Flat rate VAT question

[lloyd709]

I'm about to have a website built for £2000 but the designer wants to invoice me twice - now for £1000 and after completion for £1000. I know I can claim the VAT back for transactions over £2000 (I'm flat rate registered) but can I do the same if the transaction is split like this - for what might be considered a service!!

 

[E Storey]

not too sure but....

He could invoice for the full amount but accept a part payment? I think that would solve your issues.

 

[christian_d]

Are you are going to pay £1,000 up front before your site is started?

Bit blunt, but your biggest concern at this point might not be the VAT!

 

[lloyd709]

Are you are going to pay £1,000 up front before your site is started?

Bit blunt, but your biggest concern at this point might not be the VAT!

I know company (very reputable) and they have already built the site for someone else - 99% sure not a problem on that front!

 

[3pic]

I'm about to have a website built for £2000 but the designer wants to invoice me twice - now for £1000 and after completion for £1000. I know I can claim the VAT back for transactions over £2000 (I'm flat rate registered) but can I do the same if the transaction is split like this - for what might be considered a service!!

Notice 733 on the subject :-

Para 15.2 -

If the supply is:​

more than one purchase

​

​

under £2,000 including VAT or

​

​

of services

then no VAT is claimable, as this input tax is already taken into account in the​

calculation of your flat rate percentage.

I'd have thought that web design is a service, not a capital item for VAT purposes and therefore is irrecoverable, regardless of whether you split the invoice or not.

​

 

[lloyd709]

Notice 733 on the subject :-

Para 15.2 -

If the supply is:​

more than one purchase

​

​

under £2,000 including VAT or

​

​

of services

then no VAT is claimable, as this input tax is already taken into account in the​

calculation of your flat rate percentage.

I'd have thought that web design is a service, not a capital item for VAT purposes and therefore is irrecoverable, regardless of whether you split the invoice or not.

​

Very interesting. When is software development considered a product or a service? The software is virtually off the shelf - they are basically changing the logo!! If I purchased a piece of software in a box I would be able to claim VAT on it wouldn't I? I know it's the HMRC I would have to convince but I would have thought a web site was as much a capital item as any other - just because you can't pick it up doesn't mean you haven't paid someone to make it - I can't believe it would be considered a service! If I pay someone to build me a warehouse, would that be considered a service - it's exactly the same as building a website (even to the extent of not being able to pick it up!!)

Anyone had any experience of this?

 

[robindunne]

Very interesting. When is software development considered a product or a service? The software is virtually off the shelf - they are basically changing the logo!! If I purchased a piece of software in a box I would be able to claim VAT on it wouldn't I? I know it's the HMRC I would have to convince but I would have thought a web site was as much a capital item as any other - just because you can't pick it up doesn't mean you haven't paid someone to make it - I can't believe it would be considered a service! If I pay someone to build me a warehouse, would that be considered a service - it's exactly the same as building a website (even to the extent of not being able to pick it up!!)

Anyone had any experience of this?

You're right, this is a capital item. It's an asset that will be used for economic gain in the future. The fact there is some labour involved does not change that.

 

[David Griffiths]

Very interesting. When is software development considered a product or a service? The software is virtually off the shelf - they are basically changing the logo!! If I purchased a piece of software in a box I would be able to claim VAT on it wouldn't I? I know it's the HMRC I would have to convince but I would have thought a web site was as much a capital item as any other - just because you can't pick it up doesn't mean you haven't paid someone to make it - I can't believe it would be considered a service! If I pay someone to build me a warehouse, would that be considered a service - it's exactly the same as building a website (even to the extent of not being able to pick it up!!)

Anyone had any experience of this?

The distinction for VAT is not between "products" and services, it is between goods and services.

You can capitalise websites, but you can also capitalise goodwill. It doesn't make either of them "goods" as far as VAT is concerned. And building work is also a service as far as VAT is concerned.

The VAT notice on the Flat Rate Scheme makes it clear that the ability to claim VAT on purchases over £2000 relates to a purchase of "capital goods" i.e. not capital services. The link specifically states that purchase of capital services are NOT inlcuded

 

[3pic]

"If I pay someone to build me a warehouse, would that be considered a service - it's exactly the same as building a website (even to the extent of not being able to pick it up!!)".......

The construction of a warehouse is a service, not a supply of goods for VAT purposes. You aren't buying a warehouse, you are buying the services of a builder to build you one.

Your first post suggested you were paying someone to design and develop a website for you. That is substantially different to your second post where you suiggest you are buying some generic software from PC Worldand having someone tweak the software for you (ie, it's not bespoke software, it is just off-the-shelf software which you're paying someone else to operate/use).

 

[lloyd709]

"If I pay someone to build me a warehouse, would that be considered a service - it's exactly the same as building a website (even to the extent of not being able to pick it up!!)".......

The construction of a warehouse is a service, not a supply of goods for VAT purposes. You aren't buying a warehouse, you are buying the services of a builder to build you one.

What about buying a professional machine that has to be fitted with a tool that stamps your logo. Say in instance A the machine comes directly from stock and instance B the machine is built for you but to a standard design? I'm actually a photographer and some lenses you buy are actually built to order - does this make them a service expense??

 

[lloyd709]

"
Your first post suggested you were paying someone to design and develop a website for you. That is substantially different to your second post where you suiggest you are buying some generic software from PC Worldand having someone tweak the software for you (ie, it's not bespoke software, it is just off-the-shelf software which you're paying someone else to operate/use).

I didn't say anything about design!!! I said have a website 'built' which which entails literally duplicating an existing site for me. 'built' may not have been the most appropriate word now this thread has become more refined - I'm paying them for something they have already built. I will be populating the site with my photos and changing the text and logo etc.