Newbie Contractor

[ASB]

Huh? If its outside the scope of VAT, it stays out of the flat rate VAT calculation. Actually.....I see your point, the supply may be 'Exempt', which then does cause flat rate VAT problems. To the OP, check if the supplies your partner will make are exempt from VAT. If they are, it might be better she starts her own company, or if the work will be piecemeal to start with (and not through any agency), perhaps she just registers as a self-employed person.

This may (or may not ) help;
HM Revenue & Customs

Greg,

It is the case that if something is outside the scope of VAT then it is excluded from the turnover for FRS. However, I recall when I was looking at FRS 90% of my turnover was to EU companies the balance UK.

Clearly the rules place this as exempt, so I was going to join the FRS. However the VAT office was not prepared to give a definitive statement and agree this (strictly I think they could only give post transaction approval). My fear was that they could potentially argue later that they were zero-rated which would have been expensive.

Though the position ought to be clear lack of agreement from HMRC made me tread cautiously and not join the FRS.

[Greg@CapitalCity]

Though the position ought to be clear lack of agreement from HMRC made me tread cautiously and not join the FRS.

Yep, fair enough, the tax implications would be significant. Note they did change their rules on Place of Supply on 01 Jan 2010, maybe you were looking at this before then? If you are in the UK and the place of supply of your service is in another EU country, the supply is outside the scope of UK VAT. Take a look at the place of supply guidance again - it might have changed since you last looked, and may give you greater comfort that you're OK. Take a look at this link - you you make B2B supplies to an EU member state, you look to be on solid ground;
HM Revenue & Customs

The HMRC are impossible to nail down on queries like this - frustrating aye!

[Greg@CapitalCity]

PS any recommendations around particular organisations to use for company setup would be appreciated.

I think the Companies House service is hard to beat. You can access it through;
Incorporate your company online | Business Link

[Contreras]

But the VAT scheme set up can take up to 8 weeks.

I'm sure the accountants on here would have a better idea but I know of someone who had VAT registration recently in < 4 weeks and that included the Christmas period, so there's a good chance if you get the application in right away (it can be done online) then the company may have a VAT no. by the time you raise the first invoice.

Edit: IIRC, you can't apply for VAT registration until the Company has a business bank account set up, so that is also factor to plan ahead for.

How would this work in the interim i.e. I don't have a VAT number but I need to start billing my agency. Would I bill them excluding VAT and then send a VAT only invoice for the previous invoices when the VAT number arises or just forget about the VAT on the previous invoices.

Neither. You charge the VAT (but don't call it that) and then re-issue the invoice when you have a VAT no.

HM Revenue & Customs: Waiting for VAT registration and what to do in the meantime

See also HM Revenue & Customs: VAT invoices: what they must show for some important detail.