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Vat...

JaffasGirlJaffasGirl Trusted RegularRegistered Posts: 387
Right i hope i explain this properly! sorry if its a bit long winded!

I work for an estate agency, and we was given a property by a vendor who was unhappy with their current agent. The agent had done a lot of viewings, but she didnt like them for some reason or another....anyway in we come.

Now, to cut an even longer story short(er), one of the people that had viewed with the other agent came to us to put an offer in. This was accepted, and being the kind souls that we are, (yes there are some decent estate agents in the world) we agreed to split the fee with them, as we would be progressing the sale and getting it to completion.

Now the sale has completed, we are being paid our fee by the solicitor, and then we will pay half to the other agent. Now i thought this would be simple (£1500 + VAT fee split in half - sorted) but it now turns out that the other agent is not VAT registered....(the cheeky buggers did try and invoice for the VAT, until i asked for the VAT reg number which wasnt on the invoice...)

so how does it work now? cause all we will have to pay to the other agent is £750 and we are left with an extra £131.25 of VAT....

would we have to pay this back to our client? or are we still liable for this VAT as we invoiced it?

If only they had bothered to tell us that there werent VAT registered BEFORE the solicitor had sent the cheque.....

Thanks

Appologies again that was quite long winded, and probably more info than you need....

Comments

  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Hmm. I'm not 100% sure, however:

    You raised the invoice to the client, therefore you are required to charge VAT on the full amount. If the client was not contractually obliged to pay the other agent, and it is your goodwill that decided to pay them half, then it's you who is paying them and not the client. If that's the case, then you have to charge VAT on the whole amount, and so you have to pay the £131 over to HMRC.

    There is an argument that the other agent's fee is a disbursement (and therefore you can invoice it without VAT), but I am not sure. You can charge a disbursement to your client without VAT (sorry, I can't remember if it's zero, exempt or outside scope) if they enjoyed the benefit of the product or service and not you (i.e. if they had a contractual arrangement to pay the other agent and you just billed it on their behalf). I think it would all depend on the exact arrangement between the client, yourselves and the other agent as to whether this applied. If it did, you can pay the £131 back to the client.
  • sdvsdv Experienced Mentor Registered Posts: 585
    JaffasGirl wrote: »

    Now the sale has completed, we are being paid our fee by the solicitor, and then we will pay half to the other agent. Now i thought this would be simple (£1500 + VAT fee split in half - sorted) but it now turns out that the other agent is not VAT registered....(the cheeky buggers did try and invoice for the VAT, until i asked for the VAT reg number which wasnt on the invoice...)

    so how does it work now? cause all we will have to pay to the other agent is £750 and we are left with an extra £131.25 of VAT....

    To me it appears to be a simple problem.

    you have invoiced vendors with £1500 plus vat of £262.50. The vat collected will be passed over to HMCE in your vat returns

    You asked for an invoice from the other agents of £750 and that's what you will pay them (Net of VAT). They have not invoiced you for vat so you can not claim vat in-put from HMCE, which means that you DO NOT have extra £131.25 of VAT, unless you have claimed vat input on £750 invoice. In which case that 131.25 belongs to HMCE because you should not have claimed the input vat.
  • JaffasGirlJaffasGirl Trusted Regular Registered Posts: 387
    Thanks,

    most agents have a clause in their contracts to say that any purchaser introduced by them to a property that returns to purchase in the six months following disinstruction, the vendor is liable for a fee.

    In our contract that the Vendor signed on instruction it says that if someone buys the property - even if we didnt conduct the viewing - (unless it is a private buyer ie. not introduced by an agent - must be family or friend) we still charge our fee - (we dont always follow through on this, depends on the individual situation)

    to save our vendor for paying dual fees, we arranged to split the fee with the other agent.

    My only concern is, that as the other agent does not charge VAT, and we are not actually charging £1500 for our services, more the £750 plus VAT - that we have overcharged our Vendor.

    shes a nice old lady, if slightly crazy, and as long as we have done everything right, i'll feel better! lol

    I'm more annoyed at the other agent, if you are not VAT registered - dont try and charge VAT - grrrr.

    oh and does VAT always have to be shown as a separate amount on the invoice?

    thanks
  • JaffasGirlJaffasGirl Trusted Regular Registered Posts: 387
    sdv wrote: »
    To me it appears to be a simple problem.

    you have invoiced vendors with £1500 plus vat of £262.50. The vat collected will be passed over to HMCE in your vat returns

    You asked for an invoice from the other agents of £750 and that's what you will pay them (Net of VAT). They have not invoiced you for vat so you can not claim vat in-put from HMCE, which means that you DO NOT have extra £131.25 of VAT, unless you have claimed vat input on £750 invoice. In which case that 131.25 belongs to HMCE because you should not have claimed the input vat.

    we havent claimed anything yet - the property only completed yesterday.

