So is their VAT on THIS post?

DubTony

I've just been talking to a friend who's just started work with a company that does mailings for medium sized businesses. He's in a management position and part of his brief is to try to provide clients with a more competitive deal but without losing profit.

He tells me that the company charges clients a fixed fee per X number of units posted and adds VAT. He's not sure of the VAT rate (he just started on Monday), but assumes it's the lower rate of 13.5%.

So as we talked about what he's been doing to achieve his goal (getting better deals from suppliers etc.) we discussed the VAT. As his company uses An Post to send everything and there's no VAT on post, I suggested that he might be able to sell the service as a printing / folding & stuffing operation and charge for that and that his company would then do posting for free as long as the client (effectively) bought the stamps. Eventually it occurred to me that it didn't matter as his clients were reclaiming VAT back anyway. (I'd already had 3 pints )

But then I asked the question - if his customers weren't VAT registered and his company is charging VAT after including postage in the price, would they be overcharging the customer and paying too much to Revenue? And if they were to sell the service to unregistered customers, would they be legally allowed to sell it at X price + VAT; plus postage (at 55c each) and so not charging what is effectively VAT on stamps?

Any ideas?

ssbob

DubTony wrote: »

I've just been talking to a friend who's just started work with a company that does mailings for medium sized businesses. He's in a management position and part of his brief is to try to provide clients with a more competitive deal but without losing profit.

He tells me that the company charges clients a fixed fee per X number of units posted and adds VAT. He's not sure of the VAT rate (he just started on Monday), but assumes it's the lower rate of 13.5%.

So as we talked about what he's been doing to achieve his goal (getting better deals from suppliers etc.) we discussed the VAT. As his company uses An Post to send everything and there's no VAT on post, I suggested that he might be able to sell the service as a printing / folding & stuffing operation and charge for that and that his company would then do posting for free as long as the client (effectively) bought the stamps. Eventually it occurred to me that it didn't matter as his clients were reclaiming VAT back anyway. (I'd already had 3 pints )

But then I asked the question - if his customers weren't VAT registered and his company is charging VAT after including postage in the price, would they be overcharging the customer and paying too much to Revenue? And if they were to sell the service to unregistered customers, would they be legally allowed to sell it at X price + VAT; plus postage (at 55c each) and so not charging what is effectively VAT on stamps?

Any ideas?

Hi DubTony,

There are two ways you can treat this,

1. The Cocktail rule, whereby you have more than 1 item on your invoice(sale) with more than 1 VAT rate, you can charge the customer 13.5% on the pick and pack portion and 0% on the post portion therefore not charging VAT on the post.
2. The Two Thirds rule, whereby you have more than 1 item on your invoice with more than 1 VAT rate, and 1 VAT rate ie the 13.5% makes up for more than two thirds of the overall invoice then you are entitled to charge the customer this VAT rate.

In my opinion you should use the two thirds rule where possible as alot of computer systems only allow for 1 VAT rate per invoice and it would be cleaner to do it this way.

Any more questions I would be more than happy to speak to you.

91011

ssbob wrote: »

In my opinion you should use the two thirds rule where possible as alot of computer systems only allow for 1 VAT rate per invoice and it would be cleaner to do it this way.


.

Most accounting packages will allow you charge a carraige fee at the end of the invoice and this can have a different rate applied.

Therefore, you charge the work fee + vat (possibly could be 21%) and change carraige to "postage" with a zero rate.

Mr Clonfadda

Hi Op

There is no reason you couldn't split the invoice for unregistered customers charging the Postage at 0% and Handling fee+Vat. However vat would be at 21% on remaining amount.

Any accounts package designed to work in the Irish market is capable of having multiple VAT rates on the same invoice.

N