tax invoice / normal invoice

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Forums › Finance and wealth management › tax invoice / normal invoice

aucklander

477 posts

Ultimate Geek

#239765 2-Aug-2018 21:28

Hi,

I will try to be brief. I have engaged a trades person to do some work (architectural drawings for a house extension, needed for the building consent application). This person sends me a document titled "invoice" which does not have an identification number or code, and it is showing a separate charge for GST, which is added to the total.

As far as I know, if you charge GST then the document needs to be titled "tax invoice" very clearly (unless goods are of very low value, this is not the case here).

I have already made payments under this system and he expects even more payments to be made.

Questions:

1. is it legal to issue a document titled "invoice" (not "tax invoice") and show that you charge tax 15% at the bottom, which gets added to the total? How can I use this to my advantage? We have run into serious disputes and the "relationship" is anyway damaged.

2. Should I carry on paying these claims called "invoices" and then go to small claims tribunal at least to get my GST back based solely on the fact that he did not use for charging GST a document as per IRD guidelines? I believe that paying an invoice is a recognition of the charges, and consequently you cannot dispute it if you already paid it, but what I will be disputing is not the actual charge (services delivered at the agreed rate), is the GST I was charged on what I believe is a document not fit for purpose. Even if we agreed on a certain $/hr+gst, I am not changing the deal, I am still paying the $/hr agreed but the GST was in my opinion charged in the wrong way.

Does it make sense?

I have to keep paying him, even if he doubled the price when job is 95% done and if I am not paying what he is asking then he stops working and will not issue the drawings, cannot apply for consent, I loose everything and have to start all over again from scratch with a different draughtsman. Drawings have already been through structural engineer approval, and the draughtsman knows that abandoning everything now means the charge for the engineer as well, as they will have to approve other set of drawings, done by a second person. Plus the delay of at least 3-4 months to get another draughtsman available... He won't explain why the additional charges either, total silence, only threatening and reminding me about the overdue payment (which is the subject of the dispute). He is not interested in providing any explanation.

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3885 posts

Uber Geek

#2067176 2-Aug-2018 21:55

You need to find out if he is actually registered for GST. Are the total costs over 60K by any chance? As if he is registered for GST, you will still have to pay the GST.

He might just be using some invoicing software that is not designed for the NZ tax laws. Meaning the software is not saying "tax invoice"

And assuming that this job is not for business purposes, the CGA applies. Which means that his charges must be reasonable.

Is he actually an architect or not?

andrewNZ

2487 posts

Uber Geek
Inactive user

#2067183 2-Aug-2018 22:20

I think:
If your only gripe is that he has named the invoice incorrectly, you are being very unreasonable.

If you are upset with the hourly rate, check them against the original agreement.

If the charges are more than indicated, have you been making changes to the design.

Every hour is chargeable.
Every change takes time to make.
If you pay with the intent of claiming it back via court/tribunal, you may be disappointed with the results.

That's my random ramblings.
There is clearly a lot more to this problem than you've posted, but my gut feeling is that both parties are an equal in creating the problem.

BlinkyBill

1443 posts

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Inactive user

#2067213 3-Aug-2018 04:47

A tax invoice has a legal definition:
For supplies worth more than $1,000 (including GST), the tax invoice must clearly show:
- the words "tax invoice" in a prominent place
- the name (or trade name) and GST number of the supplier
- the name and address of the recipient of the supply
- the date the invoice was issued
- a description of the goods and/or services supplied
- the quantity or volume of the goods and/or services supplied.
- Examples: litres of petrol, hours of labour, kilos of potatoes etc.

It must also have either:
- the amount, excluding tax, charged for the supply
- the GST and the total amount payable for the supply, or
- a statement that GST is included in the final price if it has been.

A tax invoice is only useful to you if you are gst-registered and need to include the gst in your gst return. But you can ask for a tax invoice if you want to.

Q1. Totally normal. You can ask for a tax invoice if you are gst-registered.
Q2. In a professional relationship it is standard to charge a rate with additional gst added. Completely standard. Your issue is with the quotation - rate quoted should be $x per hour/day + gst. Invoice reflects that. If you did not get a written quotation you will fail at the small claims court - unless your architect is not gst registered in which case she should not be charging gst.

Whether this is a tax invoice or not is irrelevant to your issue. The issue is, are the charges consistent with your written quotation?