    - they did try to charge the VAT, it was only cause i queried it that they resent the invoice.

    - surely the vendor should not be charged for VAT on the full amount, when it was agreed that it would be split? considering her liability to us is only for £750, and its not her fault the other agent is not VAT registered?

    i can see the logic in what you say, and that it was invoiced at £1500 plus VAT, but why should HRMC get VAT when half of the fee is going to a company that is not VAT registered?

    if we had been aware before hand that the company was not VAT registered, then we would have told the solicitor to ask for invoices separately - we told the agent at the time of agreeing the fee that it would be £750 plus VAT, and not once did they mention that they were not VAT registered.

    thanks
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    If the client had to pay the other agent, then look into charging it as a disbursement as I stated above. This will save the client the VAT on the other half of the fees.

    Do look into it professionally, I'm pretty sure the disbursement rule would apply though.

    Alarm bells are going off for me that this other agent tries to charge VAT on its sales - very naughty indeed and if they tried to do it to you, how many other people is it doing it to? Pocketing the proceeds no less. I'm no grass but I can't stand tax evaders and fraudsters.
  • JaffasGirlJaffasGirl Trusted Regular Registered Posts: 387
    sdv wrote: »
    To me it appears to be a simple problem.

    you have invoiced vendors with £1500 plus vat of £262.50. The vat collected will be passed over to HMCE in your vat returns

    You asked for an invoice from the other agents of £750 and that's what you will pay them (Net of VAT). They have not invoiced you for vat so you can not claim vat in-put from HMCE, which means that you DO NOT have extra £131.25 of VAT, unless you have claimed vat input on £750 invoice. In which case that 131.25 belongs to HMCE because you should not have claimed the input vat.

    Im annoyed as i dont like people trying to take me for a fool, or trying to cheat other people out of money - be it HRMC or a Vendor/Landlord.

    I spoke to three people in their office, and none of them was bothered when i said £750 plus VAT - surely they should know that their company is not registered? cause this comes into play when they are calculating fees, and or agreeing a fee with a client - surely its a selling point in a way? come with us, we dont have to pay VAT - therefore we are cheaper?

    The whole thing is a bit dodgy to be honest - i'm just glad i'm studying the AAT (my boss doesnt know, my role doesnt normally involve anything accountancy related) as if i wasnt i wouldnt have spotted it, and it would have just cause us a problem when it got to the accountant.

    They dont put the VAT as a separate amount...i would like to take a look at their agency agreement though, if it states they charge VAT i would like to see that its crossed out at least.

    basically the invoice they sent me was just for £881.25 - no mention of VAT at all - although this is the amount plus VAT.

    I dont know why they are not registered. Our company has only been running since jan 2008 - we got a rebate i believe from all of the start up costs - so surely them being registered would be more beneficial.

    i'm sure my boss will love this piece of information though lol
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    JaffasGirl wrote: »

    basically the invoice they sent me was just for £881.25 - no mention of VAT at all - although this is the amount plus VAT.
    There is nothing wrong with that. The bottom line is that a vendor will lkely be a private individual so it doesn't matter whether the £881.21 includes VAT or not, as they wouldn't be able to claim the VAT back anyway.

    You could argue that the other vendor is charging the same as he would charge were he VAT registered, but pocketing the extra (legally) until he has to register.

    It's if he said his fee is £750, and then invoices it with VAT on top and then he isn't registered, that there is a problem.

