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PostPosted: Thu Jun 28, 2012 2:30 pm 
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Location: Ayr
grandad:- That's not quite how it works.

As the Fare he has quoted is Gross, his invoice will show the Net Fare and the VAT content, which adds up to the Gross Fare quoted. It's a minefield and must be handled correctly or HMR&C will try to claim VAT on all sales.

More time needs to be spent with his Accountant ~ He needs to know 'exactly' how the Invoices are to be prepared and Payments accounted for.

Othewise Insolvency threatens

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PostPosted: Thu Jun 28, 2012 2:37 pm 
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wee eddie wrote:
grandad:- That's not quite how it works.

As the Fare he has quoted is Gross, his invoice will show the Net Fare and the VAT content, which adds up to the Gross Fare quoted. It's a minefield and must be handled correctly or HMR&C will try to claim VAT on all sales.

More time needs to be spent with his Accountant ~ He needs to know 'exactly' how the Invoices are to be prepared and Payments accounted for.

Othewise Insolvency threatens

As I understand it the chap is not VAT registered at the moment, or have I got that wrong? It is also a private hire business. So as soon as he registers for VAT he can add this to the next invoice.

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PostPosted: Thu Jun 28, 2012 2:45 pm 
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HMR&C can claim VAT on all Sales, regardless of whether he has charged it, from the date when his Sales exceeded the VAT Entry Point

You may wonder why I am paranoiac about Accounting and VAT.

In my past, I worked in the Accountancy Profession and have seen, otherwise successful businesses, closed down and their Owners Bankrupted, by errors in the Recording of Taxable Income.

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PostPosted: Thu Jun 28, 2012 3:56 pm 
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grandad wrote:
wee eddie wrote:
grandad:- That's not quite how it works.

As the Fare he has quoted is Gross, his invoice will show the Net Fare and the VAT content, which adds up to the Gross Fare quoted. It's a minefield and must be handled correctly or HMR&C will try to claim VAT on all sales.

More time needs to be spent with his Accountant ~ He needs to know 'exactly' how the Invoices are to be prepared and Payments accounted for.

Othewise Insolvency threatens

As I understand it the chap is not VAT registered at the moment, or have I got that wrong? It is also a private hire business. So as soon as he registers for VAT he can add this to the next invoice.


He isn't VAT registered atm but his turnover last year slightly exceeded the threshold which is why all this has arisen.

Quick query:

On the government VAT site it states the following:

Accounting for VAT if you act as an agent for both cash and account work

3.4 Agent for both cash and account work

Whether you are acting as an agent depends on the terms of any written or oral contract between you and the drivers, and the actual working practices of your business. For further information on how to decide whether you are acting as an agent or a principal see the section dealing with agents in Notice 700 The VAT Guide. Typically in acting as an agent for your drivers you will:

relay bookings to the drivers (usually on a rota basis) for an agreed fee
possibly also provide them with other services such as the hire of cars or radios and
collect fares on their behalf from account customers.

If you act as an agent, the drivers are entitled to the full fares paid by the customers, even though the charge for your agency services may be deducted from the account fares you collect for them.

In which case, if you are registered, you must account for VAT on ...

A supply of agency services to your drivers. Amounts you receive for this from your drivers (including any additional charges you may make such as for vehicle or radio rental).



Might be being naive but going back to that original example with the above in mind, what would be the situation if his accounts show the full £75 paid to the driver, with a £5 deduction for administration and a £17.50 deduction for rent?

Would this then reduce his turnover to the £22.50 instead of the £75?


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PostPosted: Thu Jun 28, 2012 5:00 pm 
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wee eddie wrote:
HMR&C can claim VAT on all Sales, regardless of whether he has charged it, from the date when his Sales exceeded the VAT Entry Point


Yes I know that. He can't do anything about the past but going forward when he is registered for VAT he can add the VAT to the invoice making the job £75.00 plus VAT and not including VAT.

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PostPosted: Thu Jun 28, 2012 6:49 pm 
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Location: Scotland
The best way would be take his books to HMRC and get them to show him what they want
He could let the drivers keep everything they earn, then just charge an office rent of say for example £50 a week per driver.
Just one question though, will he be giving the drivers back the 20% vat back on the fuel they buy???or will he keep st-um and pocket it all to himself


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PostPosted: Sat Jun 30, 2012 10:11 pm 
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skippy41 wrote:
Just one question though, will he be giving the drivers back the 20% vat back on the fuel they buy???or will he keep st-um and pocket it all to himself


Bit of a none question, as the owner cannot claim back VAT on fuel he doesn't pay for, as the drivers are paying for it, he can't claim it back in the first place.


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PostPosted: Sun Aug 19, 2012 11:06 pm 
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In my view he must charge VAT on all sales, to all his customers and that includes rent charged to drivers. He can then reclaim VAT on all his purchases, electric, tea bags, phone bills etc and pay or reclaim the difference on his VAT return.

This case from Pepipoo is of some relevance even though it involved a private parking company who thought they didn't have to charge VAT on their parking charge notices:
http://forums.pepipoo.com/lofiversion/i ... 70585.html

The judgement was also interesting as it ruled that the PPC had no right to issue such charges on property they did not own or have a right to use!

It is believed the VCS tax bill will be enormous! The OP's friend could be faced with a big bill unless he gets his house in order.


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