Claiming VAT on Invoices

[TheFaQQer]

it depends on the system you use...for example in FreeAgent, you can just use self-billed invoices and record payments as "Sales" when you reconcile your bank account BUT, if the payment is later than the invoice date and falls into a different VAT quarter, FreeAgent will allocate the sale to the wrong VAT period as you can't specify an alternative date/tax point when reconciling bank transactions.

Hence, when I get a self-billed invoice, I create a duplicate in FreeAgent that I can allocate the payment to and ensure it goes into the right VAT return.

Its true however that the self-billed invoice is the correct one to keep for VAT purposes and you shouldn't send your own invoice to anybody.

Yes - it depends how you read "I have to..."

I read it as "by law, I must" kind of thing (hence my post) rather than "because of the software I use, I need to".

[TheFaQQer]

Thanks for the replies guys. I have 'Self billing' from the Agency but there is no VAT details on them even though I did supply the Agency with these details when I started.

If there's no VAT on there and there should have been, then the agency should sort it out.

If there's incorrect VAT on there (eg. you said £400 a day meaning £400+VAT and the agency meant £400 including VAT) then that's a different argument.

[TheCyclingProgrammer]

If there's incorrect VAT on there (eg. you said £400 a day meaning £400+VAT and the agency meant £400 including VAT) then that's a different argument.

If the agency has happily billed for £400/day without any VAT at all (OP said the invoice didn't mention VAT), then I think they'd have a hard time trying to argue that the rate was £400 inc. VAT. If this was the case they should have been invoicing for £333/day if they didn't think OP was VAT registered.

[Worcsman]

Thanks for the replies guys. I have 'Self billing' from the Agency but there is no VAT details on them even though I did supply the Agency with these details when I started.

I agree - my Accountant should have advised me of this when I first met him but there was no mention of it. Wish I had done more research myself. I have contacted the Agency and will bill them separately for the VAT.

Thanks again.

HMRC say "You can’t charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.

You should increase your prices to allow for this and tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT."

Just something to keep in mind

[SteelyDan]

Then your agency should have sent you copies of the invoices (they are still YOUR invoices) and they should have added VAT. But they wouldn't have done this unless you told them you are VAT registered and supplied evidence of this (VAT registration certificate).

You're going to have to speak to them about this and get them to either re-issue the invoices or accept a VAT only invoice for the missing VAT. They have every right to grumble about this as its a PITA but they shouldn't deny it - the VAT should have been charged and they can't dispute that.

Edit: read your above post. If you gave them your VAT details, then it sounds like they've cocked up. Get them to fix it.

+1
My SelfBills clearly show the VAT amount paid.

[Contreras]

it depends on the system you use...for example in FreeAgent, you can just use self-billed invoices and record payments as "Sales" when you reconcile your bank account BUT, if the payment is later than the invoice date and falls into a different VAT quarter, FreeAgent will allocate the sale to the wrong VAT period as you can't specify an alternative date/tax point when reconciling bank transactions.

Hence, when I get a self-billed invoice, I create a duplicate in FreeAgent that I can allocate the payment to and ensure it goes into the right VAT return.

Even for non-self-billing, payment date is typically later than the invoice date and occasionally the two will fall into different VAT periods. So I don't understand the problem that you are fixing here.

HMRC allow VAT to be accounted on either invoice date* (normal accounting) or payment date (cash accounting), so I still don't understand the problem. If the software only allows one method then just do that.

* unless payment comes first, which is rare but possible.

[BolshieBastard]

Yeah, you need a new accountant IMO. Are you on Flat Rate Scheme? You almost certainly should be.

Forgive me going OT, but because you appear to have knowledge gaps have you considered the following: Are you clear on your salary / dividend level? What about RTI? Have you made any corporation tax provision?

Come off it Alan, the invoicing stuff would \ should have been made clear to him by the agency.

Every agent I worked with sent out info with the contract stating how to raise an invoice including VAT if registered, what needs to be on it and when you need to submit it.

[TheFaQQer]

Come off it Alan, the invoicing stuff would \ should have been made clear to him by the agency.

Every agent I worked with sent out info with the contract stating how to raise an invoice including VAT if registered, what needs to be on it and when you need to submit it.

And the OP missed that, if it was made clear, and missed the fact that they were underpaid by 20%. Alan's point (I think) is that if you fail to notice being underpaid by 20%, what else are you missing, and is everything set up to mimimise the chances of something serious being missed.

[TheCyclingProgrammer]

S

Even for non-self-billing, payment date is typically later than the invoice date and occasionally the two will fall into different VAT periods. So I don't understand the problem that you are fixing here.

I use accrual based accounting, which is how FreeAgent is configured.

If I issue an invoice in FreeAgent the invoice date determines the VAT period regardless of when it gets paid.

If I get a self billing invoice and just record the payment as sales when I get paid and reconcile my bank statements, FreeAgent uses the payment date to determine VAT period as it doesn't know what the invoice date (how could it) is unless I create a duplicate invoice with the right date to match it to.

What FreeAgent should let me do is specify the tax date when u explain a bank transaction as sales but it doesn't so creating an invoice is the only way around it.

[Alan @ BroomeAffinity]

S

I use accrual based accounting, which is how FreeAgent is configured.

If I issue an invoice in FreeAgent the invoice date determines the VAT period regardless of when it gets paid.

If I get a self billing invoice and just record the payment as sales when I get paid and reconcile my bank statements, FreeAgent uses the payment date to determine VAT period as it doesn't know what the invoice date (how could it) is unless I create a duplicate invoice with the right date to match it to.

What FreeAgent should let me do is specify the tax date when u explain a bank transaction as sales but it doesn't so creating an invoice is the only way around it.

I'm not FreeAgent expert but Im pretty sure they can handle Cash Accounting for VAT. Which means the relevant date for VAT is the payment date NOT the invoice date. Makes no difference to the overall VAT payable in the long run but it will help cash flow short term

When to account for income and expenses: part 2 - FreeAgent