Competitor not charging correct VAT – what to do, if anything?

newtothis

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I’ve an interest in a retail business. Recently, a new place opened nearby. I’ve no issue with competition and in fact if there’s a reasonable mix, the more places at a location the better, due to the clustering effect. However, it’s come to my attention that this new place is almost certainly not charging the correct VAT rate on sales, so presumably are just pocketing the amount they should be charging; the price of the product involved is very much set by the market and very much has a “going rate”. The question is: what, if anything, should I do about it?
 

Setanta12

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They will have to make up the shortfall themselves when it comes to an examination by their accountant or by a Tax Auditor so therefore they are likely running at a loss.

But you should post up the industry you're in...to ensure you're not at the wrong rate yourself! Which is admittedly unlikely - most retail businesses are standard rate.
 

Brendan Burgess

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You could ask the VAT office if you are charging the right rate of VAT as it appears that a competitor is charging a different rate?
Brendan
 

newtothis

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How do you know? Are they charging a lower rate? Or none at all?
One of their receipts. It was printed from a POS I'm familiar with, which prints out the VAT rate of the sale as it is recorded (i.e. no possibility the receipt is wrong and its recorded differently elsewhere). Printed rate was 0%, whereas it should have been 13.5%.
 

newtothis

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They may not be VAT registered
Possibly not, but if not they should be. Given their likely rent and the number of people they employ their expected turnover must be well over the threshold.
 
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newtothis

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They will have to make up the shortfall themselves when it comes to an examination by their accountant or by a Tax Auditor so therefore they are likely running at a loss.

But you should post up the industry you're in...to ensure you're not at the wrong rate yourself! Which is admittedly unlikely - most retail businesses are standard rate.
The specific product is a take-away coffee, which should be 13.5% (up from 9% since the start of the year). The company I'm involved in sells products at 0%, 13.5% and 23%. We got written advice from Revenue when we started on a few items, as it can get quite complex. Coffee is not one of those items: it's not credible they don't know the rate it should be. If you recall at the start of the year the price of a coffee made the press as it was increased due to the VAT rate change.
One possibility is that their POS vendor set up the system with the wrong rate: this has happened to us, but we corrected it before using it.
 

newtothis

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You could ask the VAT office if you are charging the right rate of VAT as it appears that a competitor is charging a different rate?
Brendan
A sort of passive-aggressive approach? :D I think they’d know what I was really saying, as it’s well known what the rate should be.

A couple of years ago I noticed one place charging 23% for an item that should have been 13.5%. I let them know by a direct message to their Facebook page. However, they weren’t a competitor: I just felt some sympathy/empathy for the owner. I'm not sure if I'd have said anything to anyone if it had been the other way round (i.e. 13.5% instead of 23%). This is directly affecting a business in which I've an interest, though, apart from the general point about wanting to see a level playing field.

As I see it, I’ve a few options: (1) do nothing (2) tell them (3) tell Revenue (4) get someone else to tell either them or Revenue, (5) something like your suggestion, where Revenue get to hear about it indirectly. Any further ideas or thoughts from anyone on the best option to take?
 

peemac

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I'd be straight up and go over to them and introduce yourself and mention that it was brought to your attention that a zero rate was being applied to coffee on their receipts and that maybe they should check with their accountant that it's being recorded properly at 13.5%

Possibly they are simply offering better value and going for volume. A 12oz cup of coffee has a materials cost of about 30c-35c before staff costs.
If you use it as an incentive to get people in and buy a sandwich or something else, then that can work well.

So I'd very much avoid saying that they are not charging vat based on what a till receipt says
 

Brendan Burgess

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It might be better to drop in and have a chat with the owner. Welcome them to the area.

See how the land lies.

If they are friendly bring up the matter.

I know a couple of businesses that charged the wrong VAT and they nearly went under after a VAT audit. One, at least, got listed as a tax defaulter.

You might have to be a little careful talking about pricing. If you suggested to him that he should increase his prices to the going rate, then he could report you to the Competition Authority.

Brendan
 

newtothis

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It might be better to drop in and have a chat with the owner. Welcome them to the area.
Normally, that's exactly what I'd do, but the owner isn't on-site, at least any time I've passed by.

Also, I'm not sure I'd want to bring it up with them directly, as there's no way of knowing what they might think or do.

By the way, they are charging the going rate (and a bit more on some products): it's just that they seem to be helping themselves to an extra 13.5% margin that nobody else gets.......
 

newtothis

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It is most likely an error. If they wanted to defraud the VAT, they would not show it as 0% on the receipt.
That's a fair point, and one I've already acknowledged as a possibility. It's happened to us when our POS terminal supplier said they'd take care of setting it up if we have them the incormation; of course they managed to get some of the VAT rates wrong. Luckily we spotted it before we went live.

I'm coming around to your suggestion: I will probbaly follow your advice if/when the owner shows up when I'm around.
 

peemac

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I'd be thinking it's an error especially if you check revenue's site and look for vat rate on coffee.

Ground, instant, bean coffee is 0% rated as it's considered a foodstuff.

However once you add a bit of hot water, it's a beverage and 13.5%

And as they are "under pricing" there's no "keeping an extra margin" as they are not charging the vat. Obviously if they are treating it as 0%, the customers win and they are setting themselves up for a hefty unforseen vat bill.

Send them an anonymous note. If it is a genuine error, they'll correct it.
 
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