Shopping service headache!

cormie

Hey folks,
I've been offering a shopping and delivery service as part of my business for a number of years now. It's always been a bit of a headache to deal with accountancy wise and I thought I was doing things correct by instruction of my accountant but then I was told to do it a different way. I'm just posting here on the off chance there may be a better way around it.

The scenario is this:

• Customer contacts me as they see I offer a shopping/delivery/assembly service for big name stores as part of my business.
• They will have a shopping list and which can reach into the thousands in some cases.
• They will transfer the cost of the goods via bank transfer.
• I go, do the shopping, make the delivery and assemble where required.
• My own charge is usually far less than the total and rarely, if ever is more. I generally charge based on time so don't know my total until the job is completed.
• They pay me the total and that's it.

I've been told the way to account for this is to put the whole amount down as a sale and have a 23% vat rate on the invoice, including my own services.

That would all be fine, but it doesn't really then truly reflect my sales figures and I'd rather have such funds classed differently. The amount is usually accurate to the cent other than in the case of out of stock items.

The other big problem is that if I'm charging it as a sale, then I shouldn't be giving them the receipt from the store which means that if they have any issues with any of the products, they have to go back through me to resolve it, even though I'm just the one who basically picked the goods up and delivered them with their money. This is definitely something I'd rather avoid.

If anyone knows a better way to deal with such transactions please share! Would really appreciate any feedback

Immy

I would look at it as that you are a disclosed agent and your sale in the amount for the shopping, delivery and assembly service.

cormie

Thanks for the reply, but I'm not sure if you're agreeing with one method in my post, or suggesting another alternative? If you could expand a bit that would be greatly appreciated

jimmii

Looks to me you are essentially acting as a reseller even though you aren't making a profit on the goods. You will need to keep the receipt to reclaim the vat on the goods bought and then issue them a new receipt with the goods and services on. So that they can deal directly with the shop you could get a duplicate receipt at the time so if they do have any issues they can go back themselves instead of going via you.

cormie

Thanks again for the input. Pity to hear this is the only way. The duplicate receipt is a good idea though. As long as the customer doesn't kick up a fuss and demands I bring it back, but I can make it clear any issue with the goods need to be dealt with IKEA direct, although I don't know if consumer law would be on my side there.

Another issue of course is that I need to charge 23% VAT on my service which increases my price. How does this work? Is there a cut off or % of sale the goods must cost in order to have the whole invoice charged at 23%? I know mechanics charge 13.5% on their bills even though they would have paid 23% vat on any parts.

Can I charge separate VAT rates on such an invoice or it has to be all the one I wonder?

adrianw

the cut off is - if 2/3 of the total value relates to the cost of the goods, the whole invoice is charged at 23%

cormie

Thanks for that, what about making two separate invoices? One for the goods at 23% having made no profit on, and then another for service?

So I just put down two sales, one at the same value of the goods and another for the service, and then I can just claim back the 23% vat I'm charging on the sale invoice, with the 23% VAT I paid to purchase the items?

adrianw

If you are buying a flat pack piece of furniture from Ikea, this would be your stock. So if it cost €100 you pay €123 upon purchase.
If you are re-selling it you can charge the (€100 + your service fee) + VAT @23% if the total cost is €150 or less.

If your fee was €100 the furniture would account for 50% so you could charge 23% on the furniture and the reduced rate on the labour.

But you do have to charge VAT on all supplies of goods and labour.

Am I understanding you were charging VAT on the VAT inclusive price of goods bought?

cormie

No, I wasn't charging VAT on top of VAT already paid

I'm just wondering is there a work around to having to charge 23% on my service, such as doing two separate invoices for the customer.

If they order 3,000 inc VAT worth of goods from IKEA, they dump the money in my account, I put it through as a "sale of goods" which I've made no profit on of €3,000 inc VAT. I pay revenue 23% of this sale, but then claim it back with the business expense of the "goods" receipt from IKEA. So although I've made a sale, I'm not making any profit on this and just breaking even.

