Consulting firm refusing to pay invoice

[BlasterBates]

In scenario two, I spend £100 + £20, I recharge £120, HMRC gets £17.40. I get back £102.60. If I wasn't on flat rate VAT, HMRC get nothing.

Why does HMRC get 17.40?

Don´t you subtract the VAT already paid, i.e. 20? Why not? My understanding is you subtract any VAT paid from all VAT recipts and you pay the difference. OK that´s the general principle of VAT but admittedly I´m not running a Ltd in the UK.

In any case you´re the supplier and she is the customer, so no I wouldn´t stand your ground. I would only do that with a supplier. You´ve made 10 grand and your potentially throwing away a customer over 20 pounds. Send her a bunch of flowers and apologise.

If you can demonstrate you´re out of pocket in amicable way I´m sure it might be possible to get your money back.

At the moment I don´t understand why you´re out of pocket, if you can explain it so I understand it, then probably the same explanation would suffice for her.

[kempc23]

On the flat rate rate scheme, you pay back 0.145 VAT, but you cannot reclaim input VAT. It is not supposed to allow you to profit, it is supposed to save you on paperwork and the lower rate in VAT is supposed to cancel out what you would have reclaimed, if you see what I mean.

As contractors, who generally have very low input VAT, it actually means its a bit less tax to pay which is nice. Of course it does mean you cannot reclaim input VAT on anything.

I have demonstrated very clearly that I am out of pocket, using examples, emails from my accountant, and examples from the HMRC website. All ignored, either because she is incapable of understanding, or she has already decided that she is not going to admit to making a mistake.

I have high principles, and I won't do business with anyone, customer or supplier, who behaves like this. Similarly, I would not treat customers or suppliers in such a poor way.

I am out of pocket if I do it the way she and you suggest-

In scenario two, I spend £100 + £20, I recharge £120, HMRC gets £17.40. I get back £102.60. If I wasn't on flat rate VAT, HMRC get nothing.

£120 has come out of my bank account, only £102.60 goes back into it. If I wasn't on flat rate VAT, I could reclaim the input VAT which is netted off by the output VAT. In that case, it is only HMRC who loses out, not sure how happy they will be about that!

[BlasterBates]

OK understood, welll she does have a point you know, because it would be normal practice dealing with larger companies not to pay double VAT. In this particular case HMRC would get more than they should because of the quirk of the situation. In other words your status isn´t very tax efficient for your customer.

I would ask nicely and hope to be reimbursed but I wouldn´t stand your ground, and make it clear in the future of your VAT status.

Just to be clear on the principle of VAT, it is a tax on "value added" this value added was simply the hotel, under normal circumstances HMRC would only receive the 20 pounds total collected by the hotel, anything up the business chain will be passed on until the end customer pays it. Under normal circumstances I stress.

[kempc23]

She doesn't have a point, she is wrong. Thinking she is paying double-VAT is a classic example of misunderstanding how expenses recharged are invoiced. If you see the email from my accountant it explains the error in this thinking.

HMRC clearly state on their website that expenses reimbursed should be charged gross + VAT. so she is also swindling HMRC out of VAT.

I asked nicely several times, and didn't get anywhere. Like I said, I won't be doing any business with these guys in the future. Surely any reasonable person, when told by an accountant that they are wrong, would be humble and honest enough to admit to a mistake. I know I would.

My VAT status is irrelevant really, HMRC are also losing out due to her error.

[BlasterBates]

She doesn't have a point, she is wrong. Thinking she is paying double-VAT is a classic example of misunderstanding how expenses recharged are invoiced. If you see the email from my accountant it explains the error in this thinking. HMRC clearly state on their website that expenses reimbursed should be charged gross + VAT. so she is also swindling HMRC out of VAT. I asked nicely several times, and didn't get anywhere. Like I said, I won't be doing any business with these guys in the future. Surely any reasonable person, when told by an accountant that they are wrong, would be humble and honest enough to admit to a mistake. I know I would. My VAT status is irrelevant really, HMRC are also losing out due to her error.

Ok I read the HMRC link. Yes you´re right

I have to say you´re not clear in your own arguments about the reasoning, so I can see why the Operations Director took a humpty. Basically normally it´s true that VAT isn´t paid double, and I was trying to get the reasoning because it wasn´t coming across. It´s because for VAT accounting travelling expenses are an exception to the rule.

