VAT on client finance

Stewart Halperin — Fri, 01 Jul 2016 10:48:35 GMT

[quote user="Evelyn Barbour-Hill"]I've no particular axe to grind here, but [quote user="Stewart halperin"]1. Our average fee to the practice is 7.5% on a 0% interest agreement with the client, not 10%. This is improved further if you are a member of a buying group or SPVS / VPMA or BVHO or any of the other partnerships and affiliated groups we work with. [/quote] If it's 7.5% that will actually cost the practice 9%, because the practice is also paying 7.5% on the VAT that they have to collect even though they receive no benefit. Illustration: Your fee is £1000. You have to then charge the client £1200, and hand over the £200 VAT to HMRC. The client decides they wish to take up the offer of the interest-free loan. So, you invoice Carefree Credit for £1200 – that's your £1000 and the HMRC's £200 – you have no option. CC will pay you £1200 less 7.5% of £1200, which is £90. So, you are paying £90 to get your own £1000: that's 9%. (No, you can't recaim anything, you still have to send HMRC £200) Just saying. [/quote]

Tangent of: RE: client loans - what to do about fee?

I appreciate your comment and VAT is always a tricky subject.

If you weren’t a VAT registered company the fee for obtaining the much needed finance to help those pay for veterinary care who otherwise couldn’t afford it would be a straight forward % of your sales price.

However, you are correct in saying that the % fee would need to account for the VAT element. This, is an unfortunate consequence of being VAT registered, but not something that we can do anything about I’m afraid. Luckily, the finance charge is exempt from VAT so at least you aren’t paying any VAT that you can’t reclaim.

The average fee I quoted, does not actually state if VAT is included or not, but it’s also an average fee. Therefore some may be paying a lower %, whilst some a higher % for various reasons.

I hope this helps.

VetSurgeon.org

Tue, 23 Sep 2014 10:30:53 GMT

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VAT on client finance

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