I then issue the customer a separate invoice for the supply of service and just do this as any of my regular removal/transport jobs.

My fee is typically a lot less than 50% of the goods value, it's usually more along the lines of 10-20%!

adrianw

If you're fee is 10-20%, then yes.

You charge €2,439 +23% = €3,000 for the goods
and
the reduced rate on the labour.

cormie

Hey there,
Thanks a lot for your help both here, and for taking the time to PM me on this.


So if for example:

A) Customer wants me to do their IKEA shopping and delivery, and the goods they want come to a total of 3,000eur inc VAT from IKEA and I quote €200 for my fee including VAT for the job, so they know the total cost to them is €3,200.

My invoice should be €3,200 total including VAT and I can get a duplicate receipt of goods to give to them should they have any issues with items and make it clear that any issues with goods need to be dealt with direct with the store and not me.

So the €3,000 goods is at 23% and my fee can be €176.21 + 13.5% VAT (€200 total)?


Customer wants €50 worth of goods, my fee is €100, customer knows they won't spend more than €150.

My invoice can be €132.16 + 13.5% VAT (€150 total), so where I'd usually owe revenue €11.89 from a service fee of €100 total, I now owe them €17.84 as I'm charging VAT on goods at €13.5% as my service fee is 2/3 the total? €9.35 is the VAT I can reclaim from the IKEA goods, so I'm charging €17.84 VAT, but can reclaim €9.35 of this, meaning I'm only paying €8.49 on my €100 service fee in VAT and not €11.89?

Is that correct? I thought I had to pay 23% on my service fee too and the questions was, if this is the case, can I issue two separate invoices, one for a non profit "sale" reselling the goods I bought, so charging 23% on the sale of €3000, claiming back 23% from the goods purchase of €3000 and from this invoice, appear to make no profit, but then issue the customer a second invoice for service alone where I charge 13.5% vat on whatever the actual service fee on this job was, so I'm never stuck paying 23% vat on my service fee?

adrianw

Hi Cormie,

there are a lot of services being provided all which carry different vat rates.

The goods and the delivery of goods are chargeable at 23%
The assembly of these goods would be chargeable at the reduced rate of 13.5% provided the goods & delivery element do not exceed 2/3 of the total non VAT inclusive value.

If they do everything is chargeable at 23%.

Either way the goods and delivery element will always be charged at 23% it is only the labour element which is subject to change.

I do not think there is any way of having your service fee chargeable at the reduced rate given the labour element is only 10%-20%.

pedroeibar1

Don't get bogged down in VAT rates, see the bigger picture. I would not be too happy with that model for a couple of reasons. Firstly the credit risk one – what happens if you arrive with the product, assemble it and then payment bounces? OK if you are dealing with family/neighbours/friends, it’s less likely to happen, but growing your business will increase that risk considerably. Also as your business grows it will strain your working capital. Secondly, why bother complicating your business with extra book-keeping? Why not get the customer to pay the supplier direct, you collect/deliver/assemble and simply charge for what you do?

cormie

Thanks again for the replies

adrianw wrote: »

I do not think there is any way of having your service fee chargeable at the reduced rate given the labour element is only 10%-20%.

Would it not be possible to just provide the customer an invoice for the 23% items separate though, and then just a separate invoice for the 13.5% items, so I can keep my prices more competitive by not charging the higher VAT rate on them?

pedroeibar1 wrote: »

Don't get bogged down in VAT rates, see the bigger picture. I would not be too happy with that model for a couple of reasons. Firstly the credit risk one – what happens if you arrive with the product, assemble it and then payment bounces? OK if you are dealing with family/neighbours/friends, it’s less likely to happen, but growing your business will increase that risk considerably. Also as your business grows it will strain your working capital. Secondly, why bother complicating your business with extra book-keeping? Why not get the customer to pay the supplier direct, you collect/deliver/assemble and simply charge for what you do?

