Vat

[gemma-the-husky]

Anyone else having fun with VAT this week!

 

[chergh]

If I hadn't handed in my notice last week I probably would have but instead another colleague has that pleasure and from what he has said today it looks like the VAT rate has been hard coded into some off our apps.

 

[namliam]

I had that Headache here in the NL a few years ago... I cannot believe that people would actually hardcode the VAT rates?? Dont they know things can change and will change!!!

 

[gemma-the-husky]

I've hardcode them in a few places

Even if you haven't, there's so many places where you can't just look up the rate - you now have to look it up, subject to verifying the date.

I deal with a number of businesses with (it can't be helped) delayed invoicing, so November dleiveries may be invoiced in November/December. In the same way they will receive last invoices in December, for both November and December.

So you either make the code respond correctly to any (ie the correct rate- Work!) - or you ignore any discrepancies, and wait for it to correct itself when the old stuff works its way out. Its not easy!

Anyway, I've just finished modding the first set, and now it will also work when the rates go back up next year!

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Also, I can see a few issues coming in some cases. In one app, they stored the VAT rate with the sale, but also use that stored rate to issue credits. But obviously, if we sold stuff in November at 17.5%, presumably we have to credit it at 15%. This is b2b stuff only, so its technical, but I can see Customs asking for loads if we get it wrong.

 

[namliam]

??
Once sold at 17.5% the rate stays 17.5% doesnt it??

I mean if the selling price is 117.50, the tax is 17.50 not 15.
Thus the net "value added" price is 100 and stays 100.
A returned sale of 117.50 will have to IMHO be credited for 117.50..... or is my common scence so far of the tax laws??? (which I know can make no scence what so ever)

 

[gemma-the-husky]

I think its more likely that you credit it at a different VAT rate to that at which oyu invoiced it - it depends when the tax point is, i think

but, if you try have a routine to generate a number of credits from some data file then you might either need to

a) look at the original source invoice and credit it at the same VAT rate or
b) credit it at todays VAT rate (which I think more likely)

but if it is option a) then i expect the code won't do that without alteration.
and if its option b) you still need to look at it, and make sure I think.

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I think it is somewhat dangerous to make assumptions.

 

[namliam]

Assumption is the mother of all fuck ups.... is what we allways say

The thing is ... everything basicaly works of the 'consumer' price, or atleast for consumers, I have little experience in the b2b world.
If a consumer pays 117.50 for a product today and returns it next week, he will expect to get back 117.50.
Now that 117.50 is either 100 net price and 17.50 VAT or 102.17 and 15.33. I cannot imagine that the net price of the product is to change, in essance the company would make 2.17 profit on the return, which would seem 'odd'.

 

[GaryPanic]

laugh ,..

I have been banging on about this in my company for years - never hard code tax rates - have them in a table

been ignored - now I am slightly smug about it .

 

[DreamGenius]

I've just checked with my accountant, because that whole notion of giving back more money than you'd originally asked for, struck me as totally wrong.

The correct procedure, when issuing a credit note, is to use the same tax point as the original invoice. Therefore the VAT rate and the amounts credited correctly and completely offset the amount charged. Effectively, you must nullify the original invoice.

If, at a later date, you then decide to re-invoice, you are free to do so at the VAT rate prevailing at the time.

HTH

 

[namliam]

It seems VAT taxes make sence after all

Thanks for clearing that up Alan.

 

[neileg]

I've just checked with my accountant, because that whole notion of giving back more money than you'd originally asked for, struck me as totally wrong.

The correct procedure, when issuing a credit note, is to use the same tax point as the original invoice. Therefore the VAT rate and the amounts credited correctly and completely offset the amount charged. Effectively, you must nullify the original invoice.

If, at a later date, you then decide to re-invoice, you are free to do so at the VAT rate prevailing at the time.

HTH

Sorry, Alan, not the whole story!

It depends on why you are issuing the credit. If it is a correction of the earlier invoice, then the tax point is the same as the invoice. If the credit is due to returned goods, then the tax point is the date of the return.

Regarding your last point, the tax point is always the earliest of the date of supply of the goods or services, the date of payment or the date of the invoice.

In any event, HMRC has stated that they will be applying a 'light touch' as far as enforcing the tax point rules around this transitional period.

