Late payment charges

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10110527
10110527 Registered Posts: 16 New contributor 🐸
One of my clients has charged one of his customers late payment & interest charges. As he is VAT registered, should these charges be vatable? At the moment he has not added VAT to the bill.

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  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    VAT exempt.
  • blobbyh
    blobbyh Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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    I thought the compensation element was vat-able with only the calculated overdue interest part non-taxable?
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    blobbyh wrote: »
    I thought the compensation element was vat-able with only the calculated overdue interest part non-taxable?

    I'm pretty sure the whole lot is exempt though I'm by no means a VAT expert so am happy to be corrected if so. I've certainly never seen it VATed.
  • blobbyh
    blobbyh Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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    Online research seems a bit vague with differing opinions.

    This one implies no vat on the interest part only:
    http://payontime.co.uk/common-misconceptions-about-the-late-payment-legislation

    This one says no vat on any part, compensation or interest:
    http://www.deliver-it.biz/2008/04/what-are-late-payment-charges/

    This one doesn't know either way (about half way down):
    http://www.ukbusinessforums.co.uk/forums/showthread.php?t=57682

    For ones I've received (most recently from Regus [Virtual Office providers]) and done in real life, VAT is charged on the compensation element but not on the interest part!

    So no definitive answer unless someone else knows it?!
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    In the last link (from UKBF, I know it well!) The only accountants to contribute to the thread are Kent Accountant (very knowledgeable) and 3pic (ultra hot VAT expert). They both agree there is no VAT on either the interest or the fine/late payment fee.

    That agrees with my experience of it, and if those 2 agree, that's more than good enough for me!
  • blobbyh
    blobbyh Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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    Shamefully I didn't read the whole thread Miss Frost, just the first page! But I'll concede to yours - and their - greater knowledge than mine, mend my ways and find time to complain to bloody Regus for their also not knowing any better!
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    blobbyh wrote: »
    Shamefully I didn't read the whole thread Miss Frost, just the first page! But I'll concede to yours - and their - greater knowledge than mine, mend my ways and find time to complain to bloody Regus for their also not knowing any better!

    :-) I only looked for accountants who contributed to that thread, no point looking at the others (and there are some very dubious accountants on there who get things wrong all the time so wanted to check who it might have been!).

    I'd trust a reputable forum accountant over Regus any day :lol:
  • coojee
    coojee Registered Posts: 794 Epic contributor 🐘
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    They probably won't pay the interest anyway so you'd be claiming back any VAT that you did charge in 6 months time anyway.
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