Is VAT Reclaimable?-Invoice by subcontractor but contract held with a firm with 13B

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susandaly

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I currently have a contract with a large multi-national who has provided me with a completed 13B VAT exemption form. I am currently providing VAT & Non-VAT type work with this client. I am now beginning to sub-contractor some of the work to associates. I am VAT registered and so are they. They are providing vat services on my behalf to this multi-national. If they charge me VAT, can I reclaim it back? Most of my work is with clients that have 13B vat exemptions so I am not usually reclaiming VAT as I do not charge it in the first place.
 
susandaly said:
Most of my work is with clients that have 13B vat exemptions so I am not usually reclaiming VAT as I do not charge it in the first place.
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This is the bit I don't get, if you don't charge sales VAT are you not normally in a refund position? That aside if you incur VAT and you are registered for VAT and have 100% recovery then you can claim it back. You refer to providing VAT & Non-VAT type work with this client not sure what you mean by this.
 
Thank Joe 90 for the response. Most of the work I provide to clients is a mix of "vocational" training which is VAT exempt and consultancy to clients who have 13B exemption. Therefore I am not normally in a refund position even though I am vat registered. This is not a problem for me and fully concur with the fact that if I buy a laptop for example, I cannot claim vat back on it as I don't pay any vat year on year. However as I subcontract work out to associates who are conducting consultancy or other work whereby they should charge vat and that work is on behalf of my client who is vat exempt can I reclaim it back. My assumption is that even though the client is vat exempt the work being provided can be charged at zero rate vat. I am then hoping I will be in a position to claim this back once charged by my associates. Otherwise I would have to inflate my rate to the client to compensate for not reclaiming vat from my associates-a decision that will make me very uncompetitive as my rate will be inflated by 23%. Hopefully this makes more sense!
 
If you are doing some work which is VAT-exempt and some work which is Vatable then you should be reclaiming a portion of the VAT on your purchases using some sort of apportionment (usually this is based on ratio of VATable sales to VAT-exempt sales but any ratio is fine so long as you can justify it)

VATable here means that the work would normally have VAT charged on it if the client had no 13B exemption

It is irrelevant whether your customer has a VAT13B or not, if the work done is VATable then you are entitled to claim back a portion of VAT on your purchases

In the case of subcontractors doing work and invoicing you, again if the work done is VATable then they should charge you VAT and you can reclaim it (in this instance I would NOT apportion the VAT). If you then invoice the multi-national you don't charge VAT because they have a 13B. In this scenario you will be entitled to a refund of the VAT charged to you by your subcontractor.

For example

SD engages DB to provide consultancy to Multi. DB charges SD €1,000+€230 (VAT) and then SD charges Multi €1,200 (No VAT because Multi has a 13B exemption)

SD can reclaim the VAT of €230 charged by DB as the work done is VATable. There is no VAT to pay as there is no VAT charged by SD to the Multi due to the 13B exemption

Incidentally is it still called 13B - I think it might be a Sect56 exemption now or something like that
 
Thank you DB74 and Joe 90 for the responses. Just to clarify-I have not charged vat to clients in a number of years because I provide vocation training which is vat exempt to most clients. I have provided consultancy to some clients over the last few years but all of these clients have had a 13B or section 56 as it is now called. I know these work is vatable and have noted a zero rating on my invoices and have a copy of their 13B for my records. I have never conducted consultancy or vatable work to clients who do not possess a section 56 exemption and fully understand that if I were to provide such services, I would charge 23% to these clients. As a result the vatable sales are zero year on year and I have not been in a position to claim back vat on purchases. I'm ok with this. However does the same rule apply for the example/scenario you have outlined above-"In the case of subcontractors doing work and invoicing you, again if the work done is VATable then they should charge you VAT-Agreed and you can reclaim it -Can I?- even given the fact that my vatable sales are zero. If you then invoice the multi-national you don't charge VAT because they have a 13B.-Agreed In this scenario you will be entitled to a refund of the VAT charged to you by your subcontractor.-As above even if vatable sales are zero"
Thank you both for your assistance
 
If you have zero rated sales it is not correct to say that vatable sales are zero. There is a difference between zero rated and exempt.

If 50% of your sales are zero rated then you should have 50% recover on general inputs.
 
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