    It does sound like he's not being totally above board though.
  • JaffasGirlJaffasGirl Trusted Regular Registered Posts: 387
    yeah, i suppose my only worry is that they agree a fee with the Vendor say £1000 plus vat - putting £1175 on the agreement. (not mentioning VAT)

    invoice for £1175 not mentioning the VAT on the invoice, - nothing to say this isnt the flat fee charged by the agent. - they are however using VAT to bump up the fee, nothing in the paper trail to say they are, its all verbal.

    but they are actually adding VAT - thats my worry - the fee agreed was £1500 plus vat split - if they dont charge VAT, surely they dont get to benefit from us charging being able to charge it?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    JaffasGirl wrote: »
    yeah, i suppose my only worry is that they agree a fee with the Vendor say £1000 plus vat - putting £1175 on the agreement. (not mentioning VAT)

    invoice for £1175 not mentioning the VAT on the invoice, - nothing to say this isnt the flat fee charged by the agent. - they are however using VAT to bump up the fee, nothing in the paper trail to say they are, its all verbal.

    It's very naughty. If they said our fee is £1175, that would be fine. If they are saying it's x + VAT that's not on.
    - the fee agreed was £1500 plus vat split - if they dont charge VAT, surely they dont get to benefit from us charging being able to charge it?

    In this case they didn't benefit because you spotted it and didn't pay them the "plus VAT". I would expect in the majority of cases they would get paid the "VAT".

    I'm speaking very objectively here:
    They could get away with it with 'weasel words', e.g. "Our fee is £1175, that would be £1000 plus the VAT." They haven't said they are charging VAT, they are implying it, but the paperwork makes no reference to VAT. While being misleading, that wouldn't technically be wrong.

    Personally I don't condone the above, and in my opinion either they should just state "Our fees are x" or they should state "Our fees are y". They shouldn't be mentioning VAT at all til they are registered.
  • JaffasGirlJaffasGirl Trusted Regular Registered Posts: 387
    I think thats probably how they are getting around it. it annoys me cause if i hadnt spotted it, we would have been paying them that amount, paid all of the VAT and not have been able to reclaim it. at least this way we are not any worse off!!

    just worrying that the person that creates their invoices, either - didnt know there were not VAT registered, didnt know that because they weren't they couldnt charge it or that they could just 'add the VAT on' , (without mentioning it explicitly) and they would get away with it!

    well thanks very much monsoon! you've been really helpful - at least i know i've done the right thing in refusing to pay that invoice! - my doing the AAT has saved my company some money and they dont even know it! bet he doesnt think of this the next time he threatens to dock my pay.....
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Thanks Jaffasgirl.

    Yes, you definitely saved your company money. Make sure your boss knows it too (and he legally can't dock your pay without your consent).

    They are being naughty by the sounds of it but sadly there is little that you can do. I guess you can always report them to HMRC, as they are borderline doing something wrong, but depending on the way they word it, they possibly aren't. As you say, its worrying that the person doing the invoicing doesn't seem to understand.
  • sdvsdv Experienced Mentor Registered Posts: 585
    Sorry I have been away from my computer and have not been able to follow this thread as it developed.

    Let me try and summarise the problem

    1 Sale has been completed and agents sale commission invoices has not been issued
    2 Sale commission fees has been agreed to be split between 2 agents
    3 Sales commission fees agreed at £1500 plus VAT
    4 Your companyA to issue and invoice for the half (£750 plus vat) =£881.25 to vendor's solicitor
    5 Agent compabyB to issue an invoice of £750 plus VAT to Ventor's Solicitor
    6 Agent companyB is not VAT registered but has quoted a commission fees that appers to include VAT figure (ie £131.25). They will issue an invoice of £881.25
    7 It appers that both companyA and CompanyB will receive a cheque of £881.25, but companyB will profit £881.25 and CompanyA £750. Fees not split 50:50 as the industry norm

    senario 1

    If Both CompanyA and CompanyB are to issue independent invoices to the vendors solicitors and the Vat matters should be dealt with by each individual companies.

    If companyB is not VAT registered it should not charge vat on it's invoice. However, if CompanyB has agreed a fee that appears to include vat in it, then that's the agreement between the companyB and the vendor.

    I have recently advised a client to sell his product at expected margin plus 17.5% (=117.5% expected margin) because very soon he will reach the VAT exemption celing and he will have to pay that additional 17.5% margin to HMRC.

    Could companyB be in a similar position to above? I don't know.


    senario 2

    If companyA is issuing a full invoice to vendors solicitor, then ComanyA should send £750 to CompanyB (as agreed) and ask for £750 invoice from companyB. Company B can not add or charge the original fee because the splitting fee clause should supersede

    JaffasGirl wrote: »

    if we had been aware before hand that the company was not VAT registered, then we would have told the solicitor to ask for invoices separately -................

    ...

    For the above quote senario 2 should apply
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