(Another) VAT question

[whattodo]

Hi everyone,

I'm sure you've had a lot of VAT questions lately but here's another one.

The change in the VAT recently got me reviewing my records and i've got a question about the first year discount on the FRS, from 13% to 12%. Say your first year went from the 15th Jan 2007 to 14th Jan 2008, you had a VAT return on 31st Jan 2008, but all the invoices for that quarter had been prior to the 14th of Jan 2008. Would the 12% rate apply because you invoiced during the first year, or the 13% apply because the VAT return is just in the second year?

I know (hopefully correctly) that with the recent change to VAT it's the prevailing rate when you invoice that determines the flat rate you pay on your return. I.e. if you work during Nov 2008, invoice in December at 15% then you pay the new flat rate of 11.5% on your VAT return for that invoice. Correct me if i'm wrong!

Thanks for the help

[DonaldG]

On your first question the lower rate would apply, if you invoiced everything by the 14th.

Again you are correct on your second point anything invoiced in December would be at the lower rate. But watch the 14 day rule - ie the tax point has to be within 14 days of the date of supply.

For example if the date of supply was 15 November, even if you invoiced in December then you would have to use the higher rate.

If the supply was on from the 17 November onwards then the lower rate will apply because the 14 days takes you into December.

I hope this helps, but let me know if you need more info.

Only 13 months until the VAT Rate changes again - happy days for accountants like me!

[Hex]

On your first question the lower rate would apply, if you invoiced everything by the 14th.

Again you are correct on your second point anything invoiced in December would be at the lower rate. But watch the 14 day rule - ie the tax point has to be within 14 days of the date of supply.

For example if the date of supply was 15 November, even if you invoiced in December then you would have to use the higher rate.

If the supply was on from the 17 November onwards then the lower rate will apply because the 14 days takes you into December.

I hope this helps, but let me know if you need more info.

Only 13 months until the VAT Rate changes again - happy days for accountants like me!

Don't you think that most contractors would be considered continuous supply, in which case I understand that you can apply 15% if you make a tax point at the beginning of December by invoicing on that date - even if it covers supplies over 14 days old?

[DonaldG]

Don't you think that most contractors would be considered continuous supply, in which case I understand that you can apply 15% if you make a tax point at the beginning of December by invoicing on that date - even if it covers supplies over 14 days old?

Yes, good point, the official HMRC guidance is on a pdf on the following link

http://www.hmrc.gov.uk/pbr2008/measure1.htm

The 14 day rule is really for goods, but not sure contractors would strictly come under continuous supply (effect on IR35?).

I am certain that for any reasonably small amount VATman isn't going to be to concerned what the rate is on the crossover period.

[whattodo]

Thanks for clearing up the first point Donald, much appreciated

Interesting point about the continuous supply. After reading the letter sent out by the HMRC i'd thought an invoice issued in December for continuous work done over November would be at the 15% rate. But then i'm no expert!

The previous comment about there being hardly any difference is true though

[css_jay99]

slightly lost,

I am about to invoice my Agency for days worked for period 17-NOV to 30-NOV period ( last day of work is today 29th).

1) Can I invoice on 30-NOV and charge 17.5% ? (Agent may have issue with this ?)
2) If i invoice on 01-DEC should it be at 17.5% ?


cheers

css_jay99

[Gonzo]

slightly lost,

I am about to invoice my Agency for days worked for period 17-NOV to 30-NOV period ( last day of work is today 29th).

1) Can I invoice on 30-NOV and charge 17.5% ? (Agent may have issue with this ?)
2) If i invoice on 01-DEC should it be at 17.5% ?


cheers

css_jay99

1. Yes, I can't see why they would have an issue, they just reclaim VAT paid in any case. Agency I am using at the moment has specifically asked for November supplies to be invoiced on 30th November so that the 17.5% rate applies.

2. No. If the invoice is raised on 1st December then 15% VAT should be added. See 1. above.

[css_jay99]

[QUOTE=Gonzo;703532]1. Yes, I can't see why they would have an issue, they just reclaim VAT paid in any case. Agency I am using at the moment has specifically asked for November supplies to be invoiced on 30th November so that the 17.5% rate applies.
QUOTE]

cheers, would be doing the invoice today

css_jay99