Is VAT due?

A client of mine did a job for a customer who said he'd pay by cheque, but then after the job was finished said he could only pay by credit card. As my client didn't have a credit card machine at the time they put the sale through one of their subbie's credit card machines, who promptly did a runner with the £5k. There are legal proceedings in place to try recover the money but no-one knows if it will be sucessful.
Do you know if there's any way my client can get out of paying the VAT on the £5k until/if they recover the funds?
THanks
Jodie
Do you know if there's any way my client can get out of paying the VAT on the £5k until/if they recover the funds?
THanks
Jodie
0
Comments
under normal circumstances Vat will be levied at point of sale / invoice date;
Work was completed Vat is collected etc,
best wishes,
Paulr.
Regards
Dean
As much as I can see their point too, I recommend you tell them to pay across the vat this quarter and reclaim it next. Least that why they are protected from 'discovery' and avoid interest being charged.
Regards
Dean
If your client is operating the accruals method for VAT then they have no choice but to pay the output VAT in this quarter.
Even if you switch to cash accounting for the quarter, If HMR&C deem the subbie with the PDQ machine to have been an agent of your client then they would even have to pay over then:
From the cash accounting manual:
Debts collected on your behalf by an agent
The following text has force of law
Provided you have not assigned or sold the debt to the factoring agent or invoice discounter, you must account for VAT in the tax period in which your agent receives money on your behalf.
The value on which VAT is due is the amount received by the agent from your customer, not any lesser amount paid to you by the agent.
I will stick my neck out here, with my basic law knowledge.
I would even say that there may be problems with writing this off as a bad debt and claiming relief as the customer has actually paid and satisfied his part of the contract.
When your customer asked 'his mate' to collect the money for him a new contract started there and so it is 'his mate' that is the debtor to your client now and not the customer.
It is your clients fault with the method of collection. he could just as easily paid your client in cash and then your client had the cash stolen.
That aside how well does your client know his customer? The customer may have recourse through either his credit card or the supplier of the PDQ system. Just a thought.
Poodle
If there are legal proceedings going on, then the debt has not been written off.......
Claudia
If you are unsure about VAT and bad debt relief I would suggest getting a copy of VAT guide 700/18. I like to keep a library of these as you can order them free or download from the HMR&C Website.
Section 2
Regards
Poodle