# New VAT Rate for Hospitality - do the reductions get passed to consumer?



## madcatwoman (16 May 2011)

Hi,

Apologies if this is in the wrong section...

The VAT rate for aspects of the hospitality industry are being reduced on July 1st from 13.5% to 9%.

I would post the URL but am not permitted due to lack of postage, so it can be read on the Revenue.ie site under Taxes and Duties> Value Added Tax> Current & Historic Rates of VAT > Rate change - Jobs Initiative 2011.


Was wondering if there is any obligation on suppliers to pass on this charge legally?

My wedding is booked for later in the year but the prices I agreed to were inclusive of the 13.5% VAT. I asked the hotel and they said due to the rising cost of doing business blah blah that they would be absorbing this and not passing it on as a price reduction (and would just change the VAT rate in the terms and conditions). So effectively, the food portion of the package has increased by 4.5% in what I feel is a most stealthy way.

Any advice much appreciated.


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## T McGibney (16 May 2011)

madcatwoman said:


> Hi,
> 
> Was wondering if there is any obligation on suppliers to pass on this charge legally?



Nope, unless your contract with the hotel specified otherwise.


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## DB74 (16 May 2011)

AFAIK there is no obligation on the supplier to pass the VAT reduction on to the end customer.

In fact, when the 21% VAT rate was reduced to 20%, a key element of the reversal of the reduction back to the 21% rate was that most shops etc weren't passing on the VAT reduction to their customers.

What is the exact wording on the agreement that you signed?


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## QED (16 May 2011)

DB74 said:


> What is the exact wording on the agreement that you signed?


 
The Agreement should specify the Net (before VAT) Cost. This is the amount you agreed to pay so you should see a reduced overall bill.

I remember that our Agreement had a clause to highlight the fact that if the VAT rate changed it would be us (not the hotel) that would be liable for the difference. This should work in your favour now. Make sure you carefully read any agreement that you have signed.

You could also contact the Consumers' Association of Ireland for advice. I think you are definitely entitled to the reduced cost.


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## madcatwoman (16 May 2011)

Many thanks to all for the input. 

I've checked my documentation from the hotel and there's no clause regarding the VAT reduction being absorbed by them, it merely says that prices are inclusive of Govt VAT.

I've sent a mail to the Consumer Association, thanks for that idea!


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## minion (21 May 2011)

If you have a price now, but dont consume the service until after the new rate comes in, you will have a reduced cost.
If the price you have now includes VAT then that rate is at the higher rate.


Heres what to do.
Ask for a VAT invoice NOW.  Then they have to include VAT at todays rate.  They cannot assume a future VAT rate today.  This will show something like 
Cost €1000
Vat @ 13.5% = €135
Total €1135

So the vendor gets €1000 and revenue get the €135

When it comes to paying for the service get another VAT invoice.
They should not be able to change the €100 they are charging you.
So at the new VAT rate you get
Cost €1000
Vat @ 9% = €90
Total €1090

Now the vendor still gets €1000 but revenue get the €90.

If the vendor keeps the difference they are charging you a different price and breaking your contract.

If you get VAT invoices now and when you pay for the service, they cannot  possibly pocket the difference on you.

OP, If the hotel want to play dirty with you, then I suggest you tell them they have broken the contract and start looking at other venues.  Dont need to cancel your original venue until you get a good enough deal elsewhere.


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## T McGibney (21 May 2011)

minion said:


> Heres what to do.
> Ask for a VAT invoice NOW.  Then they have to include VAT at todays rate.  They cannot assume a future VAT rate today.  This will show something like
> Cost €1000
> Vat @ 13.5% = €135
> ...



Very strange advice, which should be treated with extreme caution. Issuing VAT invoices twice in relation to a single transaction would represent, in my opinion, a very serious breach of VAT laws.


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## Gekko (22 May 2011)

I've spoken with a number of service providers in this space.

Some intend passing on the VAT reduction while others do not.

The overriding attitude is that they've taken a horrendous amount of pain over the last few years and their prices have been adjusted accordingly.  The costs associated with updating menus and websites alone would be prohibitive.

In the OP's case, I don't believe she's any basis for seeking a price reduction.  Having said that, if you don't ask you don't get.


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## minion (22 May 2011)

T McGibney said:


> Very strange advice, which should be treated with extreme caution. Issuing VAT invoices twice in relation to a single transaction would represent, in my opinion, a very serious breach of VAT laws.



Rubbish.  Just like your last post in this thread.
Its not uncommon to get VAT invoices more than once.  Its also not uncommon to get a VAT invoice and then a receipt with the vat on it either.
Please shows us the "VAT laws" that are breached?

