Is this VAT fraud?

S

S.L.F

Guest
Hello everyone.

I have not been around here for quite some time.

I have been working as a sole trader over the last few years without any issues from people.

I do the work, send an invoice and I get paid.

I did a job recently for a customer who was happy with the work.

I viewed a contract last Feb and sent a quote which had both materials and labour for the work and a total amount at the bottom.

So on the day the work was finished I asked when I'd get paid.

He told me to send him an invoice and he'd pay me.

So I sent an invoice to him for the full amount and he phoned me back asking for all my receipts for materials for the work because he wanted to claim the VAT back on them.

I told him that would not happen for the simple reason that the quote I gave him was for the full amount including materials.

Plus all the receipts have my name and address on them and since I bought them I can't see a single reason why he should have them.

Not to mention that fact that I am not keen on him knowing who my suppliers are.

So I am out of pocket by a 4 figure some and still have bills outstanding from this job.

So I contacted him again and asked how would we proceed if I gave him the receipts to which he told me he'd give them to his accountant and the accountant would pay me.

So it seems to be constant obstacles.

I know that trying to get VAT back from receipts with someone else's name is breaching the VAT guidelines and I know I can't have the receipts edited.

So right now I am considering sending him a text/email/letter stating that I expect to be paid by a certain date or will be going to the revenue commissionaires the following morning.

What do you think
 
odyssey06 said:
Apologies if this is a total red herring...
Is there any way this is a miscommunication around the customer trying to claim the 13.5% VAT equivalent credit under the HRI scheme for a "supply and fit" contract?
http://www.revenue.ie/en/tax/it/reliefs/hri/hri-general-faqs.html
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I think that link only deals with private customers not business customers.

I don't charge VAT because I am not VAT registered.

The house is full of rented flats

Anyway it is a contractor I am dealing with not the owner, it is he who wants to reclaim the VAT on my receipts
 
Thanks for the clarification... those sound like murky waters you are sailing in.
I'm afraid I don't have any experience of the business to business side of things so the HRI thing popped into my mind.
 
odyssey06 said:
Apologies if this is a total red herring...
Is there any way this is a miscommunication around the customer trying to claim the 13.5% VAT equivalent credit under the HRI scheme for a "supply and fit" contract?
http://www.revenue.ie/en/tax/it/reliefs/hri/hri-general-faqs.html
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Just to carry on.

Looking at that link.

It is possible to reclaim VAT but it is only 13.5% and all my receipts are at the sales rate of 23%.

"1.4.1. What type of works don't qualify?

Carpets, furniture, white goods (such as fridges, dishwashers) and services (such as architect's fees) with a VAT rate of 23% don’t qualify. Materials a Homeowner or Landlord buys such as paint, tiles and so on, don't qualify"

This would also apply to the materials I used to do the job.
 
I take it from your post that you are not VAT registered and your client is.

It is costing him more to have used your services and material supply, than it would have done if he had purchased the materials himself. If he had purchased the materials he could have claimed the VAT back.

He may have assumed you were VAT registered, in which case he could reclaim the VAT. Of course he should have thought of all this before he gave you the job.

If you are not VAT registered and supply materials to VAT registered clients, this puts you at a disadvantage vs competitors who are VAT registered. This might be worth looking at for the future.

I am not sure that the Revenue would be interested, if they investigated everyone who thought about how to deal with VAT they would be busy. But you never know, it just may scare him.

You could offer him a discount for prompt settlement, roughly equivalent to the VAT on the materials, that might get things moving.

Undoubtedly this guy owes you the money and you are entitled to pursue him for it. But it can be difficult in practice.
 
cremeegg said:
I take it from your post that you are not VAT registered and your client is.
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Correct and plan to stay that way too

cremeegg said:
It is costing him more to have used your services and material supply, than it would have done if he had purchased the materials himself. If he had purchased the materials he could have claimed the VAT back.
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Actually compared to my competitors I am far cheaper, he can still use the invoice I gave him against his business costs at the end of the year, he just can't reclaim something that I don't charge for.

cremeegg said:
He may have assumed you were VAT registered, in which case he could reclaim the VAT. Of course he should have thought of all this before he gave you the job.
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He knew I was a sole trader who does not charge VAT it is even on the quotation.

cremeegg said:
If you are not VAT registered and supply materials to VAT registered clients, this puts you at a disadvantage vs competitors who are VAT registered. This might be worth looking at for the future.
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I've no interest in being VAT registered and I don't supply materials to customers I supply skills (such awesome skills too) and materials included.

cremeegg said:
I am not sure that the Revenue would be interested, if they investigated everyone who thought about how to deal with VAT they would be busy. But you never know, it just may scare him.
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Hopefully it will scare him because I think what he is asking me to do may be illegal ( re-editing invoices so he can claim VAT he's not entitled to)

cremeegg said:
You could offer him a discount for prompt settlement, roughly equivalent to the VAT on the materials, that might get things moving.
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There's the clincher, how can I trust him after he has reneged on the agreement to pay me after I sent him the bill

cremeegg said:
Undoubtedly this guy owes you the money and you are entitled to pursue him for it. But it can be difficult in practice.
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I got stung before by someone so I know very well it is hard to get money out of people who just are damned if they will pay you.

