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?