VAT, Penalty Charges and Invoices

[Empire Strikes Back]

Has anyone who is registered for VAT asked their Bank Manager if his Penalty Charges include VAT, or have you asked him for an Invoice for the Charges.

 

I have received BOS statements for a Loan, and they actually use the word "Penalty" on the top of their statements. They also put VAT on their letter fees. I think that the £58.75 I was charged for late payment fee was made up as follows:

 

Late payment fee: £35.00

Letter Fee: £15.00

 

Therefore the rest £8.75 must be VAT.

 

Has anyone else had a loan from these people.

 

From a business account holder's point of view it would be interesting to see what reply we would get if we asked for a VAT invoice, or if we asked for an Invoice for each Charge we have had. You are entitled to an invoice for any services rendered of should I say "disservice"

[dave]

Sadly we've been down this road before - bank charges are exempt from VAT

[Spiceskull]

Sadly we've been down this road before - bank charges are exempt from VAT

...beacuse...where is the V part of bank charges...there is no added value that I can think of...

[alanfromderby]

HM Revenue & Customs - Notice 701/49

 

2.10 Current, deposit and savings accounts

 

The charges made by banks, building societies or similar organisations for the operation of a current, deposit or savings account are exempt.

[Empire Strikes Back]

I have received BOS statements for a Loan, and they actually use the words "Penalty Interest" on the top of their statements.I found a previous letter it clearly says "£35.00 +VAT" for this particular unpaid item They also say "£15.00 + VAT" on their letter fees. Can any one help please are these fees treated the same as bank charges

They seem to run a seperate account charging £58.75 each time the loan D/D payment of £55.76 got referred .Their penalty account cost more than the original loan

[Empire Strikes Back]

Thanks all, just a note we are a vat registered bussiness

[dave]

It's a pity really.

 

The wider implications of course would have been that if the charges were proven to be punitive in a court, then would they become a VATable profit? If so, then surely the VAT man would want a chunk of the 6-12 billion quid that the banks would have stiffed him for over the years.

 

I looked into this a while back, but sadly, no, the powers that be have decided that banks can be exempt for some reason.

[bankoff]

Is that correct what you are saying, you have a letter from BOS clearly stating that VAT is being charged on the "Penalty Fee" and the "Letter Fee".

 

Did they give you an invoice with VAT on it?

 

Have you ever claimed the VAT back?

 

I wonder if BOS have actually paid the VAT to HM Customs?

 

Perhaps the VAT man will be interested in this one.

 

You may have opened a can of worms with this one!

 

Or, is it usual to charge VAT because the charges on this "Penalty" is for a loan to purchase equipment.

 

I think I am going to ask my friend in the VAT office what he thinks about this.

[Empire Strikes Back]

Yes thats right they have charged VAT on their unpaid direct debit and letter fees.

They have not issued any vat invoices for this, I dont think they are obliged to as the amount is under £100.00 and the letter advising of the charge lists the VAT seperatley, although there is no VAT registration number on their letter which there should be if they are treating this letter as a notification of VAT. we havent claimed the VAT back on the charges ,only on the monthly payment, but we are hoping to get the VAT back from them when we pursue the charges. Preliminary letter being sent tomorrow.

Was a bit confused as to whether an equipment finance loan charge would be treated any different to a bank charge , as you are financing equipment as opposed to charges on overlimit, overdraft etc, but then again both are still a penalty, perhaps someone could help me on that one.

[Seminole]

Please could you scan (deleting any information that you don't want to include) and email it to me at seminole@consumeractiongroup.co.uk

 

Generally bank charges are exempt. If they are judged to be penalty charges then they are outside the scope of VAT (like parking fines). Banks can only charge VAT on services and it depends upon the wording of the contract. For example, they could charge VAT on a loan arrangement fee.

 

This is a highly technical area of VAT. It is out of the question that they could charge VAT on a penalty. If they are trying to do so on a, say, a bounced transaction fee, this could indicate that they are trying to redefine the charge in some way and this could have wider implications.

[bankoff]

Hi Empire Strikes Back

 

Have been speaking to friend in VAT office,,,,,,,,,,, he tells me that "Late Payment Penalties are outside the scope of UK VAT, and are not a consideration for a supply - see Notice 701/49 para 5.2.8.

 

It seems that BOS have shot themselves in the foot with this one if you get them to court and get the penalties refunded. Could be a huge !!!!!!!!!!!!!!!!!! blunder

[bankoff]

Hi again, here it is as written by the VAT man:

 

5.2.8 What supplies are not considered exempt credit?

 

The provision of any of the following to your customers are not supplies of exempt credit:

 

Deferred payment - You may allow customers to defer payment but make an extra charge for allowing them to do so. If the charge relates to periods before and up to the time of the supply (see Notice 700 The VAT Guide) it is not a charge for credit, but is further consideration for the supply of the goods or services. Alternatively where you agree to defer payment beyond the time of supply and make a charge, such a charge will be consideration for an exempt supply;

Late payment penalties - If you do not explicitly allow your customers to defer payment and impose a penalty because they have not paid by the due date, the penalty is not consideration for a supply and is outside the scope of VAT; or

Discount for prompt payment - If you offer a discount on condition that your customer pays for your supply of goods or services within a specific time, the value for VAT is the discounted amount whether or not your customer takes up the offer. Further details can be found in VAT Notice 700 The VAT Guide.

[Empire Strikes Back]

Thank you BankOff for that info, we are in the middle of emailing the letter from Bos to Seminole.

[Empire Strikes Back]

Hi Seminole

Have E-mailed the letter to you but not sure if it has gone through ok, let us know if you dont get it

[joneshousehold]

Isn't the VAT advice based on the fact that consideration for a supply includes the cost of goods or services and as the charge is neither it is not liable to VAT. If that is the case how can the bank's say on the one hand it isn't for a service in their VAT returns but on the other to the customer that it is a charge for service provided.

 

I know the particular case in this thread is different but surely the rule in general is evidence in support of the view that the charges are unlawful.

 

And clearly the banks knew it too!!!

[bankoff]

Hi Empire Strikes Back

 

My friend says that the information would be well received at:

 

customs.confidential@hmrc.gsi.gov.uk

 

You don't have to give your details, just enough info to pursue it,,,,,,, on the other hand you may want to use it in court, should it go that far.

[Empire Strikes Back]

Hi

Just an update on BoS, they filed their defence in court stating they could not deal with this claim as they didnt have any account details, even though they have sent us statements following the DPA and have had numerous letters quoting the numbers, anyway I had a phone call from them after this to say that no way would they be paying up and then next day in the post was a cheque for full settlement, vat included!

There has been no mention of the VAT that they added to the charge, we have another smaller claim with them going through so will let you know what happens then.

To the Mods from the BAG weekend sorry I havent been able to post much after our chat about this but the broadband keeps dropping the connection and Orange are c**p at sorting it out.

Well I am off the hit the donate button before the darn thing goes offline again.

[jonni2bad]

CONGRATULATIONS

 

A job well done...... as soon as your connection gets back to normal, can you email the papers to research@bankactiongroup.co.uk please?

[nicsussex]

Congratulations on your win! Well done.

[blueskies]

Congratulations Empire!

 

Seems like everyone at the CAG party has got something out of the banks apart from me now, but that will be coming soon.

[Empire Strikes Back]

Thanks for your support guys

 

Blue Skies - You will get there

 

Jonni2bad - Have sent the papers a few days ago, i think Bookworm has them.

[jonni2bad]

Nice one - many thanks

[joneshousehold]

Well done Empire. It was good to meet you last week.

[Empire Strikes Back]

This topic was closed on 09 March 2019.

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