• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

You are not logged in or you do not have permission to access this page. This could be due to one of several reasons:

  • You are not logged in. If you are already registered, fill in the form below to log in, or follow the "Sign Up" link to register a new account.
  • You may not have sufficient privileges to access this page. Are you trying to edit someone else's post, access administrative features or some other privileged system?
  • If you are trying to post, the administrator may have disabled your account, or it may be awaiting activation.

Previously on "Starting a contract before the VAT registration is complete."

Collapse

  • taxevo
    replied
    If you are six weeks away from issuing your first invoice then there is plenty of time for the certificate to come through. In the worst case scenario of the registration not being confirmed then issue an invoice without the VAT and you can easily issue a VAT only invoice once the details are confirmed. Just make sure you keep the agency/client up to date with what you plan to do.

    Leave a comment:


  • chopper
    replied
    Or...

    Wait until after your VAT certificate arrives before sending the first invoice. There isn't going to be a particularly long gap between contract starting, VAT registration number being issued and you needing to issue the first invoice.

    Leave a comment:


  • Craig@Clarity
    replied
    I usually advise on both options being available but in reality, I've found that the majority will invoice less the 20% and then issue a VAT only invoice. Either way, both routes are acceptable and achieve the same result and require the same admin. If you're lucky, the VAT registration will come in on time and this dilemma will go away

    Leave a comment:


  • Maslins
    replied
    I was always taught to go with TCP's method. Seems to be what FreeAgent recommend too.

    Ie it's not a formal VAT invoice, but the amount payable tallies with what the gross VAT invoice will be. So supplier (provided they're happy to) can pay the figure on the invoice, then get a formal VAT invoice to back it up later. No further payment required at that point, and they can then just mark the initial payment as including 20% VAT.

    To my mind that's far easier than doing a net invoice when you/the client both know they'll end up having to pay 20% more...then doing a VAT only invoice further down the line. Means two payments if nothing else.

    Of course there will be an element of "the customer's always right", and what their systems accept may dictate how you proceed if you want to be paid promptly. Whilst neither solution is particularly complicated, you can imagine both will cause issues with the agency's systems...so best to try to get VAT registration in place fully prior to invoicing.

    Leave a comment:


  • malvolio
    replied
    Originally posted by TheCyclingProgrammer View Post
    There’s nothing wrong with the approach of just waiting until your number arrives before sending your first invoice either but the approach I outlined is the one HMRC have been advising for years. It is not “wrong”.
    OK, but accountants usually advise the other option. And, as has been mentioned, agencies will be expecting that route as well, so why not stick to the one that works and does not mean you have to inflate an invoice even if the agency billing system lets you do so? And not that any of us give a damn, but it also keeps the agency's VAT Accounting straight, as a minor benefit.

    Leave a comment:


  • TheCyclingProgrammer
    replied
    Originally posted by malvolio View Post
    Wrong but hey...

    Registration only takes a couple of weeks, so there is zero need to "add" 20% to preserve your cashflow: you will be registered before you have to pay over the VAT. Not that you will get a VAT Return demand before you're registered anyway.

    Ladymuck outlined the correct process.
    There’s nothing wrong with the approach of just waiting until your number arrives before sending your first invoice either but the approach I outlined is the one HMRC have been advising for years. It is not “wrong”.

    Leave a comment:


  • Hobosapien
    replied
    If using the 'adjust rate by 20% in lieu of VAT' method, anticipate agency being too dumb to understand what is going on and bounce the invoice for having the wrong rate.

    Such an issue should not occur with the older more recognised 'submit invoice stating VAT invoice to follow' method, but the choice is yours.

    Pre-empt any issues by discussing with the agent before submitting the invoice, they may have a preference to which method to use based on their accounting processes.

    Leave a comment:


  • jamesbrown
    replied
    Originally posted by malvolio View Post
    Wrong but hey...

    Registration only takes a couple of weeks, so there is zero need to "add" 20% to preserve your cashflow: you will be registered before you have to pay over the VAT. Not that you will get a VAT Return demand before you're registered anyway.

    Ladymuck outlined the correct process.
    Either approach is fine, but HMRC recommend the approach stated by CP, so you can't say it's "wrong".

    See the same "correct" advice here :

    Contractors’ Questions: How to invoice while waiting for VAT number?

    Leave a comment:


  • malvolio
    replied
    Originally posted by TheCyclingProgrammer View Post
    HMRC recommendation is to do as you mention in your first post. Send an invoice with your fees increased by 20%. Then when you have your VAT number reissue a valid VAT invoice. See bottom of this page:

    VAT registration - GOV.UK

    No need to do a VAT only invoice. Just explain to your client what’s going on.
    Wrong but hey...

    Registration only takes a couple of weeks, so there is zero need to "add" 20% to preserve your cashflow: you will be registered before you have to pay over the VAT. Not that you will get a VAT Return demand before you're registered anyway.

    Ladymuck outlined the correct process.
    Last edited by malvolio; 26 October 2018, 23:35.

    Leave a comment:


  • TheCyclingProgrammer
    replied
    HMRC recommendation is to do as you mention in your first post. Send an invoice with your fees increased by 20%. Then when you have your VAT number reissue a valid VAT invoice. See bottom of this page:

    VAT registration - GOV.UK

    No need to do a VAT only invoice. Just explain to your client what’s going on.

    Leave a comment:


  • skay
    replied
    Originally posted by ladymuck View Post
    This is quite common.

    Yes, issue an invoice without VAT and add a note to the bottom saying VAT invoice to follow on completion of registration.

    When you get your registration number, send an invoice for the VAT element only. Reference the original invoice issued without VAT. Do not reinvoice for the actual work element as you've already issued a charge for that.

    The agency will probably want to see a copy of your VAT certificate so you may as well send it with the VAT only invoice.
    Thanks for the info

    Leave a comment:


  • ladymuck
    replied
    This is quite common.

    Yes, issue an invoice without VAT and add a note to the bottom saying VAT invoice to follow on completion of registration.

    When you get your registration number, send an invoice for the VAT element only. Reference the original invoice issued without VAT. Do not reinvoice for the actual work element as you've already issued a charge for that.

    The agency will probably want to see a copy of your VAT certificate so you may as well send it with the VAT only invoice.

    Leave a comment:


  • Starting a contract before the VAT registration is complete.

    Hi, Crunch (accounting) have applied for my VAT registration for my newly created company but there was a mistake and hence HMRC requires more evidence/documents for the verification process. I have all of those and have already provided them to Crunch which in turn will update my application. Based on this I am worried that it may take a bit longer to complete the process.

    Given that I will be starting on a new contract soon, my question is if for the first invoice I don't include VAT (adjust my rate by +20%) and then adjust it again once I have my VAT number (VAT registration - GOV.UK). My first invoice will be at least 6 weeks from today so there is still time to get it in time but I am trying to find what are my options in the worst case scenario.

    Thanks in advance.

Working...
X