Reply to: Unusual billing and VAT

[Pherlopolus]

I am FD for a local charity, and last quarter we had a £17k Vat refund due (usually pay £2-3k), I was expecting an Inspection.

In the end we just got a "can you explain, please show workings, copies of 6 biggest invoices". refund was posted a week or so later.

As others have said, if it's just normal business fluctuation I wouldn't stress about it.

[MrMarkyMark]

I personally consider highly variable income as a good indicator of non-standard (9-5 x 5) working practices. I.e. I am not a permie.

+1, absolutely

[PurpleGorilla]

I personally consider highly variable income as a good indicator of non-standard (9-5 x 5) working practices. I.e. I am not a permie.

[pr1]

Who said he's coming off the scheme? May as well stay on it for the next two reporting periods at least.

If he's getting paying the VAT received on the next 6 months of invoices today, why wouldn't he then come off the scheme given the 16.5% change? That's 6 months of accountancy payments he can now claim the VAT back on, for starters

or am I missing something?

[LondonManc]

Think there's a rule against doing that generally though, which might "raise a flag" if you suddenly invoiced for 6 months worth of work (on invoice accounting) the month before you come off the FRS scheme

Can't remember the name of it

Who said he's coming off the scheme? May as well stay on it for the next two reporting periods at least.

[pr1]

Happy days indeed.

As others have said, as long as you've got it documented and the bank statements to prove that you've been paid, then all is good (suits you to be paid before April to for the VAT collection boost.)

Think there's a rule against doing that generally though, which might "raise a flag" if you suddenly invoiced for 6 months worth of work (on invoice accounting) the month before you come off the FRS scheme

Can't remember the name of it

[jamesbrown]

haha, of course not!!

just wondered if it might cause any issues.

It is a v good position to be in.

Yes, I really wouldn't worry about it. I've had VAT returns that vary massively and it's a non-issue. Now, if I could only get my accountants to understand the VAT reverse charge... It's the accuracy and internal consistency of the return that you want to worry about.

[jmo21]

I'm curious to know what you would've done had we said "yes". You're not about to decline the work, I assume. There's nothing you can do about HMRC's risk assessment process, but this would be a pretty weak indicator, as most businesses have fluctuating income. Indeed, you can't get much more consistent w/r to income than employment.

haha, of course not!!

just wondered if it might cause any issues.

It is a v good position to be in.

[jmo21]

If that's the case (that they'll definitely pay it within a few weeks i.e. within the same quarter) - it probably won't matter

On invoice accounting you'd have to pay the 6 months of VAT up front, which might affect your cash flow (it at least would mean you'd take money out of your business savings account) - could cause you problems if they then changed their mind and you had to rescind the invoices

On cash accounting you wait until the invoices are paid to pay the VAT, there's no reason (that I have ever been convinced by) for any contractor turning over less than £1.35m/year not to be on it - which probably covers all of us... except maybe MrMarkyMark

Got you.

Yep, I am on cash accounting, but I didn't understand the relevance. I didn't mention it in the original post, but yes, they want billed and to pay before the end of financial year.

[jamesbrown]

I'm curious to know what you would've done had we said "yes". You're not about to decline the work, I assume. There's nothing you can do about HMRC's risk assessment process, but this would be a pretty weak indicator, as most businesses have fluctuating income. Indeed, you can't get much more consistent w/r to income than employment.

[pr1]

It's fairly irrelevant in the context of the discussion.

agreed

[RonBW]

If that's the case (that they'll definitely pay it within a few weeks i.e. within the same quarter) - it probably won't matter

On invoice accounting you'd have to pay the 6 months of VAT up front, which might affect your cash flow (it at least would mean you'd take money out of your business savings account) - could cause you problems if they then changed their mind and you had to rescind the invoices

On cash accounting you wait until the invoices are paid to pay the VAT, there's no reason (that I have ever been convinced by) for any contractor turning over less than £1.35m/year not to be on it - which probably covers all of us... except maybe MrMarkyMark

It's fairly irrelevant in the context of the discussion.

[pr1]

I'm not clear why you are asking this, can you expand please?

the invoices are going to be issued and paid all the within the next few weeks. They are paying in advance, and the actual services will happen over the next 6 months.

If that's the case (that they'll definitely pay it within a few weeks i.e. within the same quarter) - it probably won't matter

On invoice accounting you'd have to pay the 6 months of VAT up front, which might affect your cash flow (it at least would mean you'd take money out of your business savings account) - could cause you problems if they then changed their mind and you had to rescind the invoices

On cash accounting you wait until the invoices are paid to pay the VAT, there's no reason (that I have ever been convinced by) for any contractor turning over less than £1.35m/year not to be on it - which probably covers all of us... except maybe MrMarkyMark

[LondonManc]

I'm not clear why you are asking this, can you expand please?

the invoices are going to be issued and paid all the within the next few weeks. They are paying in advance, and the actual services will happen over the next 6 months.

Happy days indeed.

As others have said, as long as you've got it documented and the bank statements to prove that you've been paid, then all is good (suits you to be paid before April to for the VAT collection boost.)

[jmo21]

Why aren't you on cash accounting?

I'm not clear why you are asking this, can you expand please?

the invoices are going to be issued and paid all the within the next few weeks. They are paying in advance, and the actual services will happen over the next 6 months.