Reply to: Charging VAT without a VAT number

[TheCyclingProgrammer]

That sounds wrong to me as you're effectively sending a fraudulent invoice. But if that's what they say...

Well its only fraudulent if you don't explain why isn't it?

[VectraMan]

you should increase your prices by an amount equivalent to the VAT rate relevant for your goods or services, and explain to your customers why you are doing so.

That sounds wrong to me as you're effectively sending a fraudulent invoice. But if that's what they say...

I did the VAT only invoice thing when I started, as advised by my accountant. That was a few years ago.

[TheCyclingProgrammer]

It's not HMRCs preferred way of doing things but the above post is wrong - you certainly CAN issue a VAT only invoice.

[Contreras]

You can't do a VAT-only invoice. (edited)

What the HMRC advice actually says:

Until you receive your VAT registration number you must not charge VAT, or show VAT on your invoices. To make sure that you do not lose income in the period after you applied for VAT registration but before you receive your VAT registration number, you should increase your prices by an amount equivalent to the VAT rate relevant for your goods or services, and explain to your customers why you are doing so.

Once you receive your VAT registration number you can then reissue those invoices, amended to show your VAT registration number and the VAT charged. This will make sure that your VAT-registered customers may reclaim the VAT that they have paid

HM Revenue & Customs: Waiting for VAT registration and what to do in the meantime

If the agency won't play ball then the OP needs to cancel the self-billing agreement (citing that they are not following VAT rules) and raise his own invoices as above.

Personally I would add a separate line item for the 20%, say call it pending-VAT registration, rather than increase the rate. The agency might refuse to pay it but at least you have the right paperwork in place to chase the debt if they continue to mess about once the VAT number is issued.

[TheCyclingProgrammer]

Both will work, it's down to the agency what they are happy to do. Ring them up and ask them!

[zudecke]

Thanks for the replies guys.

I perhaps wasn't clear... The invoice which was raised on my behalf by the intermediary did NOT include VAT. But it also did not compensate for the addition of VAT by way of an increased rate (as per the HMRC guidelines linked two posts up).

I have 2 options I think:

1. Ask the intermediary to simply raise another invoice for the VAT amount
2. Ask the intermediary to re-issue the same invoice to include VAT? This should be fine considering my VAT number was activated on 26th March and the invoice was raised on the 31st March.

Is option 2 permissible and advisable?

Regards,

Z

[TheFaQQer]

What did I do wrong?!

Invoiced for VAT without a VAT number.

You need to invoice without the VAT, making it clear that VAT registration is pending, and then issue a VAT only invoice when you get the number (assuming that the original invoice was issued after the VAT registration date).

[craig1]

Here's the process for what to do while you're waiting for your VAT number.

[zudecke]

What you did was exactly what not to do according the the VAT regs. You need to visit HMRC web site to find the rules.

As others have said, once you have your VAT number, you need to issue a VAT ONLY invoice clearly marked as such.

The main thing to watch out for is any payment in process as you send in your VAT certificate. Issue the VAT only invoice once all outstanding NON VATTED invoices have been paid. This happened to me once and I didn't catch the offending invoice until year end. Wasn't a great deal of money but it would have been better in my bank than theirs.

What did I do wrong?!

I'll get onto the agency now!

Cheers all,

Z

[tractor]

Hi guys,

I recently started contracting and whilst my VAT number is pending, I do intend to invoice the client VAT. I did tell them this before signing up the business.

However, received my first invoice to find VAT has been excluded.

Am I within my right to request reissuing of this invoice to account for VAT or is it something that will need to be back-invoiced?

Thanks in advance,

Nick

What you did was exactly what not to do according the the VAT regs. You need to visit HMRC web site to find the rules.

As others have said, once you have your VAT number, you need to issue a VAT ONLY invoice clearly marked as such.

The main thing to watch out for is any payment in process as you send in your VAT certificate. Issue the VAT only invoice once all outstanding NON VATTED invoices have been paid. This happened to me once and I didn't catch the offending invoice until year end. Wasn't a great deal of money but it would have been better in my bank than theirs.

[tractor]

...

Not sure what you mean by 'However, received my first invoice to find VAT has been excluded. '; invoices are what you issue, not what you receive.

I had this situation when I was direct with a client. Having discussed with the client, & once VAT number came thru I raised a separate invoice purely for the VAT element, with a note of explanation. No problems.

Unless it's a self billing arrangement :P

[captainham]

In that case, you need to get straight onto the agency to confirm how they intend to handle this situation, so you can be satisfied it will all end well.

Worst case (if you just ignore it and don't get on top of it now) is you need to pay the VAT out of your own pocket, which is obviously less than desirable...

[zudecke]

Thanks for the replies guys.

I've registered for self billing, which means an intermediary (recruiter) is raising the invoices on my behalf...

[captainham]

There's a thread somewhere on this topic, but i'll repeat what i said there below.

you can just invoice the full amount (including VAT) but don't show it as VAT, just show it as one total figure. add a note at the bottom to say you'll reissue the invoice once VAT registered.

Then reissue invoice correctly once you're registered.

there is a chance the client might reject it (maybe they don't believe you'll become VAT registered), so just make sure they know what you are doing and why.

EDIT: found it. http://forums.contractoruk.com/accou...ml#post1616333

[SteelyDan]

Hi guys,

I recently started contracting and whilst my VAT number is pending, I do intend to invoice the client VAT. I did tell them this before signing up the business.

However, received my first invoice to find VAT has been excluded.

Am I within my right to request reissuing of this invoice to account for VAT or is it something that will need to be back-invoiced?

Thanks in advance,

Nick

Not sure what you mean by 'However, received my first invoice to find VAT has been excluded. '; invoices are what you issue, not what you receive.

I had this situation when I was direct with a client. Having discussed with the client, & once VAT number came thru I raised a separate invoice purely for the VAT element, with a note of explanation. No problems.