VAT "Allowance"?

[PlanesTrainsAutomobiles]

Someone is rendering a service to my mom (window awnings), and when he quoted her he said that although he is VAT registered, he has an allowance of a certain amount per annum for which he is entitled to NOT levy VAT on an invoice to a client/s.

Surely this is not correct? Once he is VAT registered he has to include VAT on all invoices, correct? Are these shady practices?

 

[rh1]

Someone is rendering a service to my mom (window awnings), and when he quoted her he said that although he is VAT registered, he has an allowance of a certain amount per annum for which he is entitled to NOT levy VAT on an invoice to a client/s.

Surely this is not correct? Once he is VAT registered he has to include VAT on all invoices, correct? Are these shady practices?

He probably is not registered and uses the VAT has an extra income. He waivers the fee to get the work.

Or if he is registered, he has two set of invoice system, the vat one which gets audited by SARS and the the non vat one.


Whichever it is, he is a shady provider. (Pun intended).

 

[Snyper564]

He probably is not registered and uses the VAT has an extra income. He waivers the fee to get the work.

Or if he is registered, he has two set of invoice system, the vat one which gets audited by SARS and the the non vat one.


Whichever it is, he is a shady provider. (Pun intended).

yup shady AF def nothing like this that exists.

 

[SauRoNZA]

Probably a case of doing smaller jobs in his personal capacity rather than through the company directly.

Have done many a cash deal exactly like this using a vendor a second or third time.

 

[The Darkness]

This is fraud. If he's charging VAT to customers who pay it and claim back themselves then SARS will catch this in the end. Agreed with rh1 - he's likely not VAT registered and is pocketing the cash. Ask him for his VAT ref number.

 

[RedViking]

But your mom wants something that "does not cost an arm and a leg". Then what is the problem and why is this an issue?

 

[Snyper564]

Probably a case of doing smaller jobs in his personal capacity rather than through the company directly.

Have done many a cash deal exactly like this using a vendor a second or third time.

It actually sounds like its likely this one, also fraud

 

[SauRoNZA]

This is fraud. If he's charging VAT to customers who pay it and claim back themselves then SARS will catch this in the end. Agreed with rh1 - he's likely not VAT registered and is pocketing the cash. Ask him for his VAT ref number.

Read the thread again. There’s nothing of the sort in play here.

 

[SauRoNZA]

It actually sounds like its likely this one, also fraud

Why would it be fraud?

If just putting the deal through directly as a private entity it’s no real issue as long as he isn’t invoicing from the company or using the same bank account etc.

As long as he is up front about it, which it seems he is without trying to confuse the issue, there's no real problem.

 

[rh1]

Why would it be fraud?

If just putting the deal through directly as a private entity it’s no real issue as long as he isn’t invoicing from the company or using the same bank account etc.

Common law definition:

The unlawful and intentional making of a misrepresentation that causes actual or potential prejudice to another.

My thinking:
Misrepresention of VAT allowance
Potential prejudice is against SARS
Intentional = yes
Unlawful yes, ito VAT Act.

 

[The Darkness]

Read the thread again. There’s nothing of the sort in play here.

Thanks, I can read. In any way you look at it it's either tax evasion or tax fraud. I'd avoid this vendor on the basis of no integrity and untrustworthy. If he's fine to behave illegally, then he's fine to not honour his work.

 

[SauRoNZA]

Common law definition:

The unlawful and intentional making of a misrepresentation that causes actual or potential prejudice to another.

My thinking:
Misrepresention of VAT allowance
Potential prejudice is against SARS
Intentional = yes
Unlawful yes, ito VAT Act.

On the allowance bit I agree, but it's also based on a hearsay conversation so possibly misconstrued, but as long as he isn't actually charging the VAT then is it really an issue?

The VAT law would only apply to the entity that is VAT registered, so if he isn't presenting himself as such I don't really see the problem.

 

[The Darkness]

Why would it be fraud?

If just putting the deal through directly as a private entity it’s no real issue as long as he isn’t invoicing from the company or using the same bank account etc.

As long as he is up front about it, which it seems he is without trying to confuse the issue, there's no real problem.

If the same person controls both the company and the personal side, and shifts work between them to avoid tax, it’s a contrived arrangement designed to evade lawful tax obligations. Another word for this is fraud.

 

[Magnum]

But your mom wants something that "does not cost an arm and a leg". Then what is the problem and why is this an issue?

We need this as an option more. no tax on farm produce. Farmers get more money corrupt government gets less.

 

[SauRoNZA]

Thanks, I can read. In any way you look at it it's either tax evasion or tax fraud. I'd avoid this vendor on the basis of no integrity and untrustworthy. If he's fine to behave illegally, then he's fine to not honour his work.

But again it would only be an issue surely if he is charging the VAT, but not actually paying it.

This seems completely different in that he isn't charging the VAT in the first place.

I liken it to what I've done in the past where I've had a vendor do some work for me, but then afterwards I have one of the guys who works for the vendor doing work for me directly.

Original vendor was VAT registered and invoiced and paid accordingly, new vendor provides the same product from the same source but is working with me directly and therefore no VAT involved. End result is the same but costs me less.

This seems like much the same thing really.

 

[SauRoNZA]

If the same person controls both the company and the personal side, and shifts work between them to avoid tax, it’s a contrived arrangement designed to evade lawful tax obligations. Another word for this is fraud.

But where would they be avoiding tax? They'll end up paying it in their personal capacity as income tax.

 

[The Darkness]

We need this as an option more. no tax on farm produce. Farmers get more money corrupt government gets less.

Because it's always fine until it's not. What about warranty, recourse, competitors etc. Anyone who condones this behaviour is just as much a part of the problem.

 

[The Darkness]

But again it would only be an issue surely if he is charging the VAT, but not actually paying it.

This seems completely different in that he isn't charging the VAT in the first place.

I liken it to what I've done in the past where I've had a vendor do some work for me, but then afterwards I have one of the guys who works for the vendor doing work for me directly.

Original vendor was VAT registered and invoiced and paid accordingly, new vendor provides the same product from the same source but is working with me directly and therefore no VAT involved. End result is the same but costs me less.

This seems like much the same thing really.

No, it's not the same. You cannot legally use your VAT-registered business to market and operate, then switch the invoice to “private” to dodge VAT. That’s misrepresentation, and it’s a clear SARS violation.

 

[SauRoNZA]

No, it's not the same. You cannot legally use your VAT-registered business to market and operate, then switch the invoice to “private” to dodge VAT. That’s misrepresentation, and it’s a clear SARS violation.

Aaah right I understand now because you are claiming VAT back against your own purchases but then not charging VAT on the other side which is then not paid to SARS.

The dots have now connected.

Not sure the maths is mathing for me as I still feel like SARS wins, but I remember now how it works up and down the entire system.

 

[The Darkness]

But where would they be avoiding tax? They'll end up paying it in their personal capacity as income tax.

Because even if someone pays personal income tax on work diverted from their VAT registered business, it’s still tax evasion. VAT and income tax are separate obligations, and failing to charge VAT when required is unlawful. By routing work through their personal name, they're misrepresenting the supplier, underpaying VAT, possibly paying less tax overall, and gaining an unfair advantage over compliant businesses. SARS treats this as a contrived arrangement designed to reduce liability, which is a form of fraud. It's not about whether tax was eventually paid, but whether the correct tax was applied at the time.