BlinkyBill

1443 posts

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#2067214 3-Aug-2018 04:53

If your architect is gst-registered, btw, then she has no option - she must charge the tax. The tax is not retained by her, she passes it on to the IR - she collects the tax on behalf of the Govt. Why you would be disputing this is extremely unclear - you pay gst on pretty much everything.

aucklander

477 posts

Ultimate Geek

#2067231 3-Aug-2018 08:38

Thank you everyone to take time and give your feedback and input.

This person appears on a search on internet, as "architectural technician", on NZ Green Building Council. His company is registered in 1999 somewhere in Hastings and the tax returns are filed by someone registered there. Lots of info can be found on "businesscheck.co.nz" and "opencorporates.com" - and amazingly enough, you can even get his home address from there.

the main grievance is that I have gave him concept drawings, he quoted 80 hrs for the drawings, consent lodgement and dealing with Council RFIs. Half way through he started to complain about him getting the estimate wrong, the 80 hrs will not be enough, he already been through many more hours, but acknowledged "this is my problem and I will deal with it".

a couple of months later he sends me invoice for additional work (extra charges) which are not detailed as a breakdown, just one charge for 35 additional hours, so I have no way to assess why he is charging more. There was a variation which he estimated to be 15-20 hrs and it was incorporated in the design. Say 20 hrs. I have asked repeatedly for an explanation of the additional time charged but he always comes back that I need to pay, the payment is overdue, I am destroying the goodwill between us and I should be careful, as I will need his help in the future, which all resembles some sort of blackmail...

On top of this, due to the mistake in estimating, he also (unilaterally) excluded from his scope of work the lodging of application with Council (which became extra $1200+gst) and responding to future council RFIs (just my guess - these could be maybe another 10-15 hrs but only if I "play nice"?).

The first 80 hrs (as quoted) are already paid. I offered to accept the additional 35 hrs as full compensation for completing original scope of work but he refused, he wants extra pay for lodging to Council and future changes asked by Council.

Initially he promised to send a letter of understanding outlining what we agreed on, but this never came through (I have engaged him late 2017 but actual work only started to happen Feb-Mar 2018). He said he does not trust formal contracts (now I see why). So basically, there is no other written agreement other than his email asking for 80 hrs (based on my original concept drawings) and my response that I accept the quoted sum and I wish to engage his services.

The way I see it the civil court would be the only place with powers over this dispute, as I am not actually claiming money (small claims tribunal), I want a ruling to enforce the original agreement.

My original post about tax invoice and GST, etc, was an attempt to try and see if I can get something back - legal proceedings through the court will be very expensive, and a DIY approach to that situation would be extremely stressful. Lawyers quoted $400 - $500/hr +GST for a first consultation only, who knows what the charges could be for preparing a case and representing in Court... We are discussing here about an original quote of $6400 (incl) which might end up costing $10,000 (incl); agreed variation not included here, as I accept that.

Senecio

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#2067237 3-Aug-2018 08:49

Not a nice situation to be in. I wish you all the best in getting it resolved in your favour but I echo the responses of others. Trying to claw back some costs on a technicality is not the answer.

eracode

Smpl Mnmlst
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#2067242 3-Aug-2018 09:08

@aucklander

You said: “This person appears on a search on internet, as "architectural technician", on NZ Green Building Council. His company is registered in 1999 somewhere in Hastings and the tax returns are filed by someone registered there. Lots of info can be found on "businesscheck.co.nz" and "opencorporates.com" - and amazingly enough, you can even get his home address from there.”

Is this person registered with that organisation? Are you able to complain to them - do they have any Disputes Resolution procedure? If not this organisation, maybe any other organisation he might be registered with e.g. Institute of Architects....?

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Bung

6403 posts

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#2067262 3-Aug-2018 09:29

Since you haven't submitted your plans yet this may not be relevant but a friend has finally got his consent. When I asked what the problem was he said that the Council now wanted a lot more detail in the drawings than his designer had been accustomed to providing.

Pumpedd

1759 posts

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#2067298 3-Aug-2018 10:13

Him not showing GST number on his invoices is a big red flag.

mdf

3507 posts

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#2067401 3-Aug-2018 11:53

The Construction Contracts Act provides for quite a few consumer protections for building contracts, including design and engineering work for building work (see subsection 1A).

One of the key requirements for construction contracts include a disclosure sheet, telling you how you can resolve disputes. This is mandatory for $30K+ work, but can be asked for for sub $30K work and must be provided (sounds like you're in the on-request category). Many architects are members of a professional body that includes a way of resolving disputes without going to court, but I've never heard of an "architectural technician" so don't know. But I'd start by asking for a copy of that.