 

[Rabbie]

Sorry, Alan, not the whole story!

It depends on why you are issuing the credit. If it is a correction of the earlier invoice, then the tax point is the same as the invoice. If the credit is due to returned goods, then the tax point is the date of the return.

Regarding your last point, the tax point is always the earliest of the date of supply of the goods or services, the date of payment or the date of the invoice.

In any event, HMRC has stated that they will be applying a 'light touch' as far as enforcing the tax point rules around this transitional period.

Neil, can you clear up a point for me please. If I supply goods(worth £100 net) to a non VAT registered customer at 17.5% so I receive £117.50 and he then returns the goods when the rate has changed to 15% do I then just refund/credit him £115. There seems to be a difference for him depending on the timing. it seems to work OK if he gets a credit note for £100 + VAT but he looses out if he gets a cash refund.

 

[gemma-the-husky]

neil

thanks for the advice about "the light touch" - is there a web link on hmce website for that - and the observations about VAT credit rates.

the issue i have is to do with delayed invoicing

ie we invoice in november, but often and unavoidably we dont invoice until mid december, say

now the vat rules actually say (paraphrasing)

if invoicing is within 14 days of supply date (say late November), then charge vat at 15%,but if invoicing is AFTER 14days of supply, then VAT charge reverts to 17.5% - although traders can apply for an exemption

[they are actually talking about VAT accounting period, rather thna VAT rate, but I am assuming the two are synonymous]

Anyway, I'm working through to provide a switch to offer either option.

We'll need all this again in a years time anyway! (in the UK)

 

[namliam]

period is period, rate is rate... two different things...
Period is i.e. month of November
Rate is 17.5% not synonymous at all.

Just a (happy) coincedence that there are now two periods with different VAT rates... however we have had many periods where the VAT rates are the same.

 

[neileg]

Neil, can you clear up a point for me please. If I supply goods(worth £100 net) to a non VAT registered customer at 17.5% so I receive £117.50 and he then returns the goods when the rate has changed to 15% do I then just refund/credit him £115. There seems to be a difference for him depending on the timing. it seems to work OK if he gets a credit note for £100 + VAT but he looses out if he gets a cash refund.

A good question without a crystal clear answer. It depends on why the goods are returned. If the return is due under the Sale of Goods act, e.g. the goods are not of merchantable quality or not as described, then the consumer is entitled to full re-imbursement. So they get £117.50 regardless. If the return is out of the goodness of your heart as part of a customer care protocol then this is not governed by legislation and you do what you like. Logic suggests that you give them £117.50. Common sense suggests that you account for VAT at 17.5% either way! Just don't quote me on that.

 

[SOS]

Sorry, Alan, not the whole story!

It depends on why you are issuing the credit. If it is a correction of the earlier invoice, then the tax point is the same as the invoice. If the credit is due to returned goods, then the tax point is the date of the return.

Not in the U.S. In the U.S. we have to credit for the amount charged as that was the amount collected, regardless of the prevailing rate at the time of the refund. That is according to Generally Accepted Accounting Principles (GAAP).

 

[neileg]

the issue i have is to do with delayed invoicing

ie we invoice in november, but often and unavoidably we dont invoice until mid december, say

now the vat rules actually say (paraphrasing)

if invoicing is within 14 days of supply date (say late November), then charge vat at 15%,but if invoicing is AFTER 14days of supply, then VAT charge reverts to 17.5% - although traders can apply for an exemption

[they are actually talking about VAT accounting period, rather thna VAT rate, but I am assuming the two are synonymous]

Yes, you're right. Most registered traders have a 14 day window when the date of the invoice is substituted for the date of supply in fixing the tax point. (Section 33 traders - mostly local authorities - have a two month window).

 

[namliam]

That is according to Generally Accepted Accounting Principles (GAAP).

Which is dutch for YAWN, quite applicable to tax laws .... LOL

 

[stopher]

thanks for the advice about "the light touch" - is there a web link on hmce website for that - and the observations about VAT credit rates.

It's HMRC now although I keep calling them HMCE too.

Here's some links we got sent.

Techy VAT stuff (44pp)

FAQs for Businesses (5pp)

FAQs for Consumers (3pp)

Pre Budget Report Statement (3pp)

Ministerial Statement (2pp)

Chris