VAT "Allowance"?

[The Darkness]

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.

Exactly! When you're VAT registered, you're allowed to claim VAT on expenses because you're also required to charge it on your sales. If you invoice privately to avoid charging VAT but still claim input VAT through the business, you're creating an imbalance that cheats SARS out of tax it’s owed. This breaks the VAT chain and is considered misrepresentation.

OP - I'd advise your mother to find a different supplier.

 

[SauRoNZA]

Exactly! When you're VAT registered, you're allowed to claim VAT on expenses because you're also required to charge it on your sales. If you invoice privately to avoid charging VAT but still claim input VAT through the business, you're creating an imbalance that cheats SARS out of tax it’s owed. This breaks the VAT chain and is considered misrepresentation.

OP - I'd advise your mother to find a different supplier.

Got it.

But my example where I'm using someone from a vendor/supplier directly is fine as they are buying directly from the supplier and just doing the labour out of pocket right?

 

[rh1]

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.

I gave my opinion as a normal person, further than this would probably be in a lawyer/attorney field of expertise.

Note the definition does not require the misrepresentation to be in writing.

 

[Magnum]

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.

You skip 1 step in the sars tax sceme. there at least 10 before the step you broke.

 

[The Darkness]

Got it.

But my example where I'm using someone from a vendor/supplier directly is fine as they are buying directly from the supplier and just doing the labour out of pocket right?

If someone does side jobs using their employer’s tools, suppliers, or discounts, they could be undercutting their own company or breaching contract. It’s only legit if it’s fully separate, after hours, and not linked to the business in any way. Otherwise, it’s dodgy and possibly fraud.

 

[bwana]

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?

Will you sleep better if your mom pays 15% more?

 

[The Darkness]

Will you sleep better if your mom pays 15% more?

She'll likely pay way more by using this vendor. Dishonest people do dishonest things.

 

[bwana]

She'll likely pay way more by using this vendor. Dishonest people do dishonest things.

At least we can rest assured that any vat collected will be spent responsibly by the government.

 

[Nerfherder]

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

You pay VAT on things you sell like services

 

[The Darkness]

At least we can rest assured that any vat collected will be spent responsibly by the government.

and this is a reason to commit fraud?

 

[Nerfherder]

Got it.

But my example where I'm using someone from a vendor/supplier directly is fine as they are buying directly from the supplier and just doing the labour out of pocket right?

Labour should still charge VAT but the supplies will already have incurred a Vat invoice.

The labour is one thing as that's off the books, most of our economy works like that. Its just how it is.
The selling of goods without calculating the vat and separating it from the sale is starting to get complicated.... I assume its a separate invoice ?

 

[SauRoNZA]

Labour should still charge VAT but the supplies will already have incurred a Vat invoice.

The labour is one thing as that's off the books, most of our economy works like that. Its just how it is.
The selling of goods without calculating the vat and separating it from the sale is starting to get complicated.... I assume its a separate invoice ?

Yes I'm talking about entirely separately, like in a guy who works for the company but then moonlights after hours to do some extra jobs directly.

And obviously can't charge VAT because they aren't in the bracket of profit for it.

 

[PlanesTrainsAutomobiles]

Sorry if I was unclear.

He quoted her on his business letterhead.

He then called her to inform her that he would send her a new quote (on the same business letterhead) for a reduced amount, minus the VAT, as he is allowed to NOT charge VAT on a certain amount per annum.

So all quotes were on the same business letterhead.

 

[dontcryforme]

Those on here passing criminal judgement with very limited information are the same idiots who said that the ANC would never propose a 2% VAT increase.

If the customer gets an invoice for what they paid for and the services or goods were delivered as required - why are they so obsessed about the accounting side?

If you want SARS and the corrupt politicians to get more taxes, you should have supported the 2% VAT increase.

 

[The Darkness]

Sorry if I was unclear.

He quoted her on his business letterhead.

He then called her to inform her that he would send her a new quote (on the same business letterhead) for a reduced amount, minus the VAT, as he is allowed to NOT charge VAT on a certain amount per annum.

So all quotes were on the same business letterhead.

If he’s quoting on a VAT registered business letterhead, he has to charge VAT on all jobs, no matter the amount. The annual threshold only applies to whether a business must register, not whether a registered business can pick and choose when to charge VAT. Dropping the VAT after quoting properly isn’t allowed and could be seen as tax dodging. It also puts your mother at risk if SARS ever audits or if the invoice is used in a claim or financial records. Personally, I'd not be using him, as I said; it's show of his character and integrity.

 

[Zellephant]

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.

Wouldn’t you say anyone doing absolutely everything in their power to ensure they pay sars the absolute bare minimum, and use every loophole there is to avoid paying tax, is actually someone of excellent integrity and totally trustworthy.

He is being upfront about the VAT issue, and as others have said, is probably doing smaller jobs for private individuals, under his own name, and therefore not charging VAT on those jobs (probably cash jobs as well). If the volume of work he does in his capacity as a sole prop is under the threshold to register for vat, there is nothing illegal about it.

In this case, he will probably if the client insists on a vat invoice, will run the job through the business, but if they don’t care about claiming back the vat themselves, they will be happy to get the hand written sole prop invoice, and shave 15% off the price. And there is nothing shady or illegal about this.

I would too, but because I dabble in farming on the side, I am vat registered as a sole prop under my ID number, and also have a vat registered company, so I have to charge vat regardless of which entity I invoice from.

The old adage always rings true. Tax Evasion is illegal, but tax avoidance is compulsory