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Input Tax

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Input Tax

What is Input tax?

Input tax is VAT charged on supplies made to the County Council (i.e. on expenditure)

VAT Invoices

Whenever goods or services are supplied to the County Council on which VAT is chargeable, the supplier must, by law provide a tax invoice.
There are a few exceptions (When Invoices Are Not Required) but out simply, if you don't have a tax invoice then the VAT cannot be reclaimed.
Care should be taken over documents such as purchase orders, goods receipt notes, statements and proforma invoices as these are not tax invoices and cannot be used to reclaim input tax.

Requirements of a VAT Invoice

  • A VAT Invoice must show all of the following particulars:
  • An identifying number
  • The time of supply - the tax point
  • The date of issue of the invoice
  • The suppliers name, address and VAT registration number
  • The customer's name and address
  • A description of the goods or services showing:
  • Quantity of the goods or the extent of the service
  • The unit price
  • The rate of VAT
  • The amount payable excluding VAT
  • Total VAT payable
  • The rate of any cash discount offered.

Less Detailed VAT Invoice

Provided the consideration does not exceed £250.00 the VAT invoices need only contain particulars of:

  • The name, address and VAT registration number of the retailer
  • The time of supply
  • A description sufficient to identify the goods or services supplied
  • For each rate of VAT chargeable, the gross amount payable including VAT
  • VAT rate applicable

The invoice must not include any reference to any exempt supply.
To calculate the value of the VAT, multiply the gross amount by 1/6. This is known as the VAT fraction. the value of the supply is the gross amount multiplied by 5/6.

Modified VAT Invoice

Provided the customer agrees, an invoice can be issued showing the VAT-inclusive value of each standard rated or reduced rated supply, rather than the VAT exclusive value. At the foot of the invoice, they must be shown separately.

  • The total VAT inclusive value of standard rated or reduced rated supplies
  • The total VAT payable on those supplies
  • The total value, excluding VAT, of those supplies
  • The total value of any zero rated supplies included on the invoice
  • The total value of any exempt supplies included on the invoice

In all other respects, the invoice should show the details required for a full VAT invoice.

When Invoices Are Not Required

You do not need a VAT invoice for some types of supply if your total expenditure including VAT is less than £25.00. For the supplies listed below, the VAT element can be reclaimed without a tax invoice provided that the supplier is VAT registered.

  • Telephone calls from public or private telephones
  • Purchases through coin-operated machine (e.g. photo ID machines)
  • Road and bridge tolls provided by a private body
  • Off-street car-parking charges.

You must be sure that the supplier is registered for VAT. If in doubt, please check with the Council's VAT Officer.
If you feel that you are entitled to a VAT invoice but are having difficulty getting one from a supplier, contact the Council's VAT Officer. Of course it could be that the supplier is either not VAT registered or is making an exempt supply in which case there is not VAT to be claimed.

Pro-Forma Invoices

Invoices which are marked "Pro-Forma" or "This is not a Tax Invoice" cannot be used as evidence for reclaiming input tax, these often are Solicitor's accounts or accounts asking for pre-payment. The VAT can only be recovered when a VAT receipt is received from the supplier after payment has been made.
It is easier to obtain a VAT invoice on which to make the payment than ensure that the VAT receipt is received and then arrange for a credit to be made to the cost centre after the account has been paid.
If a pro-forma invoice or an invoice marked with "This is not a Tax Invoice" has to be paid then the whole amount (including the VAT) should be coded to the cost centre and general ledger account code. The VAT can be recovered when a VAT receipt/invoice is received. This should be marked with the month of payment and the cost centre and general ledger account code and sent to the Council's VAT Officer, who will then do a journal to credit the cost centre and recover the VAT from HMRC.

Authenticated Receipts

Authenticated receipts are used in the construction industry in place of VAT invoices for supplies of services or goods made under contracts which provide for periodic payments to be made.
Once entered into the SAP system the authenticated receipt will be raised automatically and dispatched with the payment. All signed authenticated receipts, or VAT invoices issued in response to an authenticated receipt must be returned to the revenues section. The recording system allows outstanding receipts to be noted and reminders sent out where appropriate.
The tax code VJ (for standard-rated) or VB (for lower rated) must be used for authenticated receipts when entering into SAP.

Coding Expenditure

The following codes are to be used for the classification of expenditure in SAP


VX

Standard Rated

20%

VL

Lower Rated

5%

VZ

Zero rated

0%

VE

Exempt

 

VO

Outside the Scope

 

VJ

Authenticated Receipts - standard rated

20%

VB

Authenticated Receipts - lower rated

5%

VV

Travel

4.57%

VR

Leased Cars

10%

VM

Solicitor's Invoices - marked 'this is not a Tax Invoice'

 

The VAT element of any expenditure should be coded to the following general ledger code:
ZV9201 - VAT paid
ZV9202 - VAT only

Documentation

The important point for the County Council is that in order to reclaim input tax the Council must be the beneficial owner of the goods or service. Put simply, there must be a definite benefit or service to the Council and not a third party for whom the goods may be purchased or services provided.
You must ensure that VAT is only reclaimed when we have proper supporting VAT invoice.
VAT invoices must not be altered.
If the the invoices overstates the VAT you can:
Return the invoice for correction
or
Ask for a credit not for the difference and process both in the normal way
or
Write to the supplier informing them that you are going to pay the invoice short and ask them to issue a credit note for VAT purposes only.
or
Pay the reduced invoice recovering the correct amount of VAT only.
If the invoice understated the VAT you must return the invoice for correction as the Council can only recover the VAT shown on the invoice.

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