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Paying online – ‘cheque’ out an option…

by on September 9, 2013

Many agents are reluctant to pay planning application fees on clients’ behalf at the same time as submitting online because it is widely believed that billing clients for those fees later is subject to VAT.

So the preferred method for most agents remains asking the client to provide them with a cheque for the fee, which is posted to the LPA.

And one of the most common reasons LPAs are unable to register and validate applications is that the cheque is either held up in the post, or does not include the Portal reference and cannot be reconciled with the application – a waste of time and effort for everyone

But these fees need not be subject to VAT.

Information on  HMRC’s website indicates that a planning professional acting as a client’s agent should be able to class the planning application fee as a ‘disbursement’ that is not subject to VAT.

Further guidance is available on the HMRC website.

Through Smarter Planning, the Planning Portal is working with LPAs to review and streamline their processes for handling payments to avoid validation delays and save money for everyone.

Many LPAs now encourage planning agents to pay the fee online at the same time as submitting the online application, or to make a telephone payment and provide the PP application reference number.

It can’t do any harm to check out your tax position (or ask your accountant, they should know) and take a further step towards an all-online service.

  1. Gore, Rebecca permalink

    The other reason in addition to what has been mentioned. That agents do not wish for the fee to go through there books in order to keep their turn over down.

    • This is why I try not to pass application fees through my books – it would just increase my turnover beyond the VAT threshold (also passing money through my accounts arguably costs me money), and I’d have to start charging VAT – fine for commercial projects, but that means an extra 20% on my fees for domestic projects, then I’d price mysef out of a very competitive market…

  2. I have to say I do not like to pay clients planning fees only to have to claim them back off the client, but have done occasionally. But why should anyone things they are subject to VAT?. It is a disbursement, planning fees are not subject yet anyway to VAT so why would you then charge the client VAT after or pay the VAT man for something that it exempt from VAT!! does not make sense.

  3. Laurie Reader - Laurie Reader Designs permalink

    There are other problems with agents paying the fee on behalf of the client – particularly the amount if it is a large project. In practically all applications I have made through the PP I inform the client that as soon as I have a PP reference I will pass it to them and they pay over the telephone when the application is received by the LPA. They are usually anxious not to delay validation and I have not had a problem with this.

  4. Being ‘old school’ I don’t see on-line being the acclaimed panacea and the above just confirms my stance. I still submit applications in paper form with the cheque attached via Royal Mail thus avoiding problems with registrations etc.

  5. Penny Stephan - Les Stephan Planning Ltd. permalink

    As with Laurie, once we have submitted an application online we contact the client and arrange for them to pay the Council over the phone using a debit card and given reference number. This is a much easier and user-friendly option than cheques (particularly with the Royal ail issues!) and/or agents paying on behalf of clients. We haven’t had a problem yet.

  6. VAT wouldn’t be due on the application fee anyway. The real reason we try not to pay the application fees for our clients is that there is a potential delay in getting the fee back from clients.

    Most clients are very good about it but there are some that will delay for a month and even more because that’s the way their finance department works. So we are funding it for a month, may be okay for a domestic application but fees go up to some big figures.

    Asking the client to pay by phone would be good solution.

    We always include an accompanying letter as part of the application through PP saying that the cheque is posted the same day as the application is lodged. We wait until we have the cheque in our hands then we hit the submit button.

    What is annoying is immediately, (or as immediately as LA can act !), getting a incomplete application letter back from the council saying that a fee is due. Looks like they have not read the accompanying letter with the application which says the fee is in the post the same as the application is lodged.

    What is also annoying is my spell check on this blog does not know how to spell cheque !

  7. We have had clients lose their jobs during a project or have family issues, marriage break-ups, move areas to take up new jobs, we even had one client die. When this happens the project is cancelled and its often difficult to recover our fees and we are left with bad debts. Planning application fees can be costly and we simply wont pay fees for clients and risk not getting the money back. It is far safer to ask them phone up with the Planning Portal number and make a card payment. It also enables us to be transparent with project costs. It keep things very clear as to what is our fees and what is an external cost. Clients have even told us that previous practices they have used have charged them for example £500 for an application fee when the cost was less than £200.00. They found out later that they had been cheated and didn’t go back to that practice again.

