If a company providing a service is NOT VAT registered can VAT still be charged?

[seabug]

My Mum (aged 78) rents out a small property in Hampshire. She rents it out via a letting agent - the income she receives is effectively her pension. I have noted that the letting agent she uses charges VAT on all services and fees. I recently noted that she was being charged for VAT by the agent for a service provided by a company who are NOT registered for VAT. For example the agency has charged her for resetting the valves on the flat's gas boiler. The company that re-set the valves is not registered for VAT, however the invoice sent to my Mother by the letting agent includes VAT.

Is this normal? Is this fair? It seems to me that the letting agent would be gaining if they charged the Landlord VAT, but were not being charged it by the service providers.

I know nothing about VAT and am just trying to protect an OAP.

[hopelesslydevoted]

Yes, if you are a VAT registered business you have to charge VAT on services provided - regardless of whether or not beneficiary is VAT registered. same way as VAt is charged on clothes, food & drink etc (you just dont necessarily see it broken down on price tag).

The problem here is that if the company doing the repair had charged your mum directly (as they arent registered) VAT would not be charged. The letting agent is obviously taking a cut & as is VAT registered has to charge it on total cost to your mum. The letting agent doesnt benefit from the VAT part as this is paid in full to HMRC. Your mum however has had a double hit & would be better dealing with repairs herself!

[jpkeates]

The agent is right.

If a company is VAT registered it has to charge VAT on its invoices (some companies have a VAT company version and a non-VAT company to work round the issue).
What it can't do is recover the input VAT in this case, so the VAT they will pay is all of the 20% VAT that they charge - they aren't any better off as a result.

Essentially your mother is buying the valve resetting from the agent (who, in turn, buys the service from someone else.)

Obviously it's a bit of a pain, and, if the circumstances were different it might be an argument for not doing things via an agent if possible.
The VAT is allowable as an expense against income tax, so HMRC don't win everything.

[seabug]

Thanks for your replies.

I understand the situation now - re VAT registered companies.

Is this still the case when the agent is not registered - they have no VAT registration number and have left it blank on all her invoices. Yet they are charging her (my Mum) VAT for their services (Management Fees) plus the services of others (re-setting gad valves). Neither companies are VAT registered - and obviously neither is my Mum. (I am worried they are just taking the VAT and keeping it).

[jjlandlord]

They should treat work done by contractors who were instructed on behalf of your mum as disbursements and thus they should not charge VAT on top but rather pass on the amount invoiced by the contractor (which may already include VAT if the contractor is VAT-registered).

Ask them why they don't do that.

If they are not VAT-registered then they cannot obviously charge VAT at all, and in fact I believe that charging "VAT" will then be an offence.

[jpkeates]

A VAT invoice has to have the VAT registration number of the seller to be a valid invoice (unless it's a special "modified" version which can't apply here).
It can't be blank.

If the agent is not VAT registered, charging VAT is a) a fraud and b) going to get them into a lot of trouble.

[Goobs27]

We are VAT registered but the inventory clerk we use is not. We have never charged VAT on his invoices and our accountant has signed this practice off for years. Apparently it would be different if we marked up the invoices but as we don't there is not an issue. I hope this is correct as if its not I will owe thousands....

[hopelesslydevoted]

Sorry I thought the agent was VAT registered, hence additional charge to you. If they are VAT registered as said before they must provide VAT reg. on invoices. Maybe check with HMRC National helpline to see if they can check if company is VAT registered. Telephone: 0300 200 3300. If not they can maybe take over from you in the investigation!

[jpkeates]

If you are simply passing the invoices on and the inventory clerk is paid directly, that sounds fine.
As a rule, if you are VAT registered all of your own invoices have to be VAT invoices.

[Kay Powell]

My Mum (aged 78) rents out a small property in Hampshire. She rents it out via a letting agent - the income she receives is effectively her pension. I have noted that the letting agent she uses charges VAT on all services and fees. I recently noted that she was being charged for VAT by the agent for a service provided by a company who are NOT registered for VAT. For example the agency has charged her for resetting the valves on the flat's gas boiler. The company that re-set the valves is not registered for VAT, however the invoice sent to my Mother by the letting agent includes VAT.

Is this normal? Is this fair? It seems to me that the letting agent would be gaining if they charged the Landlord VAT, but were not being charged it by the service providers.

I know nothing about VAT and am just trying to protect an OAP.

If neither the letting agent nor the gas fitter are VAT registered, then this is fraud by the letting agent, pure and simple.

[jjlandlord]

We are VAT registered but the inventory clerk we use is not. We have never charged VAT on his invoices and our accountant has signed this practice off for years. Apparently it would be different if we marked up the invoices but as we don't there is not an issue. I hope this is correct as if its not I will owe thousands....

Yes it's correct. As mentioned above these are disbursements.

You pass on the invoice including any VAT.

If you add VAT yourselves then you should pass on the invoice minus any VAT (which you will claim back).