help with financial services client & VAT registration

[Alan @ BroomeAffinity]

There is an agency involved, so does it depend on their VAT status, rather than the end user?..

Yup. You're billing the agency. Forget the end user for this purpose.

[stunews]

If you re VAT registered and providing standard rate services (worth checking) then you need to charge VAT. I'm assuming there's no agency involved in which case you'd be charging them VAT, not the client.

But, if the contract doesn't specify whether the rate is ex or inc then there is a possibility of an argument between you and the client. Submit the first invoice adding VAT and see what happens. If they pay it, you're in the clear. If they don't, stating that the rate was to be inclusive, then suck it up for the first invoice and chalk it down to experience. Then, de-register for VAT immediately so you don't need to worry about it again.

There is an agency involved, so does it depend on their VAT status, rather than the end client?

Thanks for the advice on the de-registering bit if it is the worst case..

[stunews]

You agree £100 a day plus VAT. You invoice £100 a day, plus £20 a day VAT, so £600 a week. You then hand over £87 a week to the VAT man (14.5% of the £600 amount). Company earns £513 a week.

I suspect that the client is expecting to see £100 a day, in which case you would actually be invoicing £83.33 a day plus 20% VAT. You then hand over £72.50 a week (14.5% of £500) to the VAT man. Company earns £427.50 a week.

So the lesson is you should always ascertain if the rate is inclusive of VAT before you sign a contract!

[TheFaQQer]

Thanks FaQQer. So let's see if I understand your point correctly.

Say I agreed a theoretical day rate of £100. Are you saying that the invoice will always be like so, whether they are VAT registered or not?

5 x 1 day @ £100 = £500

VAT at 14.5% = £72.50

Total £572.50

??

You agree £100 a day plus VAT. You invoice £100 a day, plus £20 a day VAT, so £600 a week. You then hand over £87 a week to the VAT man (14.5% of the £600 amount). Company earns £513 a week.

I suspect that the client is expecting to see £100 a day, in which case you would actually be invoicing £83.33 a day plus 20% VAT. You then hand over £72.50 a week (14.5% of £500) to the VAT man. Company earns £427.50 a week.

[Alan @ BroomeAffinity]

If you re VAT registered and providing standard rate services (worth checking) then you need to charge VAT. I'm assuming there's no agency involved in which case you'd be charging them VAT, not the client.

But, if the contract doesn't specify whether the rate is ex or inc then there is a possibility of an argument between you and the client. Submit the first invoice adding VAT and see what happens. If they pay it, you're in the clear. If they don't, stating that the rate was to be inclusive, then suck it up for the first invoice and chalk it down to experience. Then, de-register for VAT immediately so you don't need to worry about it again.

[JRCT]

When my mum goes to Tesco to do her weekly shop, she has to pay VAT on what she buys, despite the fact that my mum isn't VAT registered.

VAT is chargeable at 20%.

[stunews]

The fact that the client isn't VAT registered is irrelevant - if you are VAT registered, then you invoice must include VAT.

If they quoted a gross price and you meant a net price, then you need to check the contract and see what it says.

Thanks FaQQer. So let's see if I understand your point correctly.

Say I agreed a theoretical day rate of £100. Are you saying that the invoice will always be like so, whether they are VAT registered or not?

5 x 1 day @ £100 = £500

VAT at 14.5% = £72.50

Total £572.50

??

[stunews]

The contract just say £XX0 per day.
Nothing specific about VAT, so I just assumed the VAT would be added on top.

My accountant is being rather unhelpful. What they're saying isn't clear, and they've got me worried:

If they are VAT registered, you should be charging them VAT on top of your day rate. If you're not, the VAT that you should be charging will need to paid out of your own pocket.

Time for a call I think..

[TheFaQQer]

Why don't you actually speak to your accountant and get his advice? I have a funny feeling he will mention something about FRS and the fact you can actually make a couple of percent on it.

If the client isn't going to pay the VAT inclusive rate, you aren't going to make anything by being on FRS, though.

[northernladuk]

Why don't you actually speak to your accountant and get his advice? I have a funny feeling he will mention something about FRS and the fact you can actually make a couple of percent on it.

[TheFaQQer]

The fact that the client isn't VAT registered is irrelevant - if you are VAT registered, then you invoice must include VAT.

If they quoted a gross price and you meant a net price, then you need to check the contract and see what it says.

[stunews]

I've just started contracting again recently.
I had the choice of being VAT registered or not because I don't see myself earning over the threshold this year.

I understood being registered was good thing because I can charge VAT and be on the flat rate scheme, and retain ~5% (or something like that) in the company. So I asked the accountant to register for VAT, this was sent earlier this week.

The problem is, I just forwarded some payment documentation to the accountant, and they said it doesn't look like the client is VAT registered. As such, if I'm VAT registered, I've got to pay the VAT myself, which is a considerable chunk of cash that's going the wrong way!

1. Can I just ask someone here at the client's workplace if they are VAT registered? Or is that a no-no?
2. Do you think, at this stage, I should ask the accountant to cancel the VAT registration, if possible.
3. If I plan on working with financial services companies, am I right in thinking it's a bad thing to be VAT registered?

Any advice/help on this would be appreciated..

Thanks
Stu