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Zero VAT certificate

  • Member
  • 9 posts
  • # 90485

Dear all, I will be very appreciate if you could help me. I am working in a small company. We receive purchase orders from Universities which are claming z- rate for VAT. Some of them send us Z-rate certificate on a separete  from PO sheet and this is acceptable. But some of this send us Zero-VAT Purchase order. ( and no addition Z certificate). Two  years ago we had a VAT inspection and we was told that need to have for every PO separete z-rate certfificate  ( as a Certificate A from notice 701/6 HM customs and execise, however the format could be different). When I ask the Universities to send us separete Z-rate certificate they refer to:

'VAT Notice 701/6, Charity funded equipment for medical, veterinary etc uses, states:
•  We recommend that suppliers obtain a written declaration of eligibility from each customer who claims entitlement to VAT relief.

HMRC internal guidance, V1-9 States, 15.14 Eligibility declarations:

•  There is no legal requirement for the purchaser to provide a certificate or declaration

The University has a system whereby the purchaser orderer can select an option to print the eligibility declaration on its purchase order. All purchase orderers receive mandatory VAT training before being eligible to raise such orders. The training involves full guidance on the applicability of VAT reliefs in certain circumstances as described above. All such purchase orders are subject to certain risk based checks for validity of issue by the Taxation Team.

 Therefore although your HMRC inspector may have said that there must be a separate certificate signed by a person in the department there is no basis for this.

We issue thousands of VAT relief PO's with the statement on them each year and do not have the resources to separately certify and sign individual documents, especially when not required to do so!'

I am quite confused with this situation. Should I or should I not to insist om receiving separete  Z-VAT certificate?  

Many Thanks

Margarita  

  • Member
  • Practice Licence
  • 88 posts
  • # 90845

Rita,
It is good commercial practice for your customer to provide an explanation as to why you should zero rate their supplies. The explanation they give for not doing so is weak, given that their order placers have specific training.
However, you are in a competitive environment as a small player and have to serve two expectant masters, the customer, and HMRC. I would suggest the following.

Write to the head of procurement at each customer university, and ask for an ANNUAL schedule to be prepared of likely zero rated requirements. Product types, but not quantities. This will replace the need for an issue with every PO. If this meets with resistance too, then exercise your right as a VAT registered entity, to standard rate any sale that you feel has not been justified to be treated any differently. HMRC will support your stance of course, and this will then bring the customer to the table in a more conciliatory way. You are not stopping their supply, but you will be focussing them on a problem of their own making that they are not adequately addressing.

Your company will not be out of pocket if it uses VAT bad debt relief as a last resort - HMRC radar is always open to visit these offenders quicker than other traders !

Hope this helps !    

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