Wednesday, 13 February 2013

Not issuing VAT invoices

There is a legal requirement (VAT Act) to issue a VAT invoice to a VAT registered customer. Simple.

Now, a lot of people issue VAT invoices as standard to all customers. There are a couple of simple requirements you have to follow to be a valid VAT invoice, but they are generally simple enough. Whether you issue them or not, you have to charge for and account for VAT. Ironically one company we have issue with (to the extent that it was an issue in a VAT inspection) is BT as they send invoices in RTF not PDF and it prints without their letterhead so does not have BT's VAT number, arg.

The discussion came up in irc today because, apparently, EE, are changing from sending people VAT invoices to sending statements and you can say you want a VAT invoice instead.

I have seen this with other telcos, and even on supermarkets and shops. Some shops print a receipt that has all of the details to be a formal VAT invoice with the line at the end "THIS IS NOT A VAT RECEIPT" (which strangely enough can get cut off!). This is extra work (extra ink and paper in that case) and means anyone needing a VAT invoice (to reclaim VAT) has to ask to get VAT invoices. In supermarkets like Tesco you have to go to the customer service desk to get one.

What I do not understand is WHY?

Why is it somehow some advantage for a company not to issue VAT invoices/receipts as standard? It is not a procedural thing as some actually include all the details and add the extra line to make it not a VAT invoice. It makes extra work, not less. So why do they do it. What trick am I missing.

There are a few occasions that it makes sense. At A&A we have a home tariff and one of the terms is that it is for non VAT registered customers. This is a simple way to differentiate most business users and easy to enforce by simply not issuing a VAT invoice. But that is a deliberate tariff choice and not something we do generally and clearly not why EE, or Orange, or Tesco, or many many other suppliers don't simply issue a VAT invoice?

There must be a reason...

21 comments:

  1. Maybe Tesco do it to discourage businesses from shopping in their stores as they might be more likely to bulk buy a few items and cause stock issues for other customers?

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    1. Seems overkill - any business can either (a) claim anyway if small amount, or (b) simply get from customer service desk (as we have done when buying 10 laptops in one go once).

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  2. VAT invoices might conceivably take up more paper, if poorly designed. The design can get complicated if different line items have different VAT rates applied (which would apply to supermarkets, Jaffa Cakes are zero-rated, Orange jammie dodgers covered in chocolate are standard rate).

    If the invoice is delivered as email (and yes, plain text email is fine, providing that all the information is there), they have no excuse not to include the information required for it to be a VAT invoice. They aren't even having to pay for any paper that might get used to include individual VAT itemisation if required.

    Regarding your choice not to offer your home tariff to customers who require a VAT invoice, do you expect them to change Internet tariff should an individual go over the VAT threshold from their ebay trades?

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    1. Home::1 is simple, if someone asks for a VAT receipt and is VAT registered then they need to change to a tariff to suit their needs as Home::1 will no longer be available to them.

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  3. VAT invoices might conceivably take up more paper, if poorly designed. The design can get complicated if different line items have different VAT rates applied (which would apply to supermarkets, Jaffa Cakes are zero-rated, Orange jammie dodgers covered in chocolate are standard rate).

    If the invoice is delivered as email (and yes, plain text email is fine, providing that all the information is there), they have no excuse not to include the information required for it to be a VAT invoice. They aren't even having to pay for any paper that might get used to include individual VAT itemisation if required.

    Regarding your choice not to offer your home tariff to customers who require a VAT invoice, do you expect them to change Internet tariff should an individual go over the VAT threshold from their ebay trades?

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  4. Supermarkets are likely to have items of different VAT rates, which may complicate invoice designs, because for each rate (not each line item), the Net, VAT amount and Total need displaying.
    If they are sending bills by email (or forcing them to download them from a web site), they really have no excuse not to. It's not even their paper that they're using up.
    Include all the information required by law. Simple.

    By the way, your choice to limit your 'home' tariff to customers who don't get VAT invoices.. Do you expect someone with an ebay selling habit to change Internet tariff due to them going over the VAT registration threshold?

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    1. The invoices already mark non VAT, and as I say - some places issue a complete VAT invoice apart from extra text making it not one. It just seems odd. As for Home::1, if someone becomes VAT registered then they cannot get Home::1 - We have many commercial tariffs. Not an issue really. Not sure how ebay trading or other trading changes that.

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  5. My Orange invoice says "This is not a VAT invoice" despite having all the correct info on it. I claim the VAT back on it anyway. Can't see the VAT man being too concerned.

    I do have a problem with Amazon, who refuse to issue VAT invoices for Kindle books. They say Kindle books are not for business. Trading Standards and hmrc couldn't care less.

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    1. Can't see why they are not for business, but surely a simple step (which we have done to someone before now) is county court claim them for the VAT you are unable to reclaim because of their breach of the law. That usually focuses people's minds. Just to be clear, someone doing that to us would get a VAT invoice for Home::1, and then a VAT credit not for Home::1 and then a VAT invoice for a non-Home::1 commercial tariff instead as being not VAT registered is a condition for Home::1 even if not for Kindle.

