these items are used by the other (city centre based) restaurant - its these invoices he wanted splitting somehow.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
