Tax point & contract law

"Troy Steadman" wrote

You really should have read the link before posting again!

"Troy Steadman" wrote

OK. That creates the "basic tax point".

"Troy Steadman" wrote

I doubt anyone would argue that - but so what?

"Troy Steadman" wrote

If you'd have read the link for Notice 700, you'd have spotted that "the basic tax point is **overridden** if an actual tax point is created".

Now - consider whether an actual tax point was created ... !!

"Troy Steadman" wrote

No need to Tim, the link isn't going to include these wholly exceptional circumstance, large sum of money, accountant goes sick. Anyway I've got the link so lets have a look at it:

Agreed.

So you are with me so far.

It took me three seconds to find the phrase:

"You do not have to follow the 14 day rule, but if you decide not to you must write and tell the VAT Business Centre for your area."

I hope Nogood Boyo is going to come up with something better than this Tim.

I suspect that in fact the HP company received the invoice from the truck company in month 1 and delayed the finalisation of the HP agreement to month 2. The haulage contractor is liable to have misunderstood this point.

but you are prepared to continue the speculation...

Why would it get to Tribunal? The point is so straightforward that hopefully it would dawn on his professional advisers before it got to that point that the man's complaint is actually against the HP company.

What's that got to do with this case or VAT tax point rules..?

Which sale? In case it hasn't occurred to you, there are two supplies.

There's a supply from the truck company to the HP company, which will have taken place at the end of the earlier month. The date of this invoice has nothing to do with the haulage contractor. (I think we can safely say that the truck company are unlikely to have released the truck on 30th without payment and that the HP company wouldn't have released the cash without an invoice.)

And there's another supply from the HP company to the haulage contractor which took place when the HP agreement (incorporating the VAT invoice) was finalised at the beginning of the following month.

HP company claims input tax in month 1 and accounts for output tax in month 2. I wonder when their VAT period ended. Oohhh... there's funny... it happens to fall between the two transactions and they get a cashflow advantage... well what a coincidence...

It's not funny - it's tragic. And the problem is that he can't rely on his professional advisers to explain the point to him, cos a lot of 'em don't understand basic principles and just guess. If he had been your client, you would apparently have told him "don't worry, it'll be alright..." And you might even have led the poor sod to Tribunal, just to rub salt into the wound. Which really irritates me...

They are not "wholly exceptional circumstance[s]". I've seen this exact scenario plenty of times.

what a way to operate...

That's aimed at suppliers, who have to obtain agreement beforehand. Purchasers are stuck with the tax point shown on the supplier's invoice. Why should the supplier in this case (the HP company) want to disapply the 14 day rule..? It would disadvantage them.

I'm losing the will to explain the error of your ways...

That was unforgivably remiss of me and I most humbly beg your forgivness. Here is the link:

Two supplies? This is getting complicated, I'd assumed a loan and a supply direct to the haulage contractor, but never mind.

"If you supply goods then the basic tax point is usually the date when you send them to your customer or the customer takes them away".

Are we agreed that the basic tax point remains the date the contractor took delivery of the vehicle? Are we agreed that (probably) was the day he *should* have been invoiced for it by the HP company (but...) but because the HP Company's accountant was off sick he wasn't invoiced until the following month?

In that case the 14 days is a red herring, the question is:

"My accountant has been off sick this month, we have been trading normally but we haven't been able to print off any sales invoices. Do we have to account for Output VAT?"

If the answer to that is "Yes!" then the identical rule will apply for Inputs.

"Troy Steadman" wrote

So - did the **dealer/HPco** (issuing the invoice) write to the VATBC in this way?

Or are you suggesting that the haulage contractor would have been able to force/convince the invoice-issuer to disregard the 14-day rule??

no it's not... it's every day stuff...

ah... so it's not just VAT rules that you're unfamiliar with but HP as well...?

wake up and smell the coffee...

in the case of HP, the VAT invoice is (in every case I've seen) a part of the HP agreement which the HP rep (not accountant) completes with the purchaser before the supply is arranged. they consistently delay the agreement date for reasons which you must surely have realised by now. i've given you enough hints.

no it isn't. it's the crux

the question is misconceived but, if the hp company asked such an unlikely question, the answer would be no.

i note (and i hope others have noted, because that's my concern) that you've snipped several of my points about your flawed approach.

stop digging...

No? Which question are you answering?

"My accountant has been off sick this month, we have been trading normally but we haven't been able to print off any sales invoices. Do we have to account for Output VAT?"

"No"

????

People with your snappy attitude annoy me and I sometimes allow my annoyance to express itself in flippancy which I shouldn't do and I apologise. You got me with the HP, its years since I did HP and never from the negotiating side. I accept you are perfectly correct.

But...

How about your approach? A sole trader has made a calamatous mistake which will cost him his business. The HP company has lied to him, saying their accountant is ill when in reality they are deliberately delaying issuing the docket so it straddles VAT quarters. You are their accountant and you can't offer any better advice than "Pay up and go to the wall"?

There are lots of things he could try and he doesn't have a lot to lose by trying some of them.

"Troy Steadman" wrote

That's what business is like, isn't it?

Perhaps he should have been more careful with such a large purchase (which he obviously couldn't afford - without the subsequent tax relief), so close to a VAT quarter end?

"Troy Steadman" wrote

He decided to purchase the truck at that time - it was *his* call.

"Troy Steadman" wrote

Are you suggesting that he should have falsified his VAT return (claiming input VAT a quarter early) and "hoped" that HMC&E wouldn't find out?