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    2. They don't do VAT invoices for books because they charge Luxembourgese VAT...

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  6. "(extra ink and paper in that case)"

    Strictly speaking, it doesn't require extra ink - receipt printers are normally thermal printers.

    I suspect the "NOT A VAT RECEIPT" disclaimer is simply ass-covering to avoid having to make sure that all your tills are updated if/when VAT receipt requirements change - it's a lot easier to update a customer service than 100 tills.

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  7. I believe it works like this in a VAT rules way...

    Retailers (like Tesco) do not have to give a VAT Invoice unless a customer requests one.

    A Supplier, like A&A *MUST* provide them.

    If my invoice for home::1 is less than £250 you could give me a simplified invoice etc, but you can't outright refuse if I am VAT registered.

    You could choose for some reason I guess under your terms to "give notice" to stop supplying Home::1 but I'd not see why someone would apart from your own reasons that I don't really understand.

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    1. I was not really planning to discuss home::1 here - the reasons we don't issue a VAT invoice for Home::1 are very simple and well documented on the web site. It is simply that it is a very easy differentiator between "Home" and "Business" use, and this tariff is specifically for "Home" users who naturally have very different usage pattern to business users on average. The fact Home::1 is (as pert of T&Cs) not for VAT registered customers is just a matter of where and how we draw that line and is one everyone can easily understand.

      My puzzlement here is why Tescos and the like don't issue VAT invoices routinely. I can understand if they never did, but there are example of companies that current issue VAT invoices changing to issue just statements - i.e. spending time and effort to change wording and advise customers of the change with no apparent gain for doing so. These cases do not seem to be like ours, where they have a "Home" tariff, but simply a paperwork change for not reason. That is what I am asking!

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  8. Aren't company supposed to keep a copy and able to produce any VAT invoice? SO it would make sense for Tesco to consolidate all NON VAT till receipts and only keep details of VAT invoices.

    For EE, Orange, etc... the reason is probably the same as for A&A, to split B2B from B2C. Beside the obvious usage patterns that differs, there are also some legalities (consumer protection for example) that would vary. So just an easy way to sort out your customer? At least one way, while it prevent business account to go on consumer tariff, nothing prevent consumers to use business tariffs.

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  9. I know of several employers who allow employees to claim for home broadband on expenses (because being able to work from home makes them a more flexible employee etc), but they need a VAT receipt to process the expenses, so despite the fact that the purchaser, and as such the party to contract of supply isn't VAT registered, and isn't a business, nor to they request or require a business level of service, they simply require a VAT receipt for other purposes.

    With Orange, I was regularly deemed by their automated marketing profiling software as being a business, presumably because I had more than one subscription at the time, even to the point of a support agent insisting I phoned a different number for customer support, because it went through to a different team. I re-dialled, and after even longer on hold, was connected back to the same agent. I eventually persuaded them that I wasn't a business and that their customer profiling was counter-productive.

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    1. Indeed. We have drawn a line for the tariff based primarily on VAT registration. There will always be some special case like this. From a VAT point of view we don't have to issue a VAT invoice for expenses claims, but we are happy to sell to the employer directly and bill them on a business tariff. Or they could just not claim the VAT element.

      The key thing here is we are not hiding the terms for the tariff in any way, and not trying to catch people out.

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  10. Could it be to do with the requirement for serial numbering?

    The requirement as stated at http://www.hmrc.gov.uk/vat/managing/charging/vat-invoices.htm#2 is:
    "A VAT invoice must show:
    an invoice number which is unique and follows on from the number of the previous invoice - if you spoil or cancel a serially numbered invoice, you must keep it to show to a VAT officer at your next VAT inspection".

    Does this allow for a scheme where each till (or store) has its own prefix and maintains its own sequence independently? Or does it imply that only a single sequence can exist within any business? (This would be really silly, so let's hope not). Any requirement to synchronise / serialise in realtime across a scope wider than a single store would be a nightmare for reliability and correctness.

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    1. I believe the VAT notices do clarify this requirement. You can have as many series as you like. We run one for each month, for example, and actually have year/month as part of the sequence. I believe each till can have its own sequence, for example. BT tend to do a per customer sequence, which is an idea we have considered (e.g. account reference and M001, M002, M003).

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  11. Hi, found this thread after a web search for 'not supplying vat invoice'.
    Just spent nearly an hour on the phone to "Very" as I require a vat invoice for a laptop I've bought from them; quite a painful call as the agent didn't really have a clue what one was and why I required one!

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  12. Hi

    Just come across this after Googling for a similar issue (why aren't I surprised you Blogged about it!)

    I think you hit the nail on the head and it is similar to what you do at A&A, it is purely to stop businesses taking advantage of consumer benefits.

    Several computer supply companies do it (Ebuyer, PC World to name a few) and they point you to their business site if you want a VAT receipt - I believe the primary reason is to get around the sale of goods act for businesses.

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    1. To be fair - rules on businesses are much more "fair" in that each side can argue what they want in a contract, but consumers are much more "nanny state" protection. I can see a massive difference in dealing with the two that impacts the way businesses work. Heck, even ADR is an issue for us.

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