We have a customer who has come to us 6 months after we completed 2 x orders for them for the installation of new windows into a new build property. They are saying that the Invoices raised should have been zero rated. As they are a house building company, one would have to assume that they knew this work should have been zero rated right from the beginning. I believe that they should have given us a VAT Exemption Certificate. They are saying they don't have one as VAT Regulation 708 would cover this.
Who is correct? Bearing in mind that our sales rep met them and signed up a contract including VAT, and nothing was mentioned at the time. I understand that we will have to reimburse them, but should I persist in asking for a Certificate? We don't want to end up in trouble with HMRC!!
Hi Ness
I know you mention house building and new builds but I know from experience with that lot that they stray from from the expected brief and get involved in building schools and hospitals and all sorts of other things. So the key to this is what they actually built and under the VAT act does it cover a qualifying build.
There is, as far as I know, no such thing as the VAT regulation 708, but a VAT guide - 'guide' being the operative word here. HMRC provide guidance but sometimes it does actually stray from the letter of the law. That said the guide itself is a good place to start.
Was your sales rep expected to know what it is that they wanted the said goods for during their negotiations and contract sign up? I mean - did he visit the site/see the plans for the site or were you just asked to provide windows to a set specification?
HMRC expect youto charge the lowest vat rate 'applicable' to your supply but I dont recall seeing in the VAt act that you need a crystal ball.
I may be being a bit pendantic and obtuse and its not meant towards you. Start with the HMRC guide at qualifying property (or bounce it back on here) and then look at 2.1.3.
One small issue - did the contract state a gross amount? If so then they are stuck with it!
So perhaps not just VAT act stuff but contract law.
I know a man who can help if you need more info - Les Howard is our VAT 'man'. He may be along shortly so if you can at least advise on the 'build'/gross contract stuff that may help formulate a fuller response.
__________________
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
If the supply should have been zero rated, and the invoices are all dated within the last four years, then you can adjust the VAT, and refund the money. That part is straightforward.
Whether the supplies are zero rated is a matter of legislation. What was supplied? Was the project the construction of new dwellings? If the supplies are of eligible services, in the course of construction of new dwellings, then they must be zero rated. And, the recipient cannot recover VAT incorrectly charged.
If I were advising the supplier, I would want robust evidence to demonstrate that the supplies should have been zero rated. I would not want to refund a significant sum of VAT only to discover I shouldn't have done so.
We supplied and installed double glazed windows to 4 x new build houses, as requested by an established (30 + years) building and development company.
I have requested a certificate but was met with:
"there was not a certificate however the ruling under VAT regulation 708 confirms that we should not have been charged VAT therefore if you could look at this regulation, this should clear up everything you need in order to raise the credit notes and return the VAT payments".
Does this mean that a certificate should have been issued BEFORE any Invoices were raised?
Apologies for my lack of knowledge in the VAT sector - when it is straightforward, I can cope!
I also only work 2 x days a week hence my delay in thanking you both for assistance.
The customer should have made it clear at the time of placing the order that the works should have been zero rated.
I would ask them for written confirmation now, perhaps with a link to the Planning Permission for the houses, to protect you.
We supplied and installed double glazed windows to 4 x new build houses, as requested by an established (30 + years) building and development company. I have requested a certificate but was met with: "there was not a certificate however the ruling under VAT regulation 708 confirms that we should not have been charged VAT therefore if you could look at this regulation, this should clear up everything you need in order to raise the credit notes and return the VAT payments". Does this mean that a certificate should have been issued BEFORE any Invoices were raised?
Apologies for my lack of knowledge in the VAT sector - when it is straightforward, I can cope!
I also only work 2 x days a week hence my delay in thanking you both for assistance.
Hi
Didnt really answer my questions, but covered off by Les anyway. Just to stress, it's not exempt, it's vatable but at zero/don't let them fob you off with the VAT notice as they need to supply evidence, unless your sales rep has it from the order process/get the company Accountant involved or employ the services of an independent VAT expert such as Les to assist.
Also, just so you know, you don't need to be in work to use the forum as you don't need the email address used when you set up your account, just use your login and password from anywhere...PC at home or on the go via phone etc. Might be useful for CPD when not in work
__________________
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
Thanks again Joanne & Les
I think I will throw this back at the customer again, and this time ask for proof in writing - we don't want to get on the wrong side of the VAT man!
Didn't think about check the forum from home - I must be better at tuning out from work than I realised!!
