I did not expect the chancellors PBR to have a mention on the blog but the following story made me laugh.
I received a text message from the builder yesterday - "could I order another skip and settle the account." No problem with this. We have had four skips so far (the first we paid on delivery) and I hope that this next one will be the last. We have gone over budget on clearance fees.
I telephoned the skip company to be told that I owed them for three skips and another one would be the fourth.
He then said the first three skips were at 17.5% and the one delivered on Monday will be at 15% (it being 1st December). I asked how come they weren't all at 15% at I hadn't received an invoice from them for any the skips so far and the tax point should be the day they raise the invoice i.e. Monday 1st December. His response to this was that we should have been paying for the skips as we took delivery of them. The fact that they hadn't asked for payment nor had they issued an invoice was irrelevant.
I did try and point out that this was not how the new rules were supposed to work but he beat me with his response.
"Do you want the skip or not?"
I have read forum after forum about how the new VAT rules are supposed to apply for services already delivered and not invoiced and confusion reigns (I know this is sad but my real job has some exposure to this). Government seems able to make the announcement that VAT will change in one week without giving any meaningful thought to the difficulties this puts business in. I have a sneaking admiration for the way the skip company operated. They are wrong, they are not short changing HMRC and they know that reducing VAT by 2.5% will not make any difference to whether I buy their goods and services or not. In that respect they are right and I ordered the skip.
So much for a fiscal stimulus.
3 comments:
That is rather odd, I would have thought. After all, if they give you a VAT invoice +17.5%, they have to pay 17.5% to the govt, whereas if they give you one +15%, they pass on 15%. In other words, I can't see that it makes any difference to them, except making the customer less happy. Why would they do that?
Of course, they could be charging you 17.5% and paying 15%, but that would be tax fraud and would seem a big risk for 2.5% of the price of three skips.
In general tax rules should be left alone - it is very expensive for everyone to change them like this.
I don't think there was anything suspicious in their actions. I think they just didn't understand the rules. In this respect they are similar to many small businesses across the UK.
I would have thought that the PBR was a key factor to your project as it reduces your costs (although mainly materials I guess). My, mildly educated, guess is that the skip company are correct however. It might be reasonable to defer a delivery to take advantage of a different tax rate because then you are changing the tax point. However it seems wrong that invoicing could be delayed in order to procure an advantage. There are much harder "tax point" situations to untangle - such as the supply of an ongoing service: I remember as a youngster being dissapointed that I was charged 12.5% VAT on a long weekend stay in a hotel where the rate went up to the 12.5% on the Monday, the last day of our 3 day stay. My guess is that the skip company are better informed than my aforementioned hotelier was......
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