You need to get that across.

You have to argue understanding her standpoint, i.e. normally you don´t pay double VAT yes correct, BUT, travelling expenses are an exception. I think if you make that clear then she might see your point.

You see when we read your posts you don´t argue very clearly or concisely, the answer to the problem is hidden in "gobbeldy gook" from the accountant.

But don´t push for 20 pounds it isn´t worth it.

[kempc23]

You have misunderstood it as well. Flat rate VAT is nothing to do with it.

Did you read the email I posted above? About how expenses reimbursed should be charged? From the qualified accountant?

I am not an employee of the consulting firm, I charge them my expenses as I would any other customer, which is gross plus VAT, in line with my accountants advice.

Do you think that I should charge all my customers net plus VAT expenses?

[kempc23]

Ok I read the HMRC link. Yes you´re right

I have to say you´re not clear in your own arguments about the reasoning, so I can see why the Operations Director took a humpty. Basically normally it´s true that VAT isn´t paid double, and I was trying to get the reasoning because it wasn´t coming across. It´s because for VAT accounting travelling expenses are an exception to the rule.

You need to get that across.

You have to argue understanding her standpoint, i.e. normally you don´t pay double VAT yes correct, BUT, travelling expenses are an exception. I think if you make that clear then she might see your point.

You see when we read your posts you don´t argue very clearly or concisely, the answer to the problem is hidden in "gobbeldy gook" from the accountant.

But don´t push for 20 pounds it isn´t worth it.

LOL you struggle to understand what is a fairly simple concept, and its my fault because I don't argue clearly or concisely? Like I said, it is fairly common mistake to misunderstand how this works, so you (well you and her) are not alone. I mentioned flat rate VAT as I assumed that most people on here would understand how it worked. But again, like I said, that was not actually that relevant.

And where has this £20 figure come from? I just used that to illustrate a point, using simple figures so that you could understand.

EDIT: Also its not just travelling expenses, I'm fairly sure all recharged expenses are treated in the same way, providing they are not disbursements.

[BlasterBates]

You have misunderstood it as well. Flat rate VAT is nothing to do with it. Did you read the email I posted above? About how expenses reimbursed should be charged? From the qualified accountant? I am not an employee of the consulting firm, I charge them my expenses as I would any other customer, which is gross plus VAT, in line with my accountants advice. Do you think that I should charge all my customers net plus VAT expenses?

Reread my above post, as I found the answer to my question in the HMRC link. Normally VAT isn´t paid double, but travelling expenses are.


Now I understand, but I was under the same impression as the Operations Director, and the "gobeldy gook" from your accountant doesn´t really explain this anomaly of VAT.


It´s probably too late to have an amicable discussion about this, but I would still try, and if you fail I would let it go, it aint worth it.

[kempc23]

Reread my above post, as I found the answer to my question in the HMRC link. Normally VAT isn´t paid double, but travelling expenses are.


Now I understand, but I was under the same impression as the Operations Director, and the "gobeldy gook" from your accountant doesn´t really explain this anomaly of VAT.


It´s probably too late to have an amicable discussion about this, but I would still try, and if you fail I would let it go, it aint worth it.

Its not just travel expenses though, its all recharged expenses.

And its NOT being paid twice!

Its a long way past having an amicable conversation. I have already done that, and explained very clearly why she was in the wrong. She was not interested. She had already decided a long time ago that she was not going to back down. Seriously, what sort of person says "if you don't agree, then get your legal advisors to get in touch with me"?

[BlasterBates]

Its not just travel expenses though, its all recharged expenses. And its NOT being paid twice! Its a long way past having an amicable conversation. I have already done that, and explained very clearly why she was in the wrong. She was not interested. She had already decided a long time ago that she was not going to back down. Seriously, what sort of person says "if you don't agree, then get your legal advisors to get in touch with me"?

I´m trying to explain the Opeartions Director reasoning.

It strikes me you haven´t understood the general principle of VAT and why travelling expenses are an exception.

You need to talk to your Accountant again and he´ll explain it.

Having seen how argumentative you are on here with people trying to give advice I´m not surprised she dug heels in.