And if they are worried, because of your post, then all they need to do is get their quote to state the VAT rate.  eg €1135 inc VAT @ 13.5%


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## minion (22 May 2011)

Gekko said:


> I've spoken with a number of service providers in this space.
> 
> Some intend passing on the VAT reduction while others do not.
> 
> ...




Of course she does.
The vendor cannot pocket the difference in the vat rates.
What they can do is increase what they are charging for the service.  This has nothing to do with the VAT rate change.  But thats a breach of contract if she has already agreed the price.
If the price is agreed today then they must charge todays vat rate.  They cannot assume a future vat rate.

OP, do what I suggested an get the VAT rate on the quote or invoice.
They will then have no choice.  Similarly, if the VAT rate increased, then they would have to charge you the increased VAT amount.

You can bet though that anyone in the hospitality industry will try to twist this, just to wear you down, but if you think about it there is only one way it can work.  All you have to do is take them to the small claims court, or wherever a small price disagreement goes to, even just a solicitors letter, and you cant lose if you have the VAT rate stated on the invoice for the price you have agreed before the VAT change.


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## deadlyduck (22 May 2011)

The fact that the OP agreed an 'all-in price' somewhat complicates the matter- is there/ isn't there a contracted price?
However, I would suggest that the OP should insist that the VAT rate which applies is the one in force as at the date of the wedding, not the one at the date of the agreement to host the wedding.  

I disagree with the hotels stance- the hotel was agreeable to an all-in price of €X, including VAT at 13.5%. Presumably, the hotel was making a profit at X net of VAT. The hotel can still charge X but only add on the lower VAT rate if that is in force when the wedding is hosted. 

I'd 'bet the farm' that if the recent budget had led to an increase in the VAT rate that the hotel would have insisted on the all-in price being increased accordingly. Equally, I can't really see how the rising cost of business is a strong argument-  if we are to believe what we hear, many costs have been reducing/  competitiveness has been improving. Potentially, some of the employees of the hotel are on lower pay and the rate of employer's PRSI will be halved shortly. Equally, the negative feelings which the OP might have towards the hotel (if the owners insist on no change to the costs) should be taken into account- bad press and all that.

I wouldn't agree with the advice to get 2 invoices- it seems to be adding an unnecessary layer of bureaucracy to the process. In any event, surely an invoice should only be issued when the services have been rendered rather than in advance of same.


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## Gekko (22 May 2011)

minion said:


> Rubbish. Just like your last post in this thread.
> Its not uncommon to get VAT invoices more than once. Its also not uncommon to get a VAT invoice and then a receipt with the vat on it either.
> Please shows us the "VAT laws" that are breached?
> 
> And if they are worried, because of your post, then all they need to do is get their quote to state the VAT rate. eg €1135 inc VAT @ 13.5%


 
Minion, you do not appear to know what you're talking about.

It's an offence to issue multiple VAT invoices.  It's a breach of the VAT acts.

I know that when I booked my own wedding, there was no mention of VAT whatsoever (i.e. the price was the price).  That would be normal in pretty much all circumstances for sales to non VAT registered private individuals.


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## minion (22 May 2011)

Gekko said:


> Minion, you do not appear to know what you're talking about.
> 
> It's an offence to issue multiple VAT invoices.  It's a breach of the VAT acts.
> 
> I know that when I booked my own wedding, there was no mention of VAT whatsoever (i.e. the price was the price).  That would be normal in pretty much all circumstances for sales to non VAT registered private individuals.




This i not a B2B transaction.
Get a receipt/quote that shows the VAT rate.  That is not an offence.
You are allowed to do this.
When there is no mention of VAT then its VAT inclusive.  If it says ex VAT then its excluding VAT.

Its the simplest most straightforward thing in the world to ask a business to include the vat rate on their quote.  If you dont do this then prepare to get bent over by the hotels come payment day.

At the end of the day, its up to the OP to protect themselves from getting ripped off.  If they dont want to take simple steps to protect themselves then they know what to expect.


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## Gekko (22 May 2011)

minion said:


> Heres what to do.
> Ask for a VAT invoice NOW.When it comes to paying for the service get another VAT invoice


 


T McGibney said:


> Issuing VAT invoices twice in relation to a single transaction would represent, in my opinion, a very serious breach of VAT laws.


 


minion said:


> Its not uncommon to get VAT invoices more than once.


 


Gekko said:


> Minion, you do not appear to know what you're talking about.
> 
> It's an offence to issue multiple VAT invoices.


 


minion said:


> This i not a B2B transaction.
> Get a receipt/quote that shows the VAT rate. That is not an offence.
> You are allowed to do this.