Thank you for your response.
 
S.L.F said:
Actually compared to my competitors I am far cheaper, he can still use the invoice I gave him against his business costs at the end of the year, he just can't reclaim something that I don't charge for.
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If a client needs a job involving say €100 labour and €100 materials then if the contractor is VAT registered that is what it costs the client.

If he gives you the job it costs him €100 labour and €113.5 materials. Unless you swallow that €13.50 of course.

Either way if you are not VAT registered you are at a disadvantage supplying a VAT registered business.
 
cremeegg said:
If a client needs a job involving say €100 labour and €100 materials then if the contractor is VAT registered that is what it costs the client.

If he gives you the job it costs him €100 labour and €113.5 materials. Unless you swallow that €13.50 of course.

Either way if you are not VAT registered you are at a disadvantage supplying a VAT registered business.
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Hmmmmm no that is not how the VAT refund works (I'm open to correction of course)

The entire job you mention would be €100 labour and €100 materials which would have a 23% VAT added = €23.

The workman would have €100 (labour)+€123 (including VAT) = €223 plus 13.5% VAT (30.105).

Total price would be €253.105

The customer gets back €30.105
 
S.L.F said:
Hmmmmm no that is not how the VAT refund works (I'm open to correction of course)

The entire job you mention would be €100 labour and €100 materials which would have a 23% VAT added = €23.
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No it's €200 plus 13.50%= €227 and they can claim back €27.

But you charge them €223 and they can't get anything back!
 
Joe_90 said:
No it's €200 plus 13.50%= €227 and they can claim back €27.

But you charge them €223 and they can't get anything back!
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I don't know anyone who charges separately for materials.

All the people I know have one price (labour and materials) but if the customer wants something special (special paints tiles....whatever) they usually buy it themselves.

So the issue of the 23% VAT does not come up for them.

In any case in my own circumstances the vast majority of the price is for labour.
 
Joe_90 said:
No it's €200 plus 13.50%= €227 and they can claim back €27.

But you charge them €223 and they can't get anything back!
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Should that not be €213.50? S.L.F. has also pointed out they are far cheaper than the competition. So if far cheaper means any more than 6% less, then the other party isn't out of pocket. There's an expression about having cake and eating it...
 
S.L.F said:
So I am out of pocket by a 4 figure some and still have bills outstanding from this job.

So I contacted him again and asked how would we proceed if I gave him the receipts to which he told me he'd give them to his accountant and the accountant would pay me.

So it seems to be constant obstacles.
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Forget the noise about VAT, this isn't a VAT problem, it's a debt collection problem. The idea of his accountant paying you is bull of the highest order. That's not what accountants do.
 
T McGibney said:
Forget the noise about VAT, this isn't a VAT problem, it's a debt collection problem. The idea of his accountant paying you is bull of the highest order. That's not what accountants do.
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Being unregistered for VAT puts the OP is at a competitive disadvantage vis a vis other contractors who are VAT registered, when tendering for work with clients who are VAT registered. Or would you disagree ?

As to the debt collection issue of course you are right.
 
cremeegg said:
Being unregistered for VAT puts the OP is at a competitive disadvantage vis a vis other contractors who are VAT registered, when tendering for work with clients who are VAT registered. Or would you disagree ?
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That's very arguable and may well be true, but it's not the problem here. The OP tendered and did the work satisfactorily only for their customer to renege on their commitment to pay for it.
 
I agree that the customer should pay the OP.

But the point remains if the OP agreed to provide a service for say €10k, of which the OP paid out €6,000 on materials and changed €4K for his services, the OP would have been better off charging the customer €5k for his services and let the customer buy the materials himself.

The job costs the client €10k and the OP gets €5k rather than €4K.
 
T McGibney said:
That's very arguable and may well be true, but it's not the problem here. The OP tendered and did the work satisfactorily only for their customer to renege on their commitment to pay for it.
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The point I am trying in-eloquently to make is that the reason he's holding payment is because he wants to use my VAT receipts (In my name and plan to use them against my income at the end of the year) so he can claim back VAT which he is not entitled to.
 
Joe_90 said:
No it's €200 plus 13.50%= €227 and they can claim back €27.

But you charge them €223 and they can't get anything back!
Click to expand...

Just to further this.

I've spoken to other sole traders and also people who were registered for VAT (builders mostly) and they all tell me the same that they give one price for the job and claim back their own 23% VAT and then charge the customer 13.5% VAT.

Most of the costs in my own case are labour, so the €100/€100 gives a skewed picture of how the break works in my situation.
 
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