  8. Andrew Hirst permalink

    Firstly I don’t see why The Planning Portal need to be involving themselves in this issue, as I understand it you exist simply to provide a facility, ie an online service to enable the submission of planning applications to local authorities in a centralised way. The way we operate our accounting systems is our own affair and outside your remit really.

    The issue of paying clients planning application fees was raised recently with my local authority as they drafted a new code of conduct for accredited agents which requires them to pay these fees within 24hrs, the implication is that agents should stump up from their own business accounts, a great liberty simply so the LPA can operate a ‘tidy’ system.

    The point here is that for any agents that try to operate under the current VAT registration limit, is that overall business turnover is taken into account. It doesn’t take much imagination to see that if we were to pay all planning fees that our turnover would soon exceed the relevant threshold.

    There is a lot of misinformation about this, I asked my accountant to check it out, he in turn passed it up the chain to a top accountant in the City , and he in turn discussed it with the ex head of HMRC. They checked the HMRC advice on the website and both concurred that if we paid clients planning fees then it would increase our exposure to VAT registration as it would increase our turnover.

    Consequently at my company we continue to operate a system which has worked well for as long as the Planning Portal has been in existence- it’s as others have already outline, ie we invoice the client for the planning drawings and when they have paid we submit the application. At that point we then email the client with the PP confirmation message, they then telephone the LPA and pay by Debit card. The only hiccup to this system which sometimes occurs is when our local LPA don’t answer then telephone!

    I would never rely on any generic online advice from HMRC, and my advice to others who wish to remain below the VAT threshold would be not to operate any system which increases business turnover unless you have had a letter addressed to you or your company which gives advice specifically relevant to you, otherwise there is a danger that you could find yourself in an awkward position should you ever be investigated.

    • Andrew,
      whilst it’s true to say thar 1App is at the core of our service it is not by a long way all we do.
      More than half of the visitors to the website come for planning and building advice and guidance and there are more than 2M downloads of the Building Reg’s.
      The purpose of this particular post was to offer advice on an issue that leads to more invalid applications than just about any other. We don’t just want any applications passing through the Portal, ideally we want them to have a good chance of being valid on receipt.

  9. Andrew Hirst permalink

    Invalid applications due to people paying by cheque is surely the concern of LPAs Chris. All they have to do is offer a telephone payment service, it’s so simple. Incidentally the VAT issue is being confused above, while we know of course that planning fees are VAT exempt, the point is that paying clients fees can draw agents past the VAT liability threshold, that’s why we don’t do it.

    • I understand your point Andrew but we see our role as not just being about the initial submission but about making the whole process of getting permission smoother and more transparent. If we see that agents are holding back from submitting only becaiuse of payment issues we have to try and help becausr anything that gives people an excuse not to e-enable is bad for business.

  10. Simon Evans permalink

    In the bad old days, I used to ask a client for a planning fee cheque before I submitted the application. It had two problems. One was that the client might forget and delay the application. The other was that I had to be sure of the application fee in advance.

    Like others here, I like the current system that allows an agent to submit an application without the fee, which gets followed up by a request for the fee to be sent directly by the client to allow registration. I generally do a screen print of the final page of the application that gives all the payment details, including reference, and email that to the client. It has proved pretty foolproof.

    I can see that divorcing the application from the payment does make things a tad harder for LPAs (as does having to print things out at their end), but now that planning fees are so high (pre-app fees, application fees, fees for discharge of conditions,…), they surely cannot complain too much?

  11. Michael Hayes permalink

    The simple answer is to remove the payment element from the validation process. Why can’t LPAs just automatically email the client with an invoice and a list of payment options on receipt of an otherwise valid application from the agent?