 
Minion, with all due respect your advice is all over the place. The points raised by T McGibney and myself are entirely valid. You're using loose language and referring to VAT invoices, quotes and receipts as if they're interchangeable terms. In one of the above posts you're advocating the issuing of multiple VAT invoices but then subsequent to that you "back up the truck".


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## minion (22 May 2011)

Gekko said:


> Minion, with all due respect your advice is all over the place. The points raised by T McGibney and myself are entirely valid. You're using loose language and referring to VAT invoices, quotes and receipts as if they're interchangeable terms. In one of the above posts you're advocating the issuing of multiple VAT invoices but then subsequent to that you "back up the truck".




I think you're making something very complicated here where there is no need for complication.

Cut it whatever way you want.  Get an invoice, a quote, a receipt etc.  You can have the VAT rate and amount on them all if you ask for it.

And just for yourselves.
INVOICE : 
"An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. The buyer has a maximum amount of days to pay these goods and are sometimes offered a discount if paid before."

If the rate of VAT changes between issuing of the invoice and when the service is delivered or paid for a new invoice must be issued.  You cant charge somebody a VAT rate that no longer is applicable.

So lets simplify it for you even more Gekko.
Get the hotel to itemize your bill for you.  Whatever way you want to do it. Include the cost, the vat rate, the vat charged, etc
When you are paying ask them to itemize it again.  If they put the new VAT rate on it then you save the difference.  If they dont it will be obvious that they have overcharged you.

It is impossible for the hotel to overcharge you with the new rate, once you get them to write down these amounts you have agreed before the VAT rate changes.  

By all means, listen to the people saying that the hotel can take the VAT difference off you if you want.  You might as well light a cigar with your money.

And i'm still waiting for someone to provide a link to a these laws that say an invoice cannot be reissued.

So to sum up.  Its very simple for the OP to protect themselves from overcharging here.  It just involves getting the VAT rate on paper.  Dont be telling them they cannot do that.


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## Olympian (23 May 2011)

minion said:


> And just for yourselves.
> INVOICE :
> "An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. The buyer has a maximum amount of days to pay these goods and are sometimes offered a discount if paid before."



Wikipedia isn't an authoritative source for Irish VAT regulations.


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## DB74 (23 May 2011)

The hotel are not obliged to issue a VAT invoice unless the OP is entitled to reclaim the VAT on that invoice

[broken link removed]

3. Who must issue a VAT Invoice?

3.1	An accountable person (that is, a person registered for VAT) who supplies goods or services (except construction services supplied under a relevant contract. See Paragraph 3.3). is obliged to issue a VAT invoice where the supply is made to any of the following:

- another taxable person,
- a Government Department,
- a local authority,
- a body established by statute,
- a person who caries on an activity which is exempt from VAT,
- a person, who is not an individual, in another EU Member State,
- a person in another EU Member State where a reverse charge applies, that is, where the VAT is not accountable for by the supplier in Ireland but is accountable for by the customer in the other EU Member State, and
- a person in another EU Member State under the distance selling rules. Distance selling occurs when a supplier in one EU Member State sells goods to a person in another EU Member State who is not registered for VAT and the supplier is responsible for the delivery of the goods. It includes mail order sales and phone or tele-sales but does not include sales of new means of transport or excisable goods. (Information Leaflet relating to the treatment of distance sales.)

3.2	It should be noted that an accountable person is required, if requested in writing, to issue a VAT invoice in respect of a transaction with an unregistered person in the State who is entitled to a repayment of the VAT. *An accountable person is not required to issue a VAT invoice to an unregistered person otherwise, but may do so if he or she so wishes.*


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## minion (23 May 2011)

Simple question.
Simple solution.
Yet some people insist on beating about the bush and not even attempt to answer the question for the OP.  Typical of accountants, solicitors etc really.  Complicate things far beyond how complicated issues need to be.
OP, im sure you can figure out how to help yourself from this thread.  Theres really nothing to it.


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## Ceepee (23 May 2011)

I am following this thread with interest!  I am not an accountant, but I worked for many years in hotel sales.

In my experience, it was standard procedure to issue a pro-forma invoice when an order/sale was made for conferences or for banqueting.  When a wedding couple made a provisional wedding booking, usually 12-24 months prior to the actual event, I would have drafted up for them a pro-forma invoice based on the details they provided, so that they would have an indication of price well in advance of the wedding.  This procedure was also followed for conferences and other banqueting functions that would be booked by corporate clients.  Corporate bookers in particular would want proformas issued every time any substantial changes in the booking were made.  Obviously the 'final' invoice - the one that detailed the actual service provided on the day - was the one that was payable.  Is this practice, of issuing a pro-forma invoice prior to the event and a final invoice after, not permitted?  

