VAT on refundable deposits.

[Hood]

....

(@Hood may be able to enlighten us on how he got around it)
.......

Never got round anything, the local place said there was VAT on the deposit and I said there shouldn't be and brought up the Governments page on my phone and they agreed that there shouldn't be and thus didn't charge me VAT.

 

[colnerov]

Hi, As I understand it VAT is applied to goods and services. They are selling you the gas so that is simple enough, they're supplying a cylinder to put it in. The term deposit is a bit of a misnomer, a better description would be rental as BOC do. The trouble stems from is the deposit charge for a sale or a service? It's a sale if you don't return the cylinder and it's a service if you return it for more gas. To be honest your beef is with HMRC as they set the rules and SGS are doing it under HMRC guidance. Good luck getting it back off them. HMG abhors a tax free Englishman.

Colin

 

[Hood]

.....a better description would be rental as BOC do......

Not really the case though. BOC it is indeed rental and you get nothing back when you return the cylinder unless you have paid a years rental in advance and you return after 10 months, you will then get 2 months back.

With the "rent free" model you are paying a deposit on which you get a full refund when you return it and, as the Governments website says, VAT is not charged on that.

When I went the first time and they said VAT was charged on it I asked if I got the VAT refunded when I returned they said no, that is when I showed them the information and they agreed that it should not be charged. If they had said I would get the VAT back then I more than likely would have been happy enough to pay it.

 

[Agautosport]

I would quite expect not to get the full deposit back since those cylinders need testing cleaning etc before going back in the system..but to call this VAT is IMO misleading.

We always refund deposits in full including the VAT , there is never any part of the deposit held back.

Alan
SGS Gases Ltd

 

[Agautosport]

I still say that you are ridiculous if you think there is any way we can refund you the VAT you have paid another independent company.

You are still ignoring the fact that it was the HMRC who decided we should charge VAT on deposits because the cylinders are away from us for prolonged times.
I have explained this to you in an email.

If you return the cylinder complete to the distributor I will insure that you are not charged the 25% restocking charge.
(That is the distributors standard charge for anything returned , nothing to do with us but I can make sure that you receive a full refund)

BTW you call SGS Gases a big company, you flatter us. We are a small family owned company , formed in 2010 to bring rent free cylinders to the whole country .
During those years we have set up almost 800 distributors and have over 100,000 cylinders in use.

Alan
SGS Gases

Hi,



I disagree with you Alan and now you've insulted me by calling me ridiculous in an email I'm going to really dig in. I treat people with respect and am always polite.

Just because SGS is such a big company doesn't make them any different to a small company what it comes to VAT rules. It's interesting to note that you've not denied VAT shouldn't be paid on cylinder refundable deposits; the deposit I paid covers the cylinder so why charge VAT when refundable deposits don't attract VAT?

Regarding your generous £20 cashback I was aware of this but wasn't bothered about claiming it and still aren't. I'm just against paying VAT when VAT is not applicable. You tell me no way will I get a VAT refund on the returnable deposit; it won't be for lack of trying on my part.

I'd return the full cylinder for a refund but the invoice states there would a a 25% handling charge.

Kind regards, Colin.

 

[TigTigger]

Colin, I think you are missing the point. If you don't return the cylinder it is NOT a sale! It is clearly stated in the suppliers terms and conditions that ownership of the cylinder always remains with them. The deposit effectively represents the cost of the cylinder. If you don't return the cylinder the deposit effectively becomes a compensation on which I believe VAT is payable. Therefore as the supplier does not know if a cylinder will ever be returned it must be treated as a potential compensation from the outset and the VAT collected at the time of the original transaction. The grey area, which I referred to in a previous post as an anomaly, is at what point does it become a compensation. If you don't return the cylinder you have lost your deposit and can do nothing with it as it is illegal to sell it and no other gas supplier will refill it. If you do return the cylinder the supplier will return your deposit and the Vat as it is no longer a compensation.

 

[Retired]

Hi,

Many thanks Alan. I don't know what other members think of me being called ridiculous because I've been charged VAT on a refundable deposit and am asking to be refunded..

I'd like to take you up on your offer please Alan and return the unused full cylinder to Replacement Services Huddersfield for a full refund ASAP. Total cost of Invoice which I paid in cash is £286.80 I can return the cylinder on Monday morning if convenient. I'm sorry it worked out like this but at least I'll get the VAT back I'm so dead set against paying without having to wait for it.

I'm in touch with Chorley Gas and although they don't deliver to my area there are ways around it; I worked in distribution for 24 years and often delivered goods to regular customers where the paying customer was located outside our delivery area or where our 38 ton vehicles couldn't gain access; the paying customer then could collect. Chorley Gas is only an hour away so would be a run out and I've asked if the cylinder can be dropped nearer to me?.

I take offence at being called ridiculous.

Kind regards, Colin.

 

[Hood]

.... If you don't return the cylinder the deposit effectively becomes a compensation on which I believe VAT is payable. ...

Is that the case though? This is what the Governments website says (my highlighting in bold)

Returnable deposits
You may ask your customers to pay a deposit when they hire goods from you. You do not have to account for VAT if the deposit is either:

• refunded in full to the customer when they return the goods safely
• kept by you to compensate you for loss or damage

 

[WorkshopChris]

Returnable deposits
You may ask your customers to pay a deposit when they hire goods from you.

I can see why SGS took guidance from HMRC on this the wording is open to lots of interpretation, the extract above relates to the hire of goods but SGS do not hire cylinders, you pay a deposit towards the replacement cost of a cylinder, not a sum to cover a rental period.

