Confused about VAT

[joebrown]

I am a new start-up business and I am a little confused about VAT and VAT registration. My expertise is in the area of recruitment and psychometrics not Finance I'm afraid. I do not believe I will reach the VAT threshold in my first year, however I currently have some work through a large organisation, when invoicing them for work do I add VAT to invoices even though I am not registered for VAT myself, please someone with a good finance help.

yours with thanks confused. :?:

 

[vigo]

No! You must not add VAT to an invoice (or even mention it) unless you are registered.

 

[Alpha]

Dont think there is much more to say ..................vigo has put it in a nutshell

Unless you are registered for vat do not charge it on your invoices....that would be classed as fraud.

 

[gj]

...but maybe you should register for VAT voluntarily!

If you are going to have to regsiter for VAT in due course - next year presumably, you consider registering for VAT now.

If all your work is for VAT regsitered businesses, it makes no difference to them whether you are VAT registered or not, since they will reclaim the VAT you charge them. In fact, if your are not registered for VAT, your clients know that your turnover is less than the VAT regsitartion limit - maybe you do not want them to know that your turnover is that small - registering for VAT voluntarily stops them from knowing that your turnover is that low!

You can also recover any (well nearly any) VAT you incur on goods and services supplied to you.

Registering early also avoids the risk that, when you do exceed the registration limit , you do not forget to register, which could prove expensive as you can be charged for the VAT you should have charged to your customers but didn't.

If all your work is for non Vat registered businesses (doesn't sound like it), then I would normally recommend not regsitering until you have to, having exceeded the limit.

If your work is for a