On recent hotel stays, I've noticed that the bills presented on check-out and their corresponding receipts DO indicate the VAT rates, as different rates attach to different products/services consumed (room hire, food, accommodation, beverage, etc).


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## DB74 (24 May 2011)

minion said:


> Simple question.
> Simple solution.
> Yet some people insist on beating about the bush and not even attempt to answer the question for the OP.  Typical of accountants, solicitors etc really.  Complicate things far beyond how complicated issues need to be.
> OP, im sure you can figure out how to help yourself from this thread.  Theres really nothing to it.




If you read the OP's original post, there is one question in it, which is

"Was wondering if there is any obligation on suppliers to pass on this charge legally?"

The answer to this question is no

Your suggestion to get an invoice before the event and another after the event and sue them for any changes is without legal standing because, as I quoted from revenue website, the hotel is under no legal obligation to issue a VAT invoice AT ALL EVER, either before, during, or after the event.

I prefer to offer an opinion based on the tax acts and contract law as opposed to just what the ordinary man on the street thinks the OP should do to solve the problem


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## The_Hustler (25 May 2011)

_"Where,  after the making of an agreement for the supply of goods or services  and before the date on which ...... any tax in respect of the  transaction falls due, there is a change in the amount of tax chargeable  on the supply in question, then, in the absence of agreement to the  contrary, there shall be added to or deducted from the total amount of  the consideration and any tax stated separately under the agreement an  amount equal to the amount of the change in the tax chargeable."_ 

The  above is VAT legislation. Tax is due when the services are supplied as  there is no requirement to invoice you in this case as you are a private  individual (even if an invoice is sent). So unless you agree not to, an  adjustment should be made for the rate change.

The VAT info leaflet from when the rate returned from 21.5% to 21% (http://www.revenue.ie/en/tax/vat/leaflets/vat-rate-change.html) seems to have some relevant information also:

_Which VAT rate must the trader apply ?-__ general rule_

2.1  The general position is that traders accounting for VAT on the invoice  basis should apply the rate of VAT in force at the time they issue or  are obliged to issue a VAT invoice, whichever is the earlier. In the  case of transactions with* private individuals*, a trader should apply the* rate in force at the time of the supply*.

_Invoices_

4.3* VAT liability* in respect of goods or services supplied to an* unregistered person* is normally determined by the* date of supply* and* not the date of issue of the invoice, if any*.  Goods or services which are actually supplied to unregistered persons  prior to 1 January 2010 are taxable at the 21.5% rate even though they  may be invoiced on or after 1 January.

_Contracts existing on 1 January 2010_

7.1  Where a contract to supply goods or services is entered into before 1  January 2010 and the contract is not completed until after that date,  then* the agreed VAT inclusive price** may be subject to an appropriate adjustment on account of the change in the VAT rate*.


I  must caveat the above to say that I do not have experience of VAT in my  work, just in the tax institute exams.

An extract from our Part 3 manual says:

_"Adjustment and recovery of consideration_

What happens to the price stated in contracts if there is a change in VAT rate? 

Section  35(1A) VATA72 provides that where a contract (for goods or services) is  made for a price plus current VAT, or for a price including current  VAT, and before the date on which the VAT becomes due there is a change  in the rate of VAT then, in the absence of an agreement to the contrary,* the change in rate is added to or deducted from the price*. 

To  avoid any cost as a result of this, it may be preferable for the  contract to have a fixed price exclusive of VAT and a VAT clause  specifying the VAT payable as being that applicable when the supply is  made or liability arises."

Apologies for the lengthy post.


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## The_Hustler (26 May 2011)

In addition, some of the above paragraphs are in the new VAT info leaflet http://www.revenue.ie/en/tax/vat/rates/rate-changes-jobs-initiative.html

*What impact will the rate change have on traders?*
    A trader supplying goods and services to private individuals should always apply the VAT rate in force at the time of supply.

*What is the position with contracts existing on 1 July 2011?*
 Where a contract to supply goods or services is entered into before 1  July 2011, and the contract is not completed until after that date, the  agreed VAT inclusive price may be subject to an appropriate adjustment  due to the change in the VAT rate, unless there is agreement to the  contrary between the contracting parties.


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## DB74 (26 May 2011)

I don't think there is any doubt that the hotel will be applying the 9% VAT rate at the time of supply

The difference is that the overall agreed price (which originally included VAT @ 13.5%) hasn't changed but now includes VAT @ 9% so the hotel are effectively pocketing the difference.

Whether they are legally entitled to do so is the question

In my opinion, yes they are entitled to do so, as unfair as this practice is.


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## Ceepee (10 Jul 2011)

Any update on this from the OP?


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