  12. Mike Grundy (Staffs CC) permalink

    I was interested to find out about ‘Smarter Planning’ but the link is broken! I like the idea that LPAs invoice the applicant / agent as it should simply things but it would inevitably delay validation. LPAs woud need the payment before they start processing an application.

  13. What would be good is if the planning portal generated an invoice with a “pay now” button which can be sent to the client by email at the same time as we submit the application, the client (applicant) then pays it online and job done. I never pay my clients planning fees just in case they delay paying me back and never will do, so unless a new system like this comes in I stick to giving people the option of posting a cheque or phoning the council to pay by card.

  14. While any help on this that the portal can provide is obviously welcome, the idea that planning agents don’t know the VAT implications on sales seems somewhat strange and I have to say perhaps a little naive. Any agent (or their adviser) who does not know this would not be in business for very long.

    I rather suspect that, as many have said, the reason agents don’t pay the fee on submission is that it would impact their cashflow, bad debts, VAT thresholds and admin costs (esp. if a refund were needed for whatever reason). Its also easier to let the authority calculate the fee if its a little more complex than normal.

    Given this, why would any Rational Agent (in both senses of the term) do anything else? Some may call this cost shunting to the LPA others, but for agents its good business practice. Its in the same vein as the costs saved for the agents/ shunted to the LPA for printing and the costs for maintaining the IT infrastructure involved.

    This is why we’ve seen total costs of ownership for use of the portal of up to £50k/ annum for an individual LPA – EXCLUDING the cost to the wider public purse of providing the portal itself.

    Unfortunately this means that where the primary goal for our clients (LPAs) is cost savings we have been advising them to switch off their portal link – or at the very least do nothing to encourage take up unless/ until the balance is switched so that it saves LPAs money as well as the agents.

    One simple option here is a pay now link – which can be actioned by the applicant and the application goes nowhere until the fee is paid. It would not be unusual to pay before receiving service in any other commercial transaction on the web (for example you wouldn’t receive the funds for the mortgage that may ultimately be paying for the work until you’ve paid for the arrangement fee).

    As things stand the process risks giving the impression that its been designed with a lack of commercial acumen and understanding which would be concerning to LPAs and tax payers alike.

    • Can I just point out that it is important when considering the cost or value of the Portal to local Authorities not to single out the application process as a standalone process.
      If an authority switches off its connector, will it also return to producing its own paper forms as was the case before we began. Has the cost to a local authority of maintaining the ever changing question sets to reflect new legislation been factored in and what about the form design costs.

      Has the resource cost of locally produced and maintained online and offline guidance been costed into the equation. We deliver around 10,000,000 pages of guidance and advice each month to the benefit to each authority and the hundreds of thousands of citizens and businesses that use Portal, rather than clogging up contact centres and front desks with costly enquiries.

      Aside from the direct cost equation how much officer or admin time would be taken up at the front desk alone taking in the 30,000+ applications we process each month.
      That’s before you consider the carbon impact of all those unnecessary journeys.

      What about compliance, our feedback tells us that online applications are much more likely to pass validation on submission than offline applications, saving everybody time and money and speeding up the process into the bargain. Or the co-location of building reg’s and planning info etc, etc.

      Clearly there are technology and cultural issues to overcome and each and every authority will have its hurdles to surmount but in my experience its where these issues have been addressed by authorities as part of a whole service solution that significant benefits can be found.

      I refute the idea that it costs anyone authority £50k per year to work with the Portal, particularly if the full value of the services that we provide to an authority are taken into account. Indeed feedback from many authorities suggests that if e-working has been fully and robustly implemented throughout the service there are significant cost savings and efficiencies to be made .