 

[Agautosport]

You continue to misread my comments, it is ridiculous to think that one company can refund the VAT charged by another company.
I remind you that in the email you asked me to refund the VAT you had paid TBR .

Alan

Hi,

Many thanks Alan. I don't know what other members think of me being called ridiculous because I've been charged VAT on a refundable deposit and am asking to be refunded..

I'd like to take you up on your offer please Alan and return the unused full cylinder to Replacement Services Huddersfield for a full refund ASAP. Total cost of Invoice which I paid in cash is £286.80 I can return the cylinder on Monday morning if convenient. I'm sorry it worked out like this but at least I'll get the VAT back I'm so dead set against paying without having to wait for it.

I'm in touch with Chorley Gas and although they don't deliver to my area there are ways around it; I worked in distribution for 24 years and often delivered goods to regular customers where the paying customer was located outside our delivery area or where our 38 ton vehicles couldn't gain access; the paying customer then could collect. Chorley Gas is only an hour away so would be a run out and I've asked if the cylinder can be dropped nearer to me?.

I take offence at being called ridiculous.

Kind regards, Colin.

 

[eLuSiVeMiTe]

You continue to misread my comments, it is ridiculous to think that one company can refund the VAT charged by another company.
I remind you that in the email you asked me to refund the VAT you had paid TBR .

Alan

Yup. Refund must come from the supplier purchased from.

Does seem to be a very grey area.

 

[Agautosport]

I can see why SGS took guidance from HMRC on this the wording is open to lots of interpretation, the extract above relates to the hire of goods but SGS do not hire cylinders, you pay a deposit towards the replacement cost of a cylinder, not a sum to cover a rental period.

Glad someone understands that the best option for us when we started this business was to talk to all of the relevant government departments before
we made important decisions. With over £8m of cylinders in circulation HMRC have received £1.6m in VAT but this figure goes up and down as we refund VAT to distributors
as they return empty cylinders and charge them VAT when they order new cylinders.

For those who are interested , the deposit on a cylinder is for that actual cylinder, in accounting for refills the deposit is refunded on an empty cylinder when it is returned and a new deposit for the full cylinder is charged.

 

[Hood]

I can see why SGS took guidance from HMRC on this the wording is open to lots of interpretation, the extract above relates to the hire of goods but SGS do not hire cylinders, you pay a deposit towards the replacement cost of a cylinder, not a sum to cover a rental period.

That may be so (grey area) , as I said previously I probably would have had no problem if the Vat would also be refunded but they told me that the VAT portion was not refunded.
It sounds like however SGS charge VAT to the distributors and obviously they will claim the VAT back so then it is up to the distributor as to whether they decide that VAT needs charged or not.
I do however agree with Alan at SGS that he can't be expected to refund the VAT when it is another company that has charged it.

EDIT
SGS has replied before me and it looks like what I said above may not be the case regarding them charging and the distributor claiming it back via the Government, seems quite a messy way for things to happen but I am no accountant thankfully.

 

[Agautosport]

That may be so (grey area) , as I said previously I probably would have had no problem if the Vat would also be refunded but they told me that the VAT portion was not refunded.
It sounds like however SGS charge VAT to the distributors and obviously they will claim the VAT back so then it is up to the distributor as to whether they decide that VAT needs charged or not.
I do however agree with Alan at SGS that he can't be expected to refund the VAT when it is another company that has charged it.

The VAT on a deposit should be refunded , I would be very interested to hear about any instances where anybody is told that the VAT is not refunded.

 

[Hood]

The VAT on a deposit should be refunded , I would be very interested to hear about any instances where anybody is told that the VAT is not refunded.

Well I wasn't charged VAT so I will leave it at that.

 

[Retired]

Hi,

I don't expect you to pay the full refund Alan and never have; I expect Replacement Services to pay the refund who are your agents;

If you return the cylinder complete to the distributor I will insure that you are not charged the 25% restocking charge.
(That is the distributors standard charge for anything returned , nothing to do with us but I can make sure that you receive a full refund)

I'm not misreading you at all because of the statement you made quoted above; "I can make sure you receive a full refund" How can I misread this? You also ensure I won't be landed with the 25% restocking charge. I'm happy to return the cylinder to Replacement Services next Monday if possible but any day next week. I'm now asking you in a polite manner to please make this happen.

Kind regards, Colin.

 

[Agautosport]

Hi,

I don't expect you to pay the full refund Alan and never have; I expect Replacement Services to pay the refund who are your agents;

If you return the cylinder complete to the distributor I will insure that you are not charged the 25% restocking charge.
(That is the distributors standard charge for anything returned , nothing to do with us but I can make sure that you receive a full refund)

I'm not misreading you at all because of the statement you made quoted above; "I can make sure you receive a full refund" How can I misread this? You also ensure I won't be landed with the 25% restocking charge. I'm happy to return the cylinder to Replacement Services next Monday if possible but any day next week. I'm now asking you in a polite manner to please make this happen.

Kind regards, Colin.

As I am not in the office now I am not able to copy and paste your email but you did actually ask me to refund the VAT you had paid TBR!

I think you are getting confused, I will make sure that you receive a full refund for the gas and the deposit , is that clear enough?

Alan

 

[Retired]

Hi,

Thanks Alan; yes clear enough. Please let me know when I can return the cylinder.

Kind regards, Colin.

 

[Agautosport]

Hi,

Thanks Alan; yes clear enough. Please let me know when I can return the cylinder.

Kind regards, Colin.

As I am away from the office on Monday send an email to the email address you have used previously and I will get someone to reply once we have spoken to the distributor.

Alan

 

[slim_boy_fat]

Sounds like this thread has run its course.