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Readers' forum: On the waterfront

09 October 2018
Issue: 4667 / Categories: Forum & Feedback

The VAT liability on a turbine repair.

Our company is contractually due a payment from our supplier. Perhaps we could describe it as a payment under a warranty relating to a turbine located offshore. The intention under the contract is that the supplier should contribute towards the costs of bringing the turbine from offshore and delivering it to the quayside. The machine is then handed over to the supplier who is responsible for repairing it before returning it to our company to be reinstalled.

Ownership of the turbine remains with our company but the turbine supplier has sole responsibility for completing the repair.

The payment is a fixed amount and is unrelated to the actual costs of delivering the turbine to the quayside.

When we invoice the turbine supplier for this payment should we consider it a compensatory payment and therefore outside the scope of VAT? Alternatively has a supply of services taken place...

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