VAT Refund regulation 38

[technodup]

We've had a nightmare of a (domestic) customer and to get rid of him have offered a discount. He owes £5k and we've offered £2k off.

He's now saying that VAT regulation 38 means essentially that rather than £3k he's only due to pay £2.6k. Is that correct or is he taking the piss? Surely a domestic customer doesn't claim VAT so it's irrelevant to him and £2k is £2k, not £2k + VAT?

It's not one I'll be fighting but just so we know if there's ever a next time.

[mmm-five]

Reduce the offer to £1k due to extra costs of administering his account?

Or make it clear that his £5k bill included VAT, and thus his £2k discount also included VAT!

Only you can say whether it's worth the hassle telling the customer to FRO.

[akirk]

Regulation 38 is how the supplying business is allowed to adjust a previously stated VAT return to account for a discount made after a sale has taken place...

So nothing to do with the customer
nothing to do with determining how much VAT - it simply is the mechanism that allows you to adjust the VAT owed

If your original £5k bill was VAT inclusive then it is fairly clear that £2k discount is £2k VAT inclusive = £1,666.66 + VAT
Clearly it can't be £2k + VAT or you would not be offering him £2k discount, but £2.4k discount.
If your bill was £5k + VAT then a £2k discount would be plus VAT = £3,600 left to pay

There is no way in which a £5k bill with a £2k discount can be made to suddenly only be £2.6k to pay

Personally I would state that quite clearly - £2k offered is inclusive of VAT = £1,666.66 + VAT
If you don't like it - see you in court

Call his bluff.

[Ham_and_Jam]

As akirk has stated, just reiterate that all figures supplied are inclusive of VAT.

The discount you are offering is £2k (£1,666.67 ex vat)

[sgrimshaw]

Personally, I'd make it clear that the discount offered was done to enable a swift resolution to the matter.

That hasn't happened to date, and unless the expected payment of £3k is not received in 5 working days the discount offer will be withdrawn and you will take further steps to recover the £5k

[technodup]

I spoke to our accountant who agreed with everyone here that she's at it and explained how I should set out the invoice with a credit note (or discount) applied before the VAT and ending up with £3k balance. I sent it and mentioned I had checked it out but he came straight back still disagreeing. We've ended up giving him it just to draw a line under it.

It kills me to give in but it's not worth the aggro for £400. Karma will fk him up one day.