Reply With QuoteHow many watches passed through your hands on this scheme Ryan?
mike
Gents
This old chestnut again. Basically I have had to stop the Omega PSA’s due to the fact that the AD in question has had loss investigators in to investigate why they were providing RRP discounts on watches that I was paying for using vouchers I was buying at a discount via a work scheme. I was advised by the previous manager of this branch that this was the best way to do it. So the offer is retracted L
I had taken advice from members here who had passed me on to VAT professionals who said that I was not liable for VAT due to the fact that I was purchasing on behalf of members here, but wasn’t handling the watches and of course full VAT was paid by the AD (in fact they were probably paying more VAT than was due as they were paying VAT on RRP less 15% but I was paying using vouchers that had a further discount applied so the actual cash into the business was probably 15-20% less than what they were paying VAT on).
Anyway as I was simply acting as the facilitator and paying on behalf of members, I never kept the receipts as they went to the owners of the watches. I’m thinking if the worst happened and HMRC ruled VAT was payable by myself I would want to offset this against the amounts I had paid which I have a record of for the voucher transactions but not the store receipt. In terms of personal ‘profit’, this was minimal, maybe up to £100 per watch (as recommended by members here) to cover losses I had made on flipping watches at a loss elsewhere. Per year in this hobby I was still down. Members also would donate to the fundraiser.
Anyway do you think there is anything I need to do to ensure I am covered? This was only ever offered to members here and never commercially and I drafted an email in every instance to each member outlining the process, that I was simply a facilitator but that the transaction was between them and the AD and I would never handle the watch nor be liable for anything that happened with it and that full VAT was paid by the AD. I was simply using my ability to get discount vouchers cheaply to offer lower rates.
I suspect this is probably just an internal issue with the AD and their staff may get a battering (it was that store’s idea mind you!). HMRC haven’t lost out on a penny of VAT (in fact they have probably received more VAT than they ought to have for the reasons outlined earlier)
Thoughts?
How many watches passed through your hands on this scheme Ryan?
mike
None through my hands as I never handled them, but I would say on behalf of members around £110k worth over a year or so. My wife did some of them. Most of the initial ones were done for 'free', they just had to donate to fundraiserOriginally Posted by seadog1408
Obviously as a serial flipper I also flipped a load of my personal watches myself but these were always at a loss, always pre owned, sometimes a huge loss (like a £2.5k loss on one Omega for example) so I would like the opportunity to claim back VAT on these! :)
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My take is - if pushed by HMRC, would be the sum of all the £100's added up.
If they exceeded the VAT threshold in any given financial year, well technically, you'd be liable. (that's how my simple mind works after 32 yrs in business).
The £100s added up to maybe £2k! So not the £86k threshold.
I did take advice (also a call to HMRC themselves) but there was never a clear answer but the take was that as long as HMRC weren’t losing out on VAT then it shouldn’t be an issue. And they aren’t losing on VAT. I did draft an email for each transaction to outline the process and have kept records of these – example as follows;
I'm sending you this email to clarify your purchase of the Speedy Pro ref 311.30.42.30.01.005 on bracelet with RRP £3,520 and my role in this. First things first, the watch will be sold to you by AD Name who are an authorised Omega AD. The watch will be brand new and come with full Omega warranty. It will be AD Name, UK stock and will come with all boxes and papers. The price to you will be £2,544
It is important to state that I am NOT selling you this watch, I am simply purchasing it on your behalf due to the fact that I A get a good in store discount and B can pay for it using vouchers we can get at a discounted rate. But the sale is between you and AD Name, you will receive a purchase receipt from them, full UK VAT will have been charged by AD Name on the sale and any issues you have with the watch need to be remedied with AD Name and/or Omega. AD Name also know it is you who is purchasing the watch and the watch is never in my possession, I simply pay on your behalf over the phone by giving them the voucher card number and then they send the watch to you.
Please note that as the watch is being paid for using vouchers, should you decide you don't like the watch then AD Name will provide a full refund in the form of store credit/vouchers as this is the payment method. So basically make sure you like the watch first. I am in no way liable for any refunds as I am NOT the vendor.
This is very important as if it was me selling you the watch then I would technically be liable for VAT above a certain threshold. But as I am not selling you the watch, nor will it ever be in my possession, the VAT liability lies with AD Name who will of course charge full UK VAT on the sale to you and account for it as they do normally so HMRC get the full VAT due as standard.
Please also provide your full name, mailing address, email address and phone number. Once I pay on your behalf AD Name will send the watch to your home address by insured courier.
Whilst I can't police this, the spirit of the offer is that this is a watch for yourself that you intend to keep. I understand that this is not always feasible and you may wish to resell this later, this is fine however what is not fine is if you immediately flip this to a 'grey' seller who will sell at a profit - should this happen and AD Name be made aware of this then this would certainly stop my ability to continue this offer to the forum and will also cause significant issues for the store staff at AD. Finally, I must state that this is an offer available only to forum members and is not a commercial enterprise available elsewhere. As such I will not offer this facility to non-members of tz-uk, this includes members purchasing on behalf of friends and family.