Like @andrewNZ said, I think you're grasping at straws if the only issue is an incorrectly labelled invoice (and in fact your ArchTech might not even be GST registered). The substance of your complaint is about charging/price escalations. You're better off focussing on that rather than trying to ping Al Capone for spitting on the sidewalk.

In general, have a look at the Know Your Rights document on building.govt.nz - lots of info there.

Do bear in mind though that any kind of complaint may well disincentivise any contractor from completing your work. I'd suggest as a practical measure insisting on being given copies of all the work that has been done to date. If the worst comes to the worst, at least you're not starting from square one and may be able to find someone else to complete the work.

BlinkyBill

1443 posts

Uber Geek
Inactive user

#2067724 3-Aug-2018 19:55

Pumpedd:
Him not showing GST number on his invoices is a big red flag.

No it isn’t. Disclosing a gst number is only required on a tax invoice, which is only relevant if the invoicee is gst registered and needs to manage their own gst returns.

I am surprised some people don’t understand gst.

BlinkyBill

1443 posts

Uber Geek
Inactive user

#2067727 3-Aug-2018 19:59

mdf:
The Construction Contracts Act provides for quite a few consumer protections for building contracts, including design and engineering work for building work (see subsection 1A).

One of the key requirements for construction contracts include a disclosure sheet, telling you how you can resolve disputes. This is mandatory for $30K+ work, but can be asked for for sub $30K work and must be provided (sounds like you're in the on-request category). Many architects are members of a professional body that includes a way of resolving disputes without going to court, but I've never heard of an "architectural technician" so don't know. But I'd start by asking for a copy of that.

Like @andrewNZ said, I think you're grasping at straws if the only issue is an incorrectly labelled invoice (and in fact your ArchTech might not even be GST registered). The substance of your complaint is about charging/price escalations. You're better off focussing on that rather than trying to ping Al Capone for spitting on the sidewalk.

In general, have a look at the Know Your Rights document on building.govt.nz - lots of info there.

Do bear in mind though that any kind of complaint may well disincentivise any contractor from completing your work. I'd suggest as a practical measure insisting on being given copies of all the work that has been done to date. If the worst comes to the worst, at least you're not starting from square one and may be able to find someone else to complete the work.

Again. Some of this commentary shows an ignorance of what gst is. Being gst registered is a function of the size of the business, not their competence. The invoice in this case is probably acting correctly from a gst perspective. The fault, if any, is in the op not getting a written and clear quotation.

Tzoi

424 posts

Ultimate Geek

#2067743 3-Aug-2018 20:10

BlinkyBill:
mdf:

The Construction Contracts Act provides for quite a few consumer protections for building contracts, including design and engineering work for building work (see subsection 1A).

One of the key requirements for construction contracts include a disclosure sheet, telling you how you can resolve disputes. This is mandatory for $30K+ work, but can be asked for for sub $30K work and must be provided (sounds like you're in the on-request category). Many architects are members of a professional body that includes a way of resolving disputes without going to court, but I've never heard of an "architectural technician" so don't know. But I'd start by asking for a copy of that.

Like @andrewNZ said, I think you're grasping at straws if the only issue is an incorrectly labelled invoice (and in fact your ArchTech might not even be GST registered). The substance of your complaint is about charging/price escalations. You're better off focussing on that rather than trying to ping Al Capone for spitting on the sidewalk.

In general, have a look at the Know Your Rights document on building.govt.nz - lots of info there.

Do bear in mind though that any kind of complaint may well disincentivise any contractor from completing your work. I'd suggest as a practical measure insisting on being given copies of all the work that has been done to date. If the worst comes to the worst, at least you're not starting from square one and may be able to find someone else to complete the work.

Again. Some of this commentary shows an ignorance of what gst is. Being gst registered is a function of the size of the business, not their competence. The invoice in this case is probably acting correctly from a gst perspective. The fault, if any, is in the op not getting a written and clear quotation.

The invoice discloses GST on it so the person is either registered or treated as being registered

Tzoi

424 posts

Ultimate Geek

#2067744 3-Aug-2018 20:13

But there's no requirement to provide a tax invoice unless requested

mattwnz

20108 posts

Uber Geek

#2067745 3-Aug-2018 20:16

I am guessing with this type of work, and so many unknowns, such as all the extra demands a council may have, that an estimate rather than a quote, is how companies would price this sort of work. I would think it would almost be impossible to know how long something like this will take, especially if there are changes which usually have knock on effects.

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