Reply to: Client not wanting to pay VAT

[Gumbo Robot]

Pretty much.

Hmmm interesting.

I'll bear that in mind. Thanks Alan.

[Alan @ BroomeAffinity]

What, so does this mean I can't do a website for somebody in a self employed capacity rather than putiing it through my Ltd because they'll think (rightly) that I'm doing it to avoid paying VAT?

Pretty much.

[Gumbo Robot]

Before I dealt solely with contractors I had a client come to me who was subject to a vat inspection. During this it was uncovered that the client, who owned a pub, set up a limited company owned by his wife to run an outside catering co out of the kitchen. There was no common ownership, there were good commercial reasons for doing this, the businesses were genuinely separate but HMRC chinned them under disaggregation rules. I didn't take it on as I wasn't specialist in this but the last I heard it went to commissioners and HMRC won. Be very careful of disaggregation.

What, so does this mean I can't do a website for somebody in a self employed capacity rather than putiing it through my Ltd because they'll think (rightly) that I'm doing it to avoid paying VAT?

[Alan @ BroomeAffinity]

I wondered if there were any VAT rules about carrying on the same trade outside of Ltd Co.

A quick search suggests there are:- "artificial separation of trade...", "disaggregation powers..."

This, for example:


The Tax-Proof Guide of Splitting the Business to Avoid VAT

Before I dealt solely with contractors I had a client come to me who was subject to a vat inspection. During this it was uncovered that the client, who owned a pub, set up a limited company owned by his wife to run an outside catering co out of the kitchen. There was no common ownership, there were good commercial reasons for doing this, the businesses were genuinely separate but HMRC chinned them under disaggregation rules. I didn't take it on as I wasn't specialist in this but the last I heard it went to commissioners and HMRC won. Be very careful of disaggregation.

[TykeMerc]

As others have said, take it on the chin, unless your quote explicitly states that it doesn't include VAT at the prevailing rate then a client can reasonably expect that it won't be charged additionally or the quote includes it in the total.

[Contreras]

I wondered if there were any VAT rules about carrying on the same trade outside of Ltd Co.

A quick search suggests there are:- "artificial separation of trade...", "disaggregation powers..."

This, for example:

The following is useful guidance when a single business is split into more than one businesses - each one owned by different persons (e.g. each business is run by a different spouse). Usually people do that to avoid having to register for VAT (e.g. because turnover from each separate business activity is below the VAT registration threshold). Or, for purely commercial reasons, e.g. when the business sells to unregistered customers who cannot reclaim VAT.

As you may have guessed, the VAT-man doesn’t like that and they have given themselves the powers to stop it. The VAT-man is more likely to succeed if the persons carrying out those business activities, in the words of the vatman have “close financial, economic and organizational links”. Read my lips: To avoid being caught, the business owners need to prove that the reason for the disaggregation is commercial considerations and not vat avoidance.

The Tax-Proof Guide of Splitting the Business to Avoid VAT

[GillsMan]

Er, why? Do it as self-employed. You could even remember to list it on your tax return

Ah of course! Good point, my bad.

[worzelGummidge]

After reading the post fully !

I would take it on the chin. It sounds too much pain.

[worzelGummidge]

I've just competed a bit of work that I pulled in direct.

A simple website for a charitable organisation.

They are querying my invoice as I am charging VAT on top of the quoted price and they are not VAT registered.

So, my question is this: is it implicit that VAT will be charged on top of the amount I've quoted? Or am I going to have to take this one on the chin?

I have had this. The agency were idiots.

I rang HMRC and asked them what to do as really it's their money.
Letter sent to HMRC and CC'ed agency.
Agency paid the VAT.

[Andy Hallett]

From memory some charities can be exempt from paying VAT and as such you don't have to levy it. They should be able to provide evidence of this.

Completely forgotten how we had to book it our end. I'd imagine one of the forum accountants will know the scoop.

[BolshieBastard]

But when I quoted should I have explicitly said the figure was ex-VAT? That's what they are insinuating.

Yes you should. Its illegal to quote a price and not state VAT inclusive or exclusive if you're VAT registered. It makes your quote look cheaper than it really is.

I know of a couple of aerial riggers and a plumber who got into trouble over advertising their prices as an amount then stiffed the customer for the money plus VAT.

[Gumbo Robot]

Er, why? Do it as self-employed. You could even remember to list it on your tax return

Or better still, cash in hand

[Platypus]

You'd need to be PAYE'd for that I'd presume.

Er, why? Do it as self-employed. You could even remember to list it on your tax return

[TheCyclingProgrammer]

If you are billing the charity and it is registered and entitled to exemption you can invoice them exempt of VAT providing they provide you with the relevant evidence.

https://www.gov.uk/vat-charities/how-to-claim-relief

Just make sure your accounting software takes account of it properly and you charge it out exempt or you'll lose out.

But bear in mind if OP is on the flat rate scheme, he will still have to pay flat-rate VAT on the supply even though its exempt.

[GillsMan]

As this is a bit of work that I have pulled in privately I guess there's nothing to stop me from getting the client to pay into my personal account. I mean, I don't have to do this via my Ltd....

You'd need to be PAYE'd for that I'd presume.