Finally, a forum fundraiser donation is expected, the amount is up to you
No advice to offer on this, sorry.
However, I wanted to say I hope you get some certainty that you will never be liable as a result of this. Especially as the real beneficiaries are those who have bought watches at brilliant prices and the fundraiser. You are a brilliant forum member.
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AD assistant manager has been in touch, seems like I can still buy for personal use. The loss adjuster came to the conclusion with the volumes involved that I must be an unauthorised dealer and I suspect their main concern is if the watch brands found out and though they were supplying the grey market that this would cause huge issues. I reckon they will just want to hush it up but I have provided them with proof that it was a forum only offer and that a charity donation was required. That probably takes a bit of heat off them as their biggest fear would have been if they were unwittingly supplying the grey market.
Anyway it was good while it lasted, I reckon we raised a good few grand for charity and the good news is that members will see the value of their watches go up as the cost of purchase has gone up.
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You did a sterling job Ryan. As others have said it was good whilst it lasted.
Thanks! 👍
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If people were paying you and then you were paying the AD, surely you would be over the income threshold for becoming VAT registered? The fact that you never handled the watches and didn't make much profit is irrelevant I'd have thought. You are in effect a drop-shipping company.
I was just going to post similar.
My take on it is as Benny said, you were running a drop shipping company and I'm sure you will have VAT repercussions.
Don't want to frighten you but that is how I see it.
Cheers,
Neil.
Well it’s a grey area. Firstly HMRC would need to see if it’s worth getting involved and as their remit is to ensure the Public Purse gets what it is due (and it will have been due to the VAT paid by the AD), combined with the fact that the ‘margins’ in my case are so negligible, even if they went down this path it might be a waste of time. BTW what you suggest is contrary to advice provided to me by a VAT specialist. In anyc ase if they went down this path I could surely offset what I paid in vouchers vs what came in, and also add all the personal watches I flipped at a loss and Vat would be due back to me. Or you have the bonkers situation where the AD has discounted a Speedy Pro wth rrp £3520 by 15% to £2,992 and declared that as a sale with £499 output Vat which if I was deemed to be the ‘buyer’ I could reclaim. However for said Speedy pro I would have charged £2543 with technically 20% VAT at £424 so I could claim back £499-£424 = £75 Vat per watch. Big difference with drop shippers is that they set them selves up as the retailer and offer the refunds etc – in my case I was explicit that I was NOT the retailer and clarified who it was – in any case as it’s such a grey area and the Public Purse hasn’t lost out, with the bonkers situation that technically I could have a positive VAT situation on every transaction (which I wouldn’t do as it reeks of trouble down the line) I suspect this isn’t something HMRC are interested in. £100+k of watches with NO VAT paid = an issue. £100k+ of watches where VAT has been paid in full (as in this instacne) I can’t see why they would devote resources to it. That’s if the AD even flags it.
I won’t lose sleep over this as I have done nothing wrong and IF it got investigated I’m sure HMRC would see the spirit behind it and quickly ascertain that no VAT evasion has taken place. The retailer will have paid too much VAT as they will have (in the case of a Speedy pro) paid output tax on a £2992 ‘sale’ which was paid for using vouchers that cost around £2450 so they should technically have declared the sale at £2450 and paid less output VAT but that’s their issue, not mine.
I really don't think you'll have a problem here Ryan, and in the unlikely event that you need advice, I am certain the legal / accounting professionals of TZUK would step up to help you.
Thanks for doing all this for us!
Where's 'dood when you need him ?
HMRC won't take into account watches bough for yourself, sold at a loss. They'll only consider watches bought as part of your (as they'll see it) "business"
Also, can you get vat receipts for the vouchers? If the supplier is not vat registered you can't, and then you've nothing to offset the vat on the sales.
Could be a heck of a bill. Don't forget to factor in late fees, and interest on amounts outstanding too.
This was always fraught with danger of getting out of control once it got to this scale imo, no matter how noble your intentions which I don't question for a second.
The supplier is a large corporate perks company so I would imagine they would be VAT registered but my understanding was that VAT is not charged on vouchers it's only charged upon redemption of vouchers in this case which would mean I could use the AD receipts.
I honestly think that HMRC wouldn't go to this extent as clearly no Vat evasion has happened here - it's been charged by the AD at point of sale so why HMRC would want to hammer me for VAT that shouldn't really be due I don't know and in their guidance notes it states that if I can prove that purchases were made that VAT could be claimed back on then they will take that into accoubt. Well I can log into my corporate perks website and it shows every voucher purchase I've made. Alternatively I could argue that the AD purchases were the purchases not the vouchers in which case the AD could give me VAT receipts or if not members here who purchased watches could send me pics of their receipts which would prove the business is VAT registered and VAT was paid. On a technicality I could I suppose be taken to the cleaners but I think they would take into account A intention and B if the public purse has missed out and it hasn't. Plus VAT specialist who a member here put me in toucb with from a big accounting firm advised me that as long as I wasn't handling the watches then I wasn't the seller. It's a grey area I don't think this is a 'business' model that exists anywhere else so I would hope that common sense would prevail.
