Looking for some advise from you clever people thats not really bookkeeping/accounting.
My client has received some bills from their landlord for electricity availability in their unit. To say their landlord is a bit untrustworthy and I want to see if anyone has come across this before.
Bit of background, clients used to work for a company which was not very well run and went into liquidation. A few of the employees decided to start up as a partnership in the building (which is owned by their old employer). So their old employer is now the landlord. They were under the impression that everything would be all in on the rent, as the workshop has been split into separate units and didn't have a separate business rates/elec meters etc. They are currently in discussion with council for the separate business rates and it appears from the invoices the meters were installed at the start of this year.
In the bill there are the following daily charges:
Availability £1.25 per day
Standing Charge £0.28 per day
CCL £0.006 per day
Metering Charge £0.48 per day
plus £0.115 for kw unit
That makes over £2 per day standing charge, before the even start paying for elec. Plus 20% VAT
My clients have been looking to move to their own premises, however, the location allows for old business customers to know where they are (the business was established for as long as I remember).
Several issues come to mind - is it a lease or a licence which has been signed by the partnership? (Are they sure they arent sub-letting?). What does it say in the lease? Whose name is the actual electricity bill in? Sounds like it could be the 'landlord' and then he is able to re-charge it. The re-charge would then be at whatever price was agreed in the lease, or failing that, whatever price he wishes to sell it for.
There is a Maximum Resale Price which if exceeded can be enforced by Ofgem, but I understand that this does NOT apply to commercial premises.
If he is re-charging it then the VAT rate, I understood, went with the rental VAT rate (so he might not be able to include VAT at all, or it might be 20%!). Ie its rent in all but name.
If he is breaking it down to prices as per his actual supply then how is he splitting it between all the units? Based on square footage or just a three or four way split?
Certainly once they get the individual meters the de-minimus rule and therefore reduced-rate supplies may be kick in. But as it is, it sounds like the whole unit is being seen as a single set of premises, which might mean de-minimus cant be applied ( or perhaps only can in the summer).
Just my understanding and happy to stand corrected.
-- Edited by Cheshire on Sunday 6th of March 2016 06:16:36 PM
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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
