The perils of failing to ask for a VAT invoice

The perils of failing to ask for a VAT invoice

There was a company that was making a good profit by sourcing desirable consumer items like tablet computers, smartphones, etc. that were in short supply. It was unable to get these products by buying from the suppliers because there was such high demand for them that supplies were limited. Most retailers were only allowing customers to buy two of these products each.

The company was sending its staff to the retailers to buy the items two at a time. Each item generally cost several hundred pounds. Buying two was certainly more than £250.00. What’s so important about £250.00? I’ll tell you in a moment. So, the company’s staff returned with their purchases and the company was able to meet the demands of overseas customers who were unable, at that time, able to buy the products in their home countries.

Are you still with me?

The sale of the items the company had bought was outside the scope of UK VAT because the goods were exported. The company had full evidence of the export so the VAT man was happy that there was no VAT to account for on the sale.

Remember that £250.00 I mentioned earlier? Well, there’s a VAT rule that says that where the amount paid is no more than £250.00 including VAT the retailer can issue a less detailed VAT invoice. Less detailed VAT invoices contain significantly less information than a full VAT invoice. In particular the name and address of the customer is one item that is missing from them. The VAT man noticed that the company had lots of these less detailed VAT invoices where the value of the supply was over the £250.00 limit. The VAT man has assessed the company for the VAT it had claimed against these invoices.

So the moral of this tale? Remember to get full VAT invoices for purchases where you are paying more than £250.00 if you want to be able to recover the VAT on your next VAT return.

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