Reply to: Vat! :-(

[boredsenseless]

Check with HMRC but my understanding was that if someone refuses to pay the reconilliation invoice you can eventually "write off" the VAT payment and adjust the figures in a subsequent VAT return. You must notify HMRC and they will pay a visit to the company in question and demand payment from them directly.

Very true - if you warn the other company at the point of issuing the first non-VAT invoice, otherwise you are relying on their goodwill.

[MrsGoof]

What are the requirements for cash accounting?

I think you just have to tell em, although there may be turnover or limits but IANAA

check the web site

[Mustang]

Check with HMRC but my understanding was that if someone refuses to pay the reconilliation invoice you can eventually "write off" the VAT payment and adjust the figures in a subsequent VAT return. You must notify HMRC and they will pay a visit to the company in question and demand payment from them directly.

[Mustang]

What are the requirements for cash accounting?

[boredsenseless]

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...

Bear in mind that a customer has no obligation to pay a 'reconciliation' invoice if you did not point out at the time of raising the original that your VAT application was being processed and that a further invoice would be raised.

And if you don't tell them and you don't pay, HMRC consider the amount paid to include VAT and so you only get to keep 82.5% of the invoice value.

[MrsGoof]

also use Cash Accounting for VAT.

YOu only pay up once the invoice has been paid as opposed to when you issue the invoice.

[Davros]

I guy I used to work with just made up a VAT number and trousered the money. He got away with it for several years before he got invited to attend an interview with HMC&E (as it was then). He promptly upped sticks and went back home to Nigeria.

I suggest you do the same.

[VectraMan]

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!

And in my old job the UK customers would get upset at being charged more than the US customers because of adding VAT, and telling them "it's the law" never seemed to help.

Sounds like if you're selling online you might be better off not being VAT registered.

What happens if you geuinely have no idea where the customer is because it's an online transaction?

[DaveB]

By far the easiest thing to do is just register anyway. Avoids confusion and everyone is happy.

Get your self on the FRS and you'll save some dosh too, assuming you dont have any large vatable expenses.

None of it takes long, if you cant spare 20 mins to fill out a form you need to look at your time management and priorities.

[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!

[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...

[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 !

[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.

[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]

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.