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MOT and VAT #

Posted by Karen Waring on January 14, 2011, 11:54 pm
Message modified by board administrator January 17, 2011, 2:54 pm

Okay, this topic appears from time-to-time and generally I think I understand one aspect of it, but maybe not another -

MOT and VAT. We sub-contract MOTS and charge as follows:

MOT (No VAT) and a separate service charge for managing the MOT which is subject to VAT.

My question is can the whole amount be rolled into one and therefore VAT applied to the whole amount?

We would not want to change the way we charge as obviously it is beneficial to the customer but Ian and I are having a (heated!) discussion on the options.

This then brought up the subject of sub-contract work - if a non VAT registered sub-contractor is used and a service element is applied do you add the whole amount together and charge VAT on the total amount, or is it possible to list the two amounts separately and only charge VAT on the service element?

I hope I am making sense.

Re: MOT and VAT

Posted by Steve Nicholas on January 15, 2011, 10:05 am, in reply to "MOT and VAT"
Stephen Nicholas

Hi Karen

I looked into this some years ago when the VAT Office (now HMRC) informed us that if we applied a mark-up to MOT fees then we would have to charge VAT on the difference, not the whole amount.

However, since there is no (easily) reclaimable VAT element in an MOT fee I charge what my sub-contract MOT station charges me and treat it as a disbursement (where you pass a cost on).

My accountant (who is fairly brilliant at his job - thank goodness!) says that this is the best way to treat it so I simply add an MOT fee as a zero-rated addition at the bottom of my invoices and just "pass-on" the MOT charge that I pay.

Customers tend to think this is great as I don't charge extra for an MOT fee - I just charge labour for pre-MOT check, arrangement etc.

However, I recall that this was the subject of a lively discussion on here some time ago and different VAT offices apparently interpreted the regulation differently - not very helpful.

Best check with your accountant if you have any doubts!

Regards,

Steve

Re: MOT and VAT

Posted by aidan on January 15, 2011, 2:37 pm, in reply to "Re: MOT and VAT"
Aidan Birley

Hi

Sub let MOT's should be treated as a disbursement, i.e shown separately on the invoice and charged out at the exact price you pay.

If you mark up the price of sub let MOT to include your management fee, you must charge VAT on the FULL amount, This is Ok but your customer ends up paying needles VAT ( unless able to reclaim VAT )

A disbursement is not limited to MOT's, and can be used for other costs directly incurred on behalf of customer.

These are of course only my understanding and would advise you have a word with your accountant.

cheers Aidan

Re: MOT and VAT

Posted by tony bickers on January 15, 2011, 4:17 pm, in reply to "Re: MOT and VAT"
Tony Bickers

Hi Karen,

Have a read here

http://members5.boardhost.com/ukautotalk2/msg/1165443608.html

Re: MOT and VAT

Posted by sean on January 15, 2011, 7:20 pm, in reply to "Re: MOT and VAT"
Sean Savage

my belief on this subject is you must charge vat on any "profit" made on the mot. i.e mot costs you £30 you charge it out at £45 you must add vat to the £15. another thing,shouldnt this be discussed or moved to a protected forum in case mr tax man doesnt have much to do?

Re: MOT and VAT

Posted by kelly clarke on January 16, 2011, 6:54 pm, in reply to "Re: MOT and VAT"
Kelly Clarke

Before i became an MOT staion i had this sorted by my accountant but a garage up the road didn't and they got clobbered for £6000 the VATman they only went back 2 years and not the 7 they can do.

As it stands if you charge out what you are charged for an MOT no VAT need be added but it has to be shown seperately you can add a pre inspection fee but this is subject to VAT.

If you make a mark up on the MOT then VAT is due on the whole amount, not just the mark up, this is where the other garage went wrong, his accountant didn't know the rules.

With regard to other non VAT registered work you have done as i understand it when you invoice it out as you are VAT registered tehn the whole amount is liable for VAT that is what i do anyway cannot be wrong that way.
Or just not put it through the books and get the 3rd party to invoice direct to customer that is how we deal with paintwork, as our painter is not VAT registered

Kelly

Re: MOT and VAT

Posted by richard cann on January 17, 2011, 7:53 am, in reply to "MOT and VAT"

hi karen
you have to charge the mot out at the same as it costs you, and show it on the invoice or pay vat on the whole amount.we went to appeal because we were paying vat on the difference but not showing the cost of the mot, someone else also appealed and won there case just before us and the case was dropped thankfully.richard

Re: MOT and VAT #

Posted by Steve Norman on January 18, 2011, 7:35 am, in reply to "MOT and VAT #"
Steve Norman - Administrator

Any direct cost you pass on at exactly the same price as your cost to your customer, you can treat as a disbursment, this goes for non vat registered sub contract work too.
If you wish to make a profit, then this is just a labour charge extra, at the normal VAT amount, shown separately.

If you wish to combine the charges then the disbursment rules don't count & you have to charge VAT on the whole amount.

HTH
Regards
Steve

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