If an IP worked on behalf of the individual but charged the creditors rather than the individual, the creditors would recover the VAT and thus, on a typical 20% percentage the creditors could receive another 3.5p in the pound - any reason it is not done this way???
Output VAT charged by IPs on their fees cannot be reclaimed by the individual concerned, regardless of whether they are VAT registered or not.
The original poster makes an interesting point, and I agree that this would produce higher returns, but logistically it would be too difficult to administer across the board, and creditors accept that they are indirectly bearing the VAT costs.
Very appropriate!! Not so sure that the company who went to tribunal really understood the knock on effect for many many IP's. Or perhaps they did and may explain some recent changes.
VAT Exemption/Partial exemption is, in theory, a simple concept. Application in the real world can be a complete nightmare!! It could well leave a great deal of IP's far worse off, not something that's very helpful in these austere times.
Last edited by Ivoryfalcon on Thu Jul 28, 2011 4:30 pm, edited 1 time in total.