You only asked one question.

Are we still talking about a few days..?

If you've moved from a few days over month end to a period exceeding 14 days, the answer would be different. But that's not what we were talking about.

this is Usenet... people who give bad advice annoy me.

there's no requirement to be polite here but accuracy is desirable

I didn't "get you". I laid no trap. You got into this mess yourself. I was just trying to stop you giving wrong advice.

My approach to what? To your advice in these newsgroups, which is often flawed? If you carry on, I'll probably get even more stroppy then give up.

Or are you asking what I'd advise the purchaser to do? Unlike you, apparently, that's not what I do.

I haven't offered any such advice.

I'd expect his professional adviser:

- to try to ensure in advance that, when contemplating major transactions, he took proper advice;

- to alert him to this specific risk;

- if it still went wrong in this way and he was £14k out of pocket for potentially 3 months, to advise him to look the HP company to make things good (eg by adjusting payments);

- if he got no joy there, to advise him to submit his next VAT return (assuming it's for a repayment) as soon as the period ended (reducing the 3 months to 2 months) and, if he couldn't pay his VAT in the meantime, to talk to the VAT debt management people;

- if he had let his client down, to lend him the £14k, waive his fees and pay any penalty / interest he had incurred... as I'm sure you would... :-)

Which is what one of my clients, unbeknown to me until afterwards, did :-(

Because he was normally a payment trader and the VAT on the lorry created a repayment situation, he got a VAT visit before the repayment was made and ended up under caution having his backside kicked by a VAT senior manager - unfortunately he also altered the date on the HP agreement which is of course fraud and Customs don't like falsified documents

Bob

Must agree with you. Absolutely normal and definitely essential to make sure the HP company invoice on the right date. The invoice from the supplier will have been to the HP company and cannot therefore be used by the purchaser to reclaim input tax. He has to use the HP agreement and the date on that, except in the unlikely event that they take more than 14 days to raise the agreement after delivery

Have to say that it does seem strange that someone buying an 80,000 lorry would become insolvent due to a three month cashflow disadvantage of 14K. Must have been in trouble already otherwise someone would have helped him out

Bob

Sorry, Troy. I've been having a look at this thread and I think it is not as easy as some think, and easier than others are trying to suggest. First rule of VAT - remember to suspend your knowledge of logic and physics;-) Second rule - remember you'll be dealing with Customs & Excise for whom facts mean nothing if there's a good assessment to raise.

Time of Supply is set out in S6 VATA 1994 which broadly speaking says the time of supply is the earlier of receipt of consideration, issue of an invoice, or the removal or making available of the goods.

In general, I would expect that one could, after a struggle (remember rule 2 above), get the VATman to accept that (a) the goods were supplied to the customer before the end it their VAT period (made available or delivered), and (b) that input tax recovery is allowable in that period even though the invoice was issued later by the finance company. This would be easier if the customer lost the invoice;-)

Best wishes

Robert Killington Visit

I can think of several ways of bringing the repayment date forward.

I'd say it's crucial in this case to understand whether "HP" is being used accurately or euphemistically. If it really is "hire purchase" in the old-fashioned traditional sense, then the HP company is buying the truck and hiring it to the haulier until enough money has changed hands that the HPco transfers ownership to the haulier.

In such case it doesn't seem right that the haulier should be paying VAT at all -- since he's not buying anything -- yet.

If, however, "HP" is being used in the lax sense of "loan", then the loan company never owns the vehicle and does not figure in the VAT invoicing.

Of course, when you haven't got any money you haven't got any money and something has to give, I have never known a half-decent accountant who wouldn't occasionally utter the phrase "I'm going to take a view on this!"

No but as we've seen later in the thread there is an alternative view. I always think if you ask ten accountants the same question, not only will you get ten different answers but each of the accountants will think the other nine are imbeciles who shouldn't be allowed to practice.

This has been an entertaining and insightful thread. It was Sod's Law that while Nogood was berating me for my lack of care and accuracy he should make misplaced assumptions, fail to read a question properly or at all, and turn in what is probably the least accurate answer to a VAT question in Usenet history!

see below

Oh dear. Firstly, in response to your first comment, facts certainly do apply to an assessment. There's either a taxable supply and a tax point or there isn't. There's either a tax invoice or there isn't. Facts certainly do mean something to HM's inspectors.

Secondly, it's clear from the link provided that, although a taxable supply was made before the end of the VAT period, the basic tax point is overridden if an actual tax point is created - in this case, by the issue of an invoice up to 14 days after the basic tax point.

Leaving aside the issue of HP, it is clear that the actual tax point has been created in the second VAT period, and no amount of "struggle" is going to change that fact.

Finally, your suggestion that it would be easier if the customer lost the invoice is laughable - don't you know that the invoice is required to support the claim?? Without the tax invoice, the input credit would be thrown out immediately.

Oh dear oh dear.

Shano

You are assuming that Nogood Boyo's assumptions are correct. I like then and I haven't challenged them because they are clever and they are probably correct, but were I the haulage contractor I would take the HP company at their word, that their accountant is ill, the fourteen days becomes a red herring, Nogood Boyo's answer to my question become imbecile, the Input goes through and we sort out the repercussions later.

At least that way there is a "later".

I feel I might come in for some adverse criticism here, and I'm not sure mys support is what Mr Killington needs at this moment, but I have known people in real life make a VAT claim with the invoice in front of them, filed it away separately because it was Fixed Assets, at which point they forgot where they had put it, then later on they found it again.

It can happen.