+ Reply to Thread
Page 1 of 2 1 2 LastLast
Posts 1 to 10 of 19
  1. #1

    Nervous Newbie


    Join Date
    Mar 2009
    Posts
    7
    Thanks (Given)
    0
    Thanks (Received)
    0
    Likes (Given)
    0
    Likes (Received)
    0

    Default VAT-only invoice

    I started freelancing via my own limited company earlier this year. I had some logistical problems setting up a company bank account, which delayed my VAT registration.

    So when I issued my first two invoices I didn't have a VAT number and the invoices made no mention of VAT. However, I did inform the client when I sent the first invoice that I would be invoicing separately for VAT when my registration came through.

    When my VAT registration came through (with a back-dated "effective date"), I issued a third VAT-only invoice referencing the first two invoices.

    However, the client (and their accountants) are saying that because neither of the original invoices "carried a VAT item", they have "no obligation" to pay the VAT on the first two invoices.

    Is their understanding correct?

    Thanks.

  2. #2

    Godlike

    malvolio's Avatar
    Join Date
    Jul 2005
    Location
    Walking in the garden, dreaming of Olivia...
    Posts
    8,662
    Thanks (Given)
    0
    Thanks (Received)
    86
    Likes (Given)
    1
    Likes (Received)
    204

    Default

    If your invoices did not state "VAT Registration applied for" or something very similar, thus notifying them that VAT will be applied in due course, then they are right.

    However, since you won't have charged VAT on them anyway, what do you intend recovering? Start charging VAT from your next invoice. And learn the rules.
    Blog? What blog...?

  3. #3

    Contractor Among Contractors


    Join Date
    Jan 2009
    Location
    London, UK
    Posts
    1,501
    Thanks (Given)
    15
    Thanks (Received)
    66
    Likes (Given)
    67
    Likes (Received)
    177

    Default

    Quote Originally Posted by malvolio View Post
    If your invoices did not state "VAT Registration applied for" or something very similar, thus notifying them that VAT will be applied in due course, then they are right.
    Are they? I don't agree.

    Lets say for instance you issue an invoice (making no mention of VAT or VAT pending), then you apply for VAT, the registration comes through and it has been back-dated prior to the invoice date..

    You are now obliged to charge VAT on this invoice. Why wouldn't the client be obliged to pay it? And why would they care anyway seeing as they would just reclaim it as input VAT?

    The way I see it, putting "VAT registration pending" or similar on your invoice is a common practice but it strikes me as more a courtesy rather than any kind of legal statement. If the OP informed the client at the time he invoiced them that he would be issuing a VAT invoice once his registration comes through then they can have no complaints.

    However, since you won't have charged VAT on them anyway, what do you intend recovering?
    The VAT he is legally obliged to charge?
    Last edited by TheCyclingProgrammer; 13th July 2009 at 10:31.

  4. #4

    Contractor Among Contractors


    Join Date
    May 2006
    Location
    In the Sun
    Posts
    1,474
    Thanks (Given)
    0
    Thanks (Received)
    0
    Likes (Given)
    0
    Likes (Received)
    1

    Default

    Would suggest that the OP contact their local VAT office and ask them how to proceed before he ends up being out of pocket.
    I believe that you are still liable to pay any vat due post registration date even if you cant collect it from the party down the line.

    PZZ

  5. #5

    Contractor Among Contractors


    Join Date
    Jan 2009
    Location
    London, UK
    Posts
    1,501
    Thanks (Given)
    15
    Thanks (Received)
    66
    Likes (Given)
    67
    Likes (Received)
    177

    Default

    Quote Originally Posted by pzz76077 View Post
    Would suggest that the OP contact their local VAT office and ask them how to proceed before he ends up being out of pocket.
    I believe that you are still liable to pay any vat due post registration date even if you cant collect it from the party down the line.
    Yes, definitely and if the OP cannot resolve this with the client he will be out of pocket. I agree with your advice on contacting the local VAT office and I don't think they'll be too impressed with the OP's client trying to get out of paying VAT.