I always take payment before purchasing the items via bank transfer only so always know the funds are available before purchasing the items, or require cash payment on delivery. Unfortunately, IKEA, the main store customers want me to do this service for, are very difficult to deal with and the ONLY way to pay them is to be there in person, they don't take card payments over the phone, they don't reserve items, they don't have any online order system, you have to go there, pick all the items, pay immediately and take them away immediately.

There's no big risks with me doing this service thankfully.

jimmii

I think you are able to charge them separately on the revenue site they give this example which involved the supply of goods and then the service of fitting them which seems quite closer to what you are doing:

revenue.ie wrote:

A car repair service is provided at the same time as the fitting of a set of tyres for a single consideration. As the supply of car tyres does not normally form part of a routine car service, the repair service and the supply of tyres would be regarded as a multiple supply. Both supplies are physically and economically dissociable from each other. In these circumstances the consideration should be apportioned so that the service is taxed at the reduced rate and the tyres at the standard rate.

link

Probably best to call revenue to be sure.

cormie

Aha, that could be something to go on for sure. I wonder does it depend on the cost of tyres vs the cost of service though as mentioned above? I think I'll call revenue and try get clarification on it anyway. As long as I can get something in writing from them.

All I want is the least hassle when dealing with these jobs and to ideally not have to increase my rates due to the higher VAT rate.

jimmii

cormie wrote: »

Aha, that could be something to go on for sure. I wonder does it depend on the cost of tyres vs the cost of service though as mentioned above? I think I'll call revenue and try get clarification on it anyway. As long as I can get something in writing from them.

All I want is the least hassle when dealing with these jobs and to ideally not have to increase my rates due to the higher VAT rate.

It doesn't reference it I don't see the % would make a difference. What matters appears to be is there a clear separation in the service and the goods which I think in your case there is if furniture is being put together by someone I don't think it is assumed that they delivered it as well. I guess it all really depends on how revenue see that relationship they may see that it is assumed and that they are in fact one transaction instead of two.

cormie

Sorry, just to clarify, my main service is the shopping and delivery of goods, assembly is not always requested by my customers so in most cases, it's just doing the shopping for people and delivering so they don't have to go to the store themselves. But it should be clearly evident that I'm not purchasing these goods to sell on for a profit, and I never make any profit on the goods anyway. The customer is basically saying, I want you to go pick me up a sofa in a shop and deliver it, here's the money for the sofa and I'll pay you for the delivery when you drop it off to me.

jimmii

cormie wrote: »

Sorry, just to clarify, my main service is the shopping and delivery of goods, assembly is not always requested by my customers so in most cases, it's just doing the shopping for people and delivering so they don't have to go to the store themselves. But it should be clearly evident that I'm not purchasing these goods to sell on for a profit, and I never make any profit on the goods anyway. The customer is basically saying, I want you to go pick me up a sofa in a shop and deliver it, here's the money for the sofa and I'll pay you for the delivery when you drop it off to me.

Yeh it just depends on whether it is considered two different things or not given the example with the garage I don't see why it wouldn't be considered the same but you never know might be one of those quirks of the system type thing! The only people are going to know for sure are going to be Revenue.

Immy

I would accountant for you business in the following way:

Buy goods on buyers behalf, give them all receipts and any money that may be left over from cash they advanced you to buy goods. You could give them a bill of costs if you wanted.

Charge them for the service of shopping, assembly and delivery and add VAT accordingly

I would not charge them or supply them with an invoice for the costs of the goods. I don't think the costs of the goods should ever hit your profit and loss account. It is not a cost or a sale to you.

In my oinion you are not supplying goods. Your customers are telling you what to buy and where to buy it from. You are not buying goods for resale you are buying them to provide a service.

All receipts should go to customers, so like you said they can deal with returns or faults, as they didn't buy from you they bought from the shop you just did it for them.