Hi,
A friend had just started working in a service firm where they have a high level of direct outlays (payable on behalf of clients to a public office similar to the CRO) that should be 0% VAT but are charging it out at 23% VAT. When he questioned this practice he was told that it’s the way that it’s always been done and no further explanation was given.
An example of this would be charging a client €120 + VAT @ 23%. Of this €120, €100 is a professional fee and €20 is a non VAT expense paid to a 3rd party. Instead of charging €143 (€100 @ 23% VAT + €20 @ 0% VAT) they would charge €147.60 (€120 @ 23%).
The company declares all the VAT charged to the revenue and all of their clients are VAT registered companies who have the ability to claim it back so they are not profiting from this practice.
My questions are
Any advice here would be greatly appreciated.
Many Thanks
David
A friend had just started working in a service firm where they have a high level of direct outlays (payable on behalf of clients to a public office similar to the CRO) that should be 0% VAT but are charging it out at 23% VAT. When he questioned this practice he was told that it’s the way that it’s always been done and no further explanation was given.
An example of this would be charging a client €120 + VAT @ 23%. Of this €120, €100 is a professional fee and €20 is a non VAT expense paid to a 3rd party. Instead of charging €143 (€100 @ 23% VAT + €20 @ 0% VAT) they would charge €147.60 (€120 @ 23%).
The company declares all the VAT charged to the revenue and all of their clients are VAT registered companies who have the ability to claim it back so they are not profiting from this practice.
My questions are
- Is it a case that they should implement a new invoicing policy with the correct VAT rates now or will they be required to go back over the last 6 years accounts and amend each invoice?
- How would the revenue view this? Is the firm liable for potential fines? If so, what are they likely to be?
Any advice here would be greatly appreciated.
Many Thanks
David