VAT Flat Rate Scheme Problem

Discussion in 'Accounts & Finance' started by JPMiddleton, Jul 26, 2016.

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  1. JPMiddleton

    JPMiddleton UKBF Regular Free Member

    276 35
    Hello there!

    We're a online trader and we currently collect and pay VAT using the flat rate scheme.

    We trade almost exclusively to consumers online, and we've had an EU customer check out and contact us for a VAT refund as we state VAT is included in our pricing, as required.

    The issue is that we essentially lose out in a big way, because the products he has purchased we were not able to reclaim VAT on in the first place, due to the way FRS works. So we're essentially providing a discount if we do this, and losing out.

    My question is: do we actually have to do this? Do we have a choice? I've had this question once before for a small order and I gently communicated the FRS to the customer in Spain and she understood and didn't have any problem with our stance, however this is a much larger purchase.
     
    Posted: Jul 26, 2016 By: JPMiddleton Member since: Aug 18, 2011
    #1
  2. StevensOnln1

    StevensOnln1 UKBF Big Shot Free Member

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    The customer can't force you to issue a refund but they'd be less likely to order from you again if you don't.
     
    Posted: Jul 26, 2016 By: StevensOnln1 Member since: Dec 10, 2011
    #2
  3. JPMiddleton

    JPMiddleton UKBF Regular Free Member

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    Hi Steven, the latter part is obviously in my thoughts already. Do you happen to have a link to this anywhere on the HMRC site? I can't find actual guidance anywhere.
     
    Posted: Jul 26, 2016 By: JPMiddleton Member since: Aug 18, 2011
    #3
  4. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

    5,180 928
    If your customer is vat registered in the EU then you can zero rate the sale anyway.

    If not vat registered then you are correct to charge 20% UK vat and include in your invoice amount to the customer.
     
    Posted: Jul 26, 2016 By: UK Contractor Accountant Member since: Sep 18, 2013
    #4
  5. Scalloway

    Scalloway UKBF Legend Free Member

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    Posted: Jul 26, 2016 By: Scalloway Member since: Jun 6, 2010
    #5
  6. TheCyclingProgrammer

    TheCyclingProgrammer UKBF Regular Free Member

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    Isn't OP's issue is that they will still have to pay their flat rate on their zero rated sales?
     
    Posted: Jul 28, 2016 By: TheCyclingProgrammer Member since: Jul 15, 2014
    #6
  7. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

    5,180 928
    I thought the OP's issue was that he has been asked to provide a VAT refund to a customer in the EU, which of course he shouldn't?
     
    Posted: Jul 28, 2016 By: UK Contractor Accountant Member since: Sep 18, 2013
    #7
  8. lesvatadvice

    lesvatadvice UKBF Regular Free Member

    807 126
    The Flat Rate Scheme does not suit a business selling significantly outside the UK. And this question illustrates that. Do consider leaving the FRS if the problem is wider than just a few transactions.
     
    Posted: Jul 28, 2016 By: lesvatadvice Member since: Jul 7, 2011
    #8
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