Vat! :-(

[cswd]

Worked it out

[mcquiggd]

Obviously Im no accountant, but personally I registered as I was going to be over the limit in virtually the first contract I had, and so I registered from the word go and claimed everythng back that I could... it seems the least complicated way to do so, but id be interested to hear professional opinions (my accountant advised me to register as soon as I started if I intended to contract for any length of time, as id be way over the threshold and be forced to do it anyway.)

Being VAT registered would indicate a proper business i.r.t IR35 id have thought... how many permies would be VAT registered... ? mmm?

[expat]

Ok I'm not registered for VAT yet - I'll do that later when I'm approaching the £61k limit.

I'm getting all sorts of tulip from all over the web about charging for VAT if I'm VAT registered, but nothing on how to handle it if I'm not registered.

Any ideas?

This is the ONLY thing I can't get my damn head round.

Basically, Do I need to add VAT to the invoices I'm shoving out to agencies even though I'm not VAT registered?

HMRC is SFA help.

If you are registered for VAT then you must add VAT to your invoices. If you are not registered for VAT then you must NOT add VAT to your invoices.

This is because you would not be "charging" VAT, but only collecting it for the government. If you were to collect it and not pass it on to the government, that would be fraud.

This supposes that, if you are not registered for VAT, you are justified in not being registered.

[expat]

Being VAT registered would indicate a proper business i.r.t IR35 id have thought... how many permies would be VAT registered... ? mmm?

The flaw in that argument is that IR35 does not say that you are a permie: it says that you will be treated as if you were one, for tax and NIC purposes.

Thus it is not sufficient not to be a permie, you require to convince The Authorities that your activity is different from what they see permies as doing. Otherwise they will hold that you should be a permie, so they will tax you as if you were.

[VectraMan]

Regardless of when you do it, you can't add VAT to an invoice unless you have your VAT number on the invoice. That's needed for the customer to claim back VAT, and they shouldn't accept an invoice without it.

To confuse the issue further, when you register for VAT you choose the start date but they take an age (about 2 months in my case) to give you a VAT number. In that time you have to invoice without VAT, but then you're meant to add a note or something to say that a VAT invoice will follow. Then when you get your VAT registration you have to send out invoices again with just the VAT element.

Somebody said this on this forum the other day, and I can confirm that it's true (having asked my accountant). Fortunately I've only got two invoices to do, but it's still a pain and I feel stupid going back to my last client and asking them for some more money.

[malvolio]

Don't worry about back-claiming VAT, it's nobody's money other than Gordon's and you are merely acting as an unpaid collector. If you do back-charge it to your client, they merely deduct it from their next VAT100 payment anyway.

The rules about registering is also that if you expect to exceed the £61k limit in the current trading year you must register. You do not have to wait until you reach it. And you can register for VAT anyway if you are providing services of any kind, irrespective of turnover.

And, just to provide the usual complete answer, it has damn-all to do with IR35, perceived professionalism, IBOYA pointers or anything else. It's a legal requirement.

[VectraMan]

On the subject, does anyone understand how VAT works if you're selling something on the interweb? If for example you're selling something intangible like a download and collecting the money via PayPal, if you charge one price for all then does that count as VAT fraud as you didn't charge VAT to the UK and EU customers?

In my old permie job we had a system using an IP to country database to try to find the location of the purchaser so we could charge VAT to UK and EU people but nobody else, but that was never 100% effective. So I assume that's how it's meant to work, but these things are based on delivering actual goods and you have an actual address to go on.

[eternalnomad]

once you start the VAT reg. process put "VAT applied for" on your invoices and in the "comments sections" of your invoice put a note to the effect that a retrospecive VAT invoice only will be issued in due course.

I did this and it was never a problem and the retrospective VAT invoices were paid without issue.

I enquired about the process with HMRC advice line and asked them what would happen if the agency refused to pay the retrospective VAT invoice. Amusingly i was told it was not the problem of HMRC but one I would have to sort out and i would still be liable to cough up for any VAT i had invoiced !

[Gold Dalek]

To confuse the issue further, when you register for VAT you choose the start date but they take an age (about 2 months in my case) to give you a VAT number. In that time you have to invoice without VAT, but then you're meant to add a note or something to say that a VAT invoice will follow. Then when you get your VAT registration you have to send out invoices again with just the VAT element.

Somebody said this on this forum the other day, and I can confirm that it's true (having asked my accountant). Fortunately I've only got two invoices to do, but it's still a pain and I feel stupid going back to my last client and asking them for some more money.

I got caught out by this... I issued a 'reconcilliation' invoice to the agent back to the time of VAT registration, the agency dragged its feet but paid up 2 quarters later.
I included the amount in the current quarter VAT submission which triggered a VAT inspection (must be a threshold thing).

The outcome was to charge me compounded interest on the missing VAT back to the companies registration... seemed very unfair to me and another example of HM Gov adopting a "robber Baron" approach to taxation...

[expat]

On the subject, does anyone understand how VAT works if you're selling something on the interweb? If for example you're selling something intangible like a download and collecting the money via PayPal, if you charge one price for all then does that count as VAT fraud as you didn't charge VAT to the UK and EU customers?

Yes. And it's worse: you should now also be charging VAT to your EU customers, at the rate for their country.

If you charge the same price for all then that's equivalent to having a different net price depending on the customer's VAT; i.e. you're discriminating against some customers according to their country. Oops!