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• PRO

  Nick @ NM Garden Services Ltd May 6, 2010 at 11:12am

  You will only be allowed to back claim VAT back on fixed assets that the company still owns at the date of registration. You will not be able to back-claim VAT on materials.
  
  -Nick
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  Pip Howard May 6, 2010 at 11:30am

  My understanding is that you would have to negate the transaction through your books for this to remain legal. The invoices would have to be made out to him or his company. If you photocopy the receipts and ensure the whole thing is recorded to ensure that should an investigation occur all is well for you. However I think for certain the HMRC would take a dim view over what he wants to do, though probably legal it would take some explanation.
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  Benedict Green May 6, 2010 at 3:44pm

  Sounds like a potential risk with zero gain for you. I agree with Pip, you can't claim the recepts against your profit and have someone else claim the VAT, so you would have to negate the transaction.
  I believe NMGS is right about fixed assets only and not materials being claimable.
  Why doesn't he buy direct? Less of a headache for you.
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  David Seller May 6, 2010 at 4:39pm

  Thanks for all of the advice.
  
  I feel a bit uncomfortable with the whole thing but this guy is a new customer who has a huge amount of work planned that i've agreed to undertake. He wouldnt be able to get the trade prices I can get and gave me the cash to purchase the materials so i havent put them through my trade account. I guess i've just acted as a broker for the materials free of charge.
  
  I've just given him a revised seperate invoice for the labour only, as you're right Sue it would affect my turnover figures had i included the materials as well.
  
  Going forward i've told him that i get a better deal on material ordering via my trade account rather than a cash account, however I will not be giving him the invoices as i need to account for them myself. This means I can add on my margin for running around and a contingency for under ordering, which has happened on this job! he likes to haggle over just about everything, but going forward i need to be firm and set out terms and conditions before hand.
  
  p.s the guy is a lottery winner would you beleive it!?
  
  BeGreen said:

  Sounds like a potential risk with zero gain for you. I agree with Pip, you can't claim the recepts against your profit and have someone else claim the VAT, so you would have to negate the transaction.
  I believe NMGS is right about fixed assets only and not materials being claimable.
  Why doesn't he buy direct? Less of a headache for you.
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  Pip Howard May 6, 2010 at 5:03pm

  A friend of mine had an experience similar though more sinister - he was asked for the original receipts and invoices for all plants to a site. The plants had been sourced from various Nurseries. As they were witholding payment, believing he was trying to make a profit on the plants, until he had done this, he duly sent them all off and received payment. He had not charged any commission or percentage for the plants. At end of year processed the payments as he had paid for them all - hmrc choose to look at his accounts that year and the clients had duly submitted all the receipts as well for their business. They went bankrupt the same year. But it was still a huge amount of time and effort to clarify the situation.
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  Bigyin May 6, 2010 at 5:52pm

  If the client intends to use a lot of materials over a period, TP would probably set him up with an account.
• PRO

  Geoffrey King May 6, 2010 at 7:35pm

  At TP anyone can set up a Trade Cash account, with terms set up as per regular credit account> I knows 'cos I used to work for TP, we used set them up, when joe public was getting loads of heavy stuff, to avoid them getting charged the delivery.
  
  The other thing with your invoices, you may have other stuff on them which you may not want him to see.
  
  Bigyin said:

  If the client intends to use a lot of materials over a period, TP would probably set him up with an account.
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  Fenlandphil May 6, 2010 at 8:57pm

  I thought you could claim VAT back on all purchases upon registration but it's nearly twenty four years since I was in that position and my memory isn't that good.
  Tricky situation, I think you have pursued the correct course of action.
• PRO

  Graham Parker May 6, 2010 at 9:19pm

  If the customer has paid cash and you have not put these items through the books then there should be no problem with giving hin the reciepts. If you want to put them through your books then I would advise against giving him the invoices.
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  Bigyin May 6, 2010 at 9:22pm

  For what it's worth, in my opinion, your best course of action by far is to persuade the client to set up his own account. He can then purchase at favourable rates (maybe even better than yours). If he's asked for the invoices to be made out to his company then there's no probs for him or the VAT man and he can be assured that you're not doing any sly marking up as per your initial agreement with him. I can see why you don't want to upset your relationship with him but you have your whole future to think about.