Question about levying VAT

[blunomore]

Consultant A and Consultant B are business associates and are rendering a service together for a client.

Only Consultant A is on the database of the client and is therefore the one that must invoice the client for services rendered by both A and B. So all invoicing happens on the letterhead of Consultant A.

Consultant A recently established a company and now operates as a Pty Ltd. The company is NOT registered for VAT and can therefore not levy VAT on the services it renders.

Consultant B is VAT registered and is by law, it must levy VAT when it invoices a client.

How to proceed with invoicing?

 

[P924]

Consultant B invoices consultant A with services incl vat. Consultant A invoices client.

 

[Fulcrum29]

Consultant B invoices consultant A with services incl vat. Consultant A invoices client.

Basically this yes,

Consultant A can provide Consultant B with a statement, "like" owing him a salary, Consultant B invoice Consultant A the outstanding stated amount. They should simply ask their respective accountants.

 

[markings]

Consultant B is a subcontractor to A. B must invoice A with a VAT invoice. A must invoice the client with an non-VAT invoice.

 

[blunomore]

Consultant B invoices consultant A with services incl vat. Consultant A invoices client.

So how does Consultant A levy the VAT from the client on behalf of Consultant without calling it VAT?

 

[blunomore]

Consultant B is a subcontractor to A. B must invoice A with a VAT invoice. A must invoice the client with an non-VAT invoice.

How? Let's say the VAT portion is RX. Where or under what name is that included in Consultant A's invoice to the client?

 

[justanotherguy]

Consultant A cut: R100
Consultant B cut: R100 + R14 VAT

Consultant B invoices Consultant A R114 (including VAT)
Consultant A invoices client R214 (no mention of VAT)

Consultant A income R100
Consultant B income R100
Client expense R214

 

[blunomore]

Consultant A cut: R100
Consultant B cut: R100 + R14 VAT

Consultant B invoices Consultant A R114 (including VAT)
Consultant A invoices client R214 (no mention of VAT)

Consultant A income R100
Consultant B income R100
Client expense R214

So, to answer my own question, all Consultant A has to do is, when drafting the invoice, to increase Consultant B's fee with the VAT portion?

 

[justanotherguy]

So, to answer my own question, all Consultant A has to do is, when drafting the invoice, to increase Consultant B's fee with the VAT portion?

Yes, but it can not be shown as VAT on the invoice that Consultant A sends to the client. It will effectively increase the cost to the client as they will not be able to claim back any VAT.

 

[Venomous]

So how does Consultant A levy the VAT from the client on behalf of Consultant without calling it VAT?

inv incl vat amount from B becomes the total cost to A
meaning

B invoice R100 , R114 including VAT.

A will take Binv R114 and calculate markup. Then A inv client. Meaning Acost is R114.

 

[blunomore]

Yes, but it can not be shown as VAT on the invoice that Consultant A sends to the client. It will effectively increase the cost to the client as they will not be able to claim back any VAT.

I do not know if the client will accept that, because normally Consultant A and B charge the same fees, and now idea how I will explain to them why Consultant B's fee is now higher.

 

[justanotherguy]

I do not know if the client will accept that, because normally Consultant A and B charge the same fees, and now idea how I will explain to them why Consultant B's fee is now higher.

Unfortunately that will be the only way, as Consultant A is not registered for VAT, they cannot charge VAT, and the client cannot claim VAT. If the amounts are material, maybe it will be to the client's benefit to register Consultant B as a vendor on its database

 

[blunomore]

Thanks for the input guys

 

[markings]

As consultant B is not on the client's database the client knows nothing about Consultant B and B thus never makes an appearance as far as the client is concerned. Whatever happens between A and B is none of the client's business. A will also be responsible for anything that B has done or recommended. For the client consultant B does not even exist.

 

[bekdik]

If the client receives a non tax invoice, can he claim input tax?

 

[markings]

If the client receives a non tax invoice, can he claim input tax?

No