VAT when payment for services is paid in installments

[anarchist]

Hi there,

I am trying to work out whether I will need to pay VAT quarterly or by some other means and when I will be liable to pay VAT. Essentially, the plan is to charge the overall cost of website design over three months in three monthly installments including the VAT payable to us - when does the VAT become payable to the taxman? At the end of the three installments or as each installment is paid? When would the first lot of VAT need to be paid to the taxman in this scenario?

Thanks!

[Mpg]

VAT is paid quarterly on Invoices raised.(Usually)

Which quarter I think depends on when you register I had a month before my first 1/4 came up

[KM-Tiger]

It depends whether you opt for Cash Accounting or the Standard (accrual) method.

With Cash Accounting your VAT is payable according to cash received and paid out, ie into and out of your bank account.

With the Standard method VAT is calculated according to invoices received and issued, whether these are actually paid or not.

You can only use Cash Accounting below a certain threshold (around £450K), and you don't need to tell anyone, just do it.

VAT is payable by the end of the month following the end of the VAT quarter, with an extra 7 days if you both file and pay online.

Talk to your accountant about whether there would be a financial advantage to using the flat rate scheme. There could be if your taxable inputs are low.

[David Griffiths]

With the Standard method VAT is calculated according to invoices received and issued, whether these are actually paid or not.

But the receipt of payments in advance of an invoice triggers a tax point so the VAT is due on receipt of the cash, irrespective of invoice date.

You can only use Cash Accounting below a certain threshold (around £450K), and you don't need to tell anyone, just do it.



£1.35 million actually

[KM-Tiger]

But the receipt of payments in advance of an invoice triggers a tax point so the VAT is due on receipt of the cash, irrespective of invoice date.

True, I was assuming the OP would be invoicing each instalment prior to payment.

£1.35 million actually

Blimey, that's gone up a lot since I had to deal with it many years ago.

[anarchist]

Thanks for everyones posts!

So am I right in saying that If I am paid in Month 1, I am liable for any installments that come in (for VAT purposes) by the taxman at the end of month 4 (give or take a week to make sure the payment hits them on time) to include months 1, 2,3,4?

Am I then right in saying I am liable to pay the taxman VAT again at the end of Month 8 for any VAT accrued during months 5,6,7,8?

If by the time the VAT is paid in any given quarter there are any extra sales made not accounted for in the VAT payment for the month the payment is made to the taxman would I just add this on to the next month's payment to them?

Thanks for your help!

[BudgetB]

Not quite.

Months 1 2 & 3 are paid at the end of Month 4.
Months 4 5 & 6 are paid at the end of Month 7. etc

Yes, if something is missed from the accounts then you would account for it in the next quarter, however as you have a month from the end of the period until the filing date there should be ample time to make sure everything is correct before it's submitted and paid.