  15. Telford & Wrekin Council permalink

    I can see what the Portal is trying to do and that is to seemlessly allow planning applications to be submitted electronically and allow the payment to be made at the same time. Any site that offers such service but does not allow you to pay as well would be the subject of criticism as this service is the norm now. Whether agents decide to pay the fee or not is their call but from an LPA point of view the application is incomplete until such fee is received, however long it takes for that payment to come through. Also agents act on behalf of the applicant and it’s their responsibility to ensure payment is submitted to the LPA and any incomplete letter is therefore sent to agent as the applicant is paying for that service.

    I do not understand why you would want to turn the connector off. I cannot comment for any other authority but we work a paperless environment and therefore with Portal applications it automatically creates temporary records in our back office system (including dual applications), there is no printing of plans, information/drawings/attachments are all automatically uploaded into the relevant areas, fees area is also automatically populated included online payments. We also carry out ALL consultations electronically. Take that away I hate to think what the costs are if it were all to be done manually let alone the errors that go with it. Yes there are cost implications of setting this up in the first place but benefits are soon realised especially now with the reduction of staff (not sure where the £50k per annum figure is coming from). Each LPA works differently and some are more advanced that others. With the development of technology surely we want to be moving forward rather than be stuck in a rut.

    Costs are also realised for agents as their is no requirement to submit an original and 3 copies of plans and attachments. Just the thoughts of one LPA.

  16. Interesting post from Alasdair, especially the section about the costs of the Portal. We are in a similar position to Telford, ie council that does encourage our agents and applicants to use the Portal, and think its an integral part of our ‘e’ planning/’e’ commerce and ‘open for business’ agenda. We do get the befits of automatically creating records in the back office, although we are not yet at a paperless stage, more like a ‘less paper’ stage.

    That said, we are not immune from the need to cut costs, so I would be interested to understand where the costs of upto £50 k pa for each LPA to use the Portal has come from, and to know what the business case might be for turning off the portal. Does this mean we go back to paper only? It would be good to hear from any LPA that has switched off the portal link and see what savings they are making.

  17. I don’t pay planning fees for clients in case they don’t pay me. That will not change. It is bad enough when a client does not pay for my time and effort on their behalf, but when they don’t re-pay actual money expended… I think the “Send invoice to client” button idea is a good one.

  18. Nigel Hancock permalink

    I really cant begin to understand where this idea that using the portal costs LPA’s more money than going back to a paper based system unless it is just being used as a system to collect applications that are then printed off. We have moved to an electronic planning application system and do not have paper applications any more. Technology has moved on leaps and bounds in the last few years and a portion of my staff work remotely. This would not be possible with the paper chase that we used to engage in and has enabled significant cost savings beyond just the printing and storing of paper. Using electronic workflow and the automatic downloading of online applications into our back office system saves considerable time on indexing and re-keying information that has already been electronically captured.

    We used to be in a ridiculous situation where we would print off plans to create a file, only to rescan the whole thing three years later when it was removed from the shelves for archiving. We have realised significant savings and efficiencies from moving to an electronic application and I would urge other LPA’s to do so.

    Even if the Planning Portal didn’t exist anymore and you couldn’t submit an online application, I have no doubt that the vast majority of agents would send their completed applications on an email (or a number of different emails to get around email size restrictions) and expect the LPA to deal with the submission that way. We do receive a few applications via this method and have no problems creating an electronic application in the same way as if had been submitted via the portal.

    The main issue seems to be all about the payment of an application. How hard can this be? If the application is submitted without the cheque, we just hold onto it until we receive the cheque and then start the validation process immediately after. It’s a bit of a faff to consolidate the two but if that’s what works for agents then so be it – its still a lot better than having a paper application. We also get applicants paying over the telephone once the agent has given them the planning portal reference number.

    Just my thoughts, but we wont be turning off our connector any time soon as I can assure you that it would cost us money to do so rather than save anything.

  19. Cannot see what the problem is, client pays fee into my account via BACs or I put their cheque/cash into the bank and then pay the fee to the authority via pp with debit card. Money goes into my account and out again, no vat applied, the accountant and vat/tax man/woman can see the whole process on the bank statement. Easy as cake! and yes I am VAT registered.

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