Edit just saw this when googling and I could certainly provide evidence based on at least 3 of the points where HMRC can use discretion to allow VAT to be reclaimed in the absence of VAT receipts. I have the whole list of voucher purchases. I have some photos of the AD receipts. Members here would surely help me by providing pics of their own. And bank transactions to back this all up. So I'm sure there's not an issue but here's a screen grab from the requisite part of the site. In any case I was told by VAT specialists that I'm not eligible to pay VAT as my turnover is the delta between what I paid for the vouchers and what members here paid me and that was a very small amount unless they want to factor in the fundraiser donations. I just don't think I'm the sort of case HMRC are interested in. Here's screen grab anyway
The fact that there are so many disparate views here shows what a grey area it is but HMRC's stated mandate is to ensure that the public purse doesn't lose out and also that individuals don't pay more tax than they are supposed to. Public purse hasn't lost out whatsoever as AD has charged full VAT and thankfully it's a huge AD not a small operator so easy to prove VAT compliance.
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Last edited by ryanb741; 24th May 2017 at 19:09.
Well if that's the case, maybe you should put it to bed then and have a good restful nights sleep
I have been watching the 'deals' as they have progressed over time and couldnt help thinking that the dealer must be taking a clattering. Most voucher schemes have an inherent corporate 'loss' factored in as they are not the same as being bought with cash at point of sale. The AD is not receiving cash but a diluted form in the form of a voucher they have agreed to redeem at face value but has an inherent cost to them as part of the cost of the promotion. I think what you are saying is you are trading vouchers for cash in fact selling the voucher to the recipient and this voucher is being used to fund the purchase at a rate which is also equivalent to the dealer allowing a 15% discount so if the voucher is costed at 15% when the dealer receives remuneration through the scheme they are selling at 30% and therefore making scant profit and even less if their vat receipts dont tally with this 30% giveaway. The net cost of the vouchers to you offset against the monies received from members may be liable to income tax. The watches are new at point of supply and as long as the vat has been paid at the invoiced purchase price hmrc cannot claim it twice. If the dealer has paid more vat than would have been necessarily due had the purchase been made at the equivalent cash price they actually receive in remuneration from the scheme then it is this further vat which will eat into their margins. They may find they have sold 100k of watches for very little return.
May also be an issue if income tax has not been paid at source as part of an 'award', which you have then sold on for the cash value before depositing same back into voucher supply chain. Depending how the scheme is administrated namely are these corporate rewards declared as revenue earned on which the taxman takes his cut or have they been recycled for a nominal cash value within a scheme so as to generate revenue to a third party namely yourself which may then be classed as earnings which you have given away to your friends on the forum thereby incurring personal income tax on the full £110k of deposits... Interesting but Im sure you wouldnt wanna be coughing up 40g's anytime soon.
All the opinions on here are gonna have Ryan tearing his hair out !
Ryan, clarify this with an accountant why don't you.
If you want a phone number, PM me.
Neither, it's a work incentive scheme that allows any employee to purchase vouchers for various retailers at various discount levels, to get reduced gym membership, cashback etc. In this instance I could purchase vouchers for this AD at a 17% discount. Similar schemes exist on the open market. You have to be an employee to purchase them but that's it, they aren't part of the stated compensation/remuneration rather it's just a corporate perk that we have access to a wide range of vouchers that we can purchase at a discount including supermarkets, retailers, all the major high st jewellers, holiday companies and so on. My employer has known fully what I was doing with them as I wanted to ensure they weren't incurring any cost. The corporate benefits are administered by a third party which sells this identical corporate benefits scheme into many different companies. This third party corporate benefits company obviously purchases these vouchers at a discount from the various retailers. My employer simply pays a set fee each year for access to the corporate benefits scheme. Many large companies have similar. It's not a taxable benefit at all and sits nowhere near a P60. It's totally different to where vouchers are given to employees as a reward (on which the company pays their income tax). This scheme just allows you to get discounts on a wide range of retailers.
Last edited by ryanb741; 24th May 2017 at 22:22.
Have spoken to 2 accountants (plus our CFO) and a VAT specialist, all have been bamboozled by it but all have said it's not the sort of thing HMRC would be interested in as the retailer is charging full output VAT on voucher redemption and as such full VAT is paid to HMRC. They have all been flummoxed as to why the heck the AD provides a further 15% RRP discount when they already have my money in the form of the vouchers I purchased but that's their prerogative.
Last edited by ryanb741; 24th May 2017 at 22:26.
Is there anything actually worth investigating. Would HRMC even bother investigating? £100k turnover is the level of even the most basic small companies, so to be investigated would be by random selection, as they certainly don't have the man power to check the majority of businesses in the UK.
You're also not registered, so you're unknown to them.
Not exactly identical, but a friends father used to work investigating European VAT fraud. Apparently, it's a fairly easy scam of pretending to import/export and reclaiming VAT. He said anything less than 1m wouldn't even register on their radar, because they didn't have the man power to investigate, and it was deemed too low of an amount to be of interest. No idea how true that is, but it makes logical sense.
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