VAT and no VAT

[dragonfly]

If I have a subcontractor that works for me for say £200 per day, he isn't vat registered so he just invoices me exactly that simple.

No I offer to help him out with a van, instead of him hiring a van (helps me cos he's in a sign written van now), Now if I charge him for a van and fuel at x+vat and y+vat, then he is paying the vat.

But what stops him just knocking x+y off his bill He's better off, and I'm no worse off.

Can this be done?

Dave.

 

[maidofkent]

Dave,

You WILL be worse off, because he won't be paying you the VAT, which you have to pay yourself at the end of the quarter.

If you raise an invoice to anyone, that invoice value is the amount they owe you, and they should pay it in full. If not, they're still a debtor of yours.

MoK

 

[primeaccounts]

I would say strictly speaking this would not be allowed as you would be disguising your supply to him of the van.

I think if you ever got a VAT inspection and HMRC saw his invoices they would ask you where your sales invoice was that was charging him for the van, then ask for output tax on the recharge of the van.

 

[maidofkent]

Yet again, IL've misunderstood what you were asking.

Ignore my post, it won't make any sense!

MoK

 

[uksel]

can he counter his expense by reducing the rate of pay to the contractor and subsidise for the cost of the van, would he be liable for benefit in kind then if you hire the van as a pool vehicle?

 

[dragonfly]

But his discount could be x+y for "Driver Only Discount"??

 

[Kent Accountant]

Are you sure that the sub contractor will be self employed and not classified by HMRC as an employee?

There is an employment status indicator calculator on HMRC, but the link appears to be broken at the moment

 

[David Griffiths]

Are you sure that the sub contractor will be self employed and not classified by HMRC as an employee?

There is an employment status indicator calculator on HMRC, but the link appears to be broken at the moment

It's going to be replaced by a new calculator. It will only have one question

Q Can he breathe?

A If Yes, he is an employee.

Slightly cynical, but the existing one is little better and coveniently ignore court decisions that the Revenue don't like.

 

[Kent Accountant]

It's going to be replaced by a new calculator. It will only have one question

Q Can he breathe?

A If Yes, he is an employee.

Slightly cynical, but the existing one is little better and coveniently ignore court decisions that the Revenue don't like.

Sorry David, you are right but I was in a hurry and my post was too brief. I fully accept that the calculator provides HMRC's opinion and that that is why taxpayers should engage accountants to act for them

I know that many double glazing firms provide vans on exactly the same basis as Dragonfly is proposing, but they tend to do it properly. They account for the VAT correctly and charge the sub contractor the full weekly rent whether or not he works and they don't pay £200 per day - they pay by the job

 

[dragonfly]

We also pay by the job, but I was going for simplicity

 

[CertaxBexley]

This is the same business model as used in the Private Hire industry
You charge van rental + vat, also fuel if you want to include that.
You pay the contractor, usually a % of the job fee.
Its not neccessary for the Contractor to invoice you, you give hiim a weekly print out of his earnings, together with vehicle hire deducted. This forms a 'self invoice' and is accepted by HMRC.
Even if the Contractor is VAT registered you can use the same self invoice principle, allthough on the print out there is a specific wording to use.

Allthough how the Private Hire Industry has got away with Subcontractors on this basis I've no idea, but I would assume HMRC has been through the legal route & failed - I know of Companies with excess of 100 subcontracts 'employed' under these terms.