The decimal point that nearly cost us £16000

We were recently buying key blanks from Norway. When they arrived in the UK, we were given a bill for VAT by the courier. This is standard procedure: when importing from Norway, we don’t have to pay Norwegian VAT, but UK VAT on delivery.

The trouble was that the bill was for £16000 of VAT—sixteen thousand pounds!

Wait… what?!

Yep, it’s true, the bill was enormously high. In fact, the VAT bill was twenty times as high as the value of what we’d bought.

The invoice was for £800, or 10240kr (Norwegian kroner). The exporter had filled out a customs declaration form, and had already converted the currency into pounds. The VAT on £800 of goods, at 20%, should therefore have been £160 exactly.

Trouble is, they intended to write £160.00, but missed out the decimal point! The invoice said £16000 of VAT was payable!

But you can claim VAT back, so what’s the problem?

Ahhh, yes, if only it were that simple. As a VAT-registered entity, we just need to submit a VAT receipt to HM Revenue & Customs, and they’ll pay it back to us.

Except with this bill there are a few complications:

• The £16000 bill was a mistake: Given that the invoice was due to a clerical error, we didn’t actually owe that money, so why should we pay it?
• £16k is a lot of money to pay out in one go: Even if we did decide to pay it, £16k is a huge pile of money, especially since there’s no huge order to accompany the expense. Normally, if you fork out large amounts of money on parts, you’ll have all that money rolling back in following the job(s) you use the parts on. Not this time, though, since we didn’t buy that much stuff.
• There’s always a risk you won’t get it back after all: Given that we didn’t actually owe the money, HMRC could easily say “We’ll only pay you back the actual VAT. You’ll have to collect the remainder from the courier company to whom you paid the money, as that’s their debt to you.” We’d be stuck, then, fighting a stupid battle with an enormous delivery firm. We’d be unlikely to win.

As you can imagine, we were deeply reluctant to pay this.

So, what happened?

After many months of back-and-forth with the debt-chasing courier company, HMRC got involved and the whole matter was cleared up. It was agreed that the decimal point was missing, and we paid the correct amount of £160. Phew!

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Aside from all other layers of bureaucracy caused by barriers to trade (e.g. very strict import/export rules in countries like South Africa and India) simple clerical errors like this can cause massive headaches for buyers, sellers, couriers and governments alike.