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Customer not happy with VAT portion of my invoice.. advice needed!

electroplated

electroplated

off minehead
I run a small LTD company and am VAT registered. I recently did some work for someone and sent over my invoice in due course, with 20% VAT added to the amount I quoted for the job (as per normal for me).

The customer has just sent me a message saying the VAT is a problem and implying they are not happy to pay the amount requested as they didn't know that they would be charged in this way.
In nearly 10 years of being VAT registered and quoting for jobs/issuing invoices I have never had a problem like this but they seem to think I am trying to charge them more than they originally agreed.

As they are not VAT registered are they able to claim back VAT paid to me for my services or will it effectively come out of their pocket in a way that is different to if they were registered themselves?

I'd like to resolve the situation amicably as they are a friend of friend and there was the possibility of more work from them in the future, but if I take the hit and charge them the amount minus VAT I'll be considerably out of pocket for a job that I was already doing for less than I would usually charge and quite frankly am totally skint right now so not particularly keen to do so.

Just wondering if anyone has any useful advice of how best to resolve the situation or if there is anything that I can say to them about the accounting side of things that might help...?
 
Supine said:
If your service or trade requires vat you have no choice but to charge it.

Did your quote say cost + vat. I can imagine someone being a bit pissed off if it wasn't clear.
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I can also understand that too but unfortunately on this occasion I didn't go through any real discussion of price as I stepped in to do the job on behalf of a friend at the last minute and just was told what price had already been agreed. To be honest I've never had an issue before simply discussing the cost and then adding VAT on top of that as most (but not all) previous work has been done for VAT registered individuals or companies so it all basically cancels out in the accounts.

I'm just wondering if there is any way they can avoid taking the hit even if they are not VAT registered - accounting is not my strong point so not sure if there's any way of doing that?
 
electroplated said:
I'm just wondering if there is any way they can avoid taking the hit even if they are not VAT registered - accounting is not my strong point so not sure if there's any way of doing that?
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No, not as far as I know.

They're in the wrong - this is standard stuff - but it depends on how much you want to stay in their good books. I wouldn't give them a discount just because they're friends-of-a-friend, that group of people are notorious for trying it on. (If they're pros they're definitely trying it on.) You might want to meet them halfway while sending emails referring to this as standard business practice.

Tbh if they're bitching about this they won't be giving you any more work I would say, regardless of how it ends up, unless you end up massively undercharging them to the point where it's not worth your while to do the work at all.
 
Surely they must know this stuff just by being alive? Are they very young?

They need to learn that you pay VAT for services like this. Personally I would stick by my guns. When they are more worldly wise they will forgive you. Either that or they are just trying it on.
 
They have actually been in business for longer than me as far as I know so I am amazed that this would have come as any sort of surprise to be honest. I also incorrectly presumed they would be VAT registered themselves but apparently not.

This job has already cost me more than I'm even charging as some of my gear got damaged by accident on the day so it's already a bit of a nightmare frankly. Haven't yet found out if my insurance will cover the damage as it's a bit of a grey area.

I also doubt there is much chance of future work but I try not to burn any bridges unless really necessary...

Sounds like I'll have to stick to my guns and as a last resort offer to split the difference...
 
Poot said:
Surely they must know this stuff just by being alive? Are they very young?

They need to learn that you pay VAT for services like this. Personally I would stick by my guns. When they are more worldly wise they will forgive you. Either that or they are just trying it on.
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Yep, this. But change your contracts/quotes in future to say "plus VAT" or "inc VAT".
 
I'm just wondering if there is any way they can avoid taking the hit even if they are not VAT registered - accounting is not my strong point so not sure if there's any way of doing that?[/QUOTE]

Absolutely not! No mor3 than you can avoid charging it.

The VAT will still be deductible a a business sense, they just can’t reclaim it at the end of the quarter/year.

They shouldn’t be making you responsible for their lack of VAT registration.
 
The VAT will still be deductible a a business sense, they just can’t reclaim it at the end of the quarter/year.
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This is what I meant, I thought it might help them cough up if I can remind them the VAT is offset against other aspects of their accounts but I don't really know the details.
 
Sounds like they are trying it on, although did the original quote from the OP's mate include or exclude VAT ?
But VAT has to be there, except in very few cases.
I've just had an estimate accepted for a job in the Isle of Man, and I still have to charge VAT ...
(btw, I always use estimate rather than quote, as the latter implies fixed price)
 
Is it 20% on £1000 or £10000?

What documentation do you have in place to prove the contract between you? What do you know about them? Do think they will pay the VAT if you insist, or might they hold out on the full invoice value until an agreement is reached?

What is the potential value of follow-on work and can you increase it's value to cover the loss on this?
 
Poot said:
Surely they must know this stuff just by being alive? Are they very young?

They need to learn that you pay VAT for services like this. Personally I would stick by my guns. When they are more worldly wise they will forgive you. Either that or they are just trying it on.
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No one should assume that anyone knows anything and based on that be really really clear! I would not necessarily know which services VAT is charged. Best always to give a quote and make it very clear if that price includes VAT or not and what percentage VAT is. Not everyone knows this!!!!!
 
It sounds like a familiar story, the client trying to get the work done for the lowest price they can and quibbling over the bill whilst waving the carrot of possible future work, the future work will either not materialise or the budget will be equally pared to the bone.
 
I think you should stick to your guns. Tell them
a) I have no choice about charging VAT
b) I have made the supply at a substantial discount already due to friend to friend stuff.

Some business people appear to think that behaving like a twat makes them look tough and competent. Do your emails include your VAT number? (They should!) This is a massive clue.
 
As a general rule quotes to consumers should include VAT, quotes to businesses tend to exclude the VAT, but it should be indicated that the quote is subject to VAT.

But, as no quote was issued in this case, and no discussion, it does make things very difficult. I think offering to split the difference is a good first move, but if they don't agree I think you'll need to take the hit, as there's nothing but a verbal contract, and one where no mention of VAT was made.

I had a situation like this over a year ago, luckily I had I a reply from the customer to my e-mail confirming the price was plus VAT, so I was able to enforce it. Bloody pain it was, he even ignored the County Court Judgement & I had to escalate it to the High Court and appoint a firm of H.C. Enforcement Officers, I used The Sheriff's Office - the ones featured in the BBC 1 programme.
 
Mrs D said:
They can’t claim VAT back if they’re not VAT registered any more than you as an individual can claim VAT back on your supermarket shopping bill.
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Indeed. That they're not VAT registered means either their business sells goods or services that are VAT exempt, or that their turnover is less than the threshold (currently £85k).

I had a shop for several years and was not VAT registered for the latter reason. And it really annoyed me when people thought I could claim VAT back. And incidentally, although I knew which goods and services incurred VAT, I still expected to be informed whether a quote included VAT or not. All you need to do is add the words "plus VAT" to your letter, email, or verbal quote.
 
danny la rouge said:
Indeed. That they're not VAT registered means either their business sells goods or services that are VAT exempt, or that their turnover is less than the threshold (currently £85k).

I had a shop for several years and was not VAT registered for the latter reason. And it really annoyed me when people thought I could claim VAT back. And incidentally, although I knew which goods and services incurred VAT, I still expected to be informed whether a quote included VAT or not. All you need to do is add the words "plus VAT" to your letter, email, or verbal quote.
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And if there was no mention of VAT, would you ask? I know I would. I don't think there's an adult in the land that doesn't know that VAT is payable on gazillions of things. The need for clarity works both ways, as it does in reaching any agreement; if you don't want to check the details you live with the consequences.
 
AnnaKarpik said:
And if there was no mention of VAT, would you ask? I know I would. I don't think there's an adult in the land that doesn't know that VAT is payable on gazillions of things. The need for clarity works both ways, as it does in reaching any agreement; if you don't want to check the details you live with the consequences.
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If someone came and quoted me for new windows and said it would cost five grand, I wouldn’t be impressed when the work was finished if they suddenly hiked it to six grand including VAT. Why not just say six to begin with? It seems underhanded to say the lower price. Just tell me what I’ll actually be paying.
 
Magnus McGinty said:
If someone came and quoted me for new windows and said it would cost five grand, I wouldn’t be impressed when the work was finished if they suddenly hiked it to six grand including VAT. Why not just say six to begin with? It seems underhanded to say the lower price. Just tell me what I’ll actually be paying.
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The government could easily change the VAT rate between the quote and completion. So the 6k might be wrong. That’s why they should say plus VAT.
 
Mrs D said:
The government could easily change the VAT rate between the quote and completion.
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So what? To make a difference the govt would have to change the rate of VAT between the contractor giving the quote and them buying the windows. And then surely all they’d have to do is explain, or re-quote or whatever.
 
Mrs D said:
The government could easily change the VAT rate between the quote and completion. So the 6k might be wrong. That’s why they should say plus VAT.
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The change from 17.5% to 20% wasn't overnight. Everyone knew it was coming for a long time. It's unlikely there'd be a snap change which would catch anyone unawares.
 
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