Hoping someone can point me in the right direction.
We are a scaffolding company and have a project at the moment for a rather large house building company. We supply the scaffolding whilst the new houses are being built and get paid on a monthly basis according to the measured works. We provide a net invoice and they have been paying net - nice and easy.
Now, for some reason, the last two payments we have received have had VAT on - we have then put the VAT onto the customers account in sage and then receipted in full paying off the invoice and the VAT.
We have included the VAT amounts on our last return and since paid HMRC.
My question is - what do we do to make this correct - without being out of pocket as we have already paid HMRC?
i hasten to say, this all happened weeks before i started to work here and have inherited this.
Kind of depends what they are paying you for as to whether VAT should have been charged..... as I suspect you're aware, the erecting or dismantling of the scaffolding can be zero rated if the qualifying conditions are met, however the hire of the scaffolding is always standard rated.
Assuming that you know for sure that the building company have been adding VAT on (and it sounds like you do), I'm not sure why you feel you're out of pocket? You say that you have added the VAT to the customer account in sage, and then paid it off in full - so you have received the VAT from your customer, and then paid it over to HMRC, so where has the loss occurred?
I was wondering if the customer was doing self billing, but then when I read it again I saw that the scaffolding company are issuing invoices, so I too am a bit confused. Can I ask- how do you know it's VAT? Plus as Helen says you are in no worse a position.
Would certainly like more info.
Also, we usually ask newbies to do a small intro, helps to get to know you and also how to pitch answers. Doesn't need to be much, just a bit of your professional background, where based, how long doing bookkeeping, industry experience might be a good one because of where you are working.
Looking forward to hearing more.
__________________
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
Are you issuing monthly Valuations and they are paying from them or are you issuing actual invoices. I take it you are VAT registered? IS this particular contract VAT exempt (new build?) and do you or the main contractor have a certificate to say that it is VAT exempt or has it just been assumed?
I work for a main contractor and if we received a Valuation from a subbie who is VAT registered we would always add the VAT unless it was known that the contract or particular item was VAT exempt or 0 rated.
I can't helop you with the sage bit though. My boss is terribly old fashioned and apart from Payroll she operates a manual book keeping system. She has been a bookkeeper for 40 years so I guess if it aint broke don't fix it.
-- Edited by pictures on Wednesday 21st of September 2016 10:44:19 AM
We erect and dismantle the scaffolding and we produce a monthly net invoice according to the measured works that have been agreed.
Now for some reason we have received remittances for the payment and they have included VAT (shown as a seperate entry) on them. So i have booked the VAT onto sage as an additional invoice in the customers account, done a vat rec, paid HMRC - like i know should happen.
My boss seemed to think that we will be out of pocket as the company will want the VAT back at some stage- after reading your comments on here - i have advised that we wont be out of pocket as we have done what was correct to do. He thought that they were then underpaying the invoices due to the VAT - i have advised that they are simply underpaying what has originally been agreed. So he has a lovely bee in his bonnet now about them short paying - :)
I think he was just over thinking things.
I do apologise about not doing an intro. I am MAAT, but after living in germany for most of my life, i have never really dealt with real accounts - my previous position was accounts assistant so i was generally doing data input and paying the occasional invoice. I have kind of been thrown in the deep end here as my predecessor left under a cloud and took lots of info with her (including hmrc logins, bank logins etc) so fighting fires all the time at the moment.
Thanks for your help so far, i am sure i will be back
If you are VAT registered then you cannot issue a nett invoice. Invoices have to show VAT unless the item you are supplying is VAT exempt or zero rated.
It sounds like what you are issuing and calling an invoice is actually a Valuation of Measured Works and the main contractor are then correctly issuing you a self-billing payment with VAT added on. If they are paying you less than the amount on your Valuation they should issue you with a Pay Less Notice (or are they just deducting the standard 5% retention to be paid on Practical Completion or 12 months on?)
Not had to chance to read this properly, just skim read Tracy's (not read Julie's post yet). Sorry(between meetings!), but two Qs is the invoice you are issuing correct given Helens comments. If so why not contact the payer and ask why they are paying you VAT as you could be asked for the money back.
-- Edited by Cheshire on Thursday 22nd of September 2016 08:04:27 AM
__________________
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
Yes, we are VAT registered, and yes it is a value of measured works, not an invoice. They are underpaying the valuations, adding VAT on and paying this amount. I have never seen a Pay less notice yet but that doesnt mean one hasnt been issued, and as far as i am aware it is not a retention issue either.
So, Cheshire - is a possibilty they could ask for it back?
I am not making excuses but i have inherited this and it seems like i am going to have to get to the bottom of it with my facts right. i have asked the company for copies of the payment notices and see where that gets me - it is a mess, there are 4 accounts but thank goodness only 2 have to be sorted out, they are paying the other 2 correct.
Hi Tracy
Sounds like you are having fun!!!! Nightmare, but sometimes great once it's sorted and a way to learn lots.
I've not dealt with builders for a VERY long time and I know that the VAT rules have changed and there has been some to-ing and fro-ing with case law about hire v erection and dismantling of scaffolding that I have to say I haven't kept up with. I do know that Julie is spot on about you having to include the VAT detail for zero rated and exempt as this is just covered by general VAT regs.
It seems that your debtor thinks it should be a VATable supply, at least in part so the question is.....is some of it? If they get to the end of the contract and have paid the balance plus a pile of VAT and then it is discovered the whole lot should've been at a nil rate, then yes they would come back for a refund.
That said it could be that they are correct and your boss has been issuing the wrong invoices etc.
Helen and Julie can help you with the builders specific stuff.
It's Joanne by the way, Cheshire is just my forum profile, my name is under the signature bar, although I know you can't see it if you are using a smartphone. On that score, sorry Julie....I mentioned you as Pictures yesterday.....edited now!!
__________________
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
We've not hired scaffolding on a VAT exempt project and indeed it has been some time since we did a VAT exempt project (this is the royal we by the way I go nowhere near actual sites!) but from what I have read Helen is absolutely correct in that if the project is a VAT exempt New Build then you still have to charge VAT on the scaffold itself although I believe the erection/labour can be VAT exempt. But like Joanne I'm not up to date on the latest with that.
You really need to find out for definite if this is Vatable supply. We assume that all projects are Vatable unless we are told otherwise. It might be that the main contractor knows something you don't about the eligibility.
Now here is where I put the caveat in that my areas of knowledge are payroll & CIS not the actual accounts although I am responsible for raising invoices from Valuations.
A couple of years ago a university we worked for realised that a project should have been VAT exempt. I was charged with the task of trying to ascertain if they were correct and it seemed that they were so we did have to pay them the VAT back. But my colleague simply then claimed it back herself from HMRC in her next return (how I don't know as I don't deal with the VAT returns/accounting procedures and as I said before she does not use Sage)
Main contractors often underpay valuations. It is usually because they disagree with your figures of how much work you have carried out so far but then they are supposed to detail the underpayment in a Pay Less Notice or at the very least they are supposed to let someone at your company know why they are paying less. Recently we had a main contractor who mistakenly deducted a 2.5% main contractors discount or 90% of the companies we deal with stop retention. Or it could be something like they think you havn't finished something off. Someone needs to get on the phone and ask them.
My boss is in today so I'm going to have to stop now and do some of my own actual work but I'll keep an eye on the thread.
Apologies - only now had time to come back to this one.
So, the VAT side of things construction related can be found on VAT notice 708, particularly note section 3.4.2 for scaffolding.
However, now that it's established that self billing is happening, the relevant VAT notice for this scenario is actually 700/62. In section 2.2 it states: you will be responsible for ensuring that the self-billed invoices you raise carry the correct VAT liability for the goods or services supplied to you. The 'you' in this is the company undertaking the self-billing - the house building company in this situation.
So, quite simply, if they have issued self-billing payments with VAT on them - they cannot change their minds at a later date and ask for the VAT back. Your boss must have also signed an agreement for self-billing, as they are not allowed to do it without prior agreement.
well that was a learning curve - yes they are paying VAT on some of the services we have supplied, i have asked them for the breakdown of what they have paid VAT on.
And yes, they are underpaying our applications - they are now going back and sending us the details on why they have underpaid so we can sort out the issues this end.
I thank you all and i am sure this is not going to be the last time you hear from me - will find another problem next month i am sure