    Also, HMRC's Notice 700 makes it quite clear that the normal 30 day limit on charging VAT does not apply if you are waiting for your registration to come through, in which case you have 30 days from receipt of your certificate to issue a VAT invoice.

  6. #6

    Contractor Among Contractors

    blacjac's Avatar
    Join Date
    Dec 2007
    Posts
    1,402
    Thanks (Given)
    0
    Thanks (Received)
    1
    Likes (Given)
    2
    Likes (Received)
    11

    Default

    I agree with Lurkered path.
    I would send a copy of the company VAT certificate with another invoice and a letter explaining the situation.

    In the meantime contact the VAT office for advice, but in my opinion, the client and their accountants are eaither just trying it on, or are increadibly dim.....
    Still Invoicing

  7. #7

    Godlike

    Clippy's Avatar
    Join Date
    Nov 2006
    Posts
    6,702
    Thanks (Given)
    0
    Thanks (Received)
    0
    Likes (Given)
    0
    Likes (Received)
    0

    Default

    I had a very similar situation when I started trading.

    Wasn't VAT registered to begin with and all invoices submitted to my agency made no mention of VAT whatsover.

    A few months later, applied for VAT registration which came within 2 weeks and was back dated by a few weeks.

    This meant a couple of invoices which had already been submitted and paid needed VAT applied to them and collected from the agency.
    Hence, submitted a VAT only invoice to the agency cross-referencing the previous invoices.

    Agency duly paid the VAT only invoice no questions asked.

    At the time, I too was concerned that they may not pay and put this to my accountant who did agree that they could refuse to pay the VAT only invoice but they were legally obliged to.

    As others have said, I would re-submit the invoice with a cover letter highlighting the fact that they are legally obliged to pay the VAT due.
    If they still refuse, refer the matter to your local VAT office.

    Or you could call the VAT Helpline for advice.

  8. #8

    Still gathering requirements...


    Join Date
    Jun 2009
    Posts
    46
    Thanks (Given)
    0
    Thanks (Received)
    0
    Likes (Given)
    0
    Likes (Received)
    0

    Default

    Just to chime in I also had the same when starting out, agency paid the VAT only invoice without any problems 3 months after I started...

  9. #9

    Godlike

    malvolio's Avatar
    Join Date
    Jul 2005
    Location
    Walking in the garden, dreaming of Olivia...
    Posts
    8,662
    Thanks (Given)
    0
    Thanks (Received)
    86
    Likes (Given)
    1
    Likes (Received)
    204

    Default

    Chaps, of course you are required to charge invoices with VAT applied when you are VAT registered, but if you haven't told your invoicee that you will be retrospectively applying VAT at some point, they are under no obligation to accept the later application of a VAT charge to an invoice they had treated as VAT free. Apart from anything else, it would make their own VAT100 incorrect and break the audit trail that have to keep.

    That's why the rules say you should note on all relevant invoices that VAT registration is pending. The fact the OP loses the VAT he has to repay to HMRC is not part of the discussion: charging output VAT correctly is his own problem.

    The only course of action is to negotiate with the client and see if the original invoices can be cancelled and correctly re-issued (although personally I wouldn't hold my breath). However, the client is under no obligation to do anything to help. Tough, but them's the rules.
    Blog? What blog...?

  10. #10

    Super poster


    Join Date
    Feb 2008
    Posts
    3,399
    Thanks (Given)
    0
    Thanks (Received)
    1
    Likes (Given)
    0
    Likes (Received)
    0

    Default

    Hmmm, tough justice. Back when I started up there was about a 2 month delay is getting VAT numbers. I invoiced as "VAT pending, VAT only invoice to follow" and never had a hitch when I invoiced the VAT a couple of months later.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts

Content Relevant URLs by vBSEO 3.6.0 ©2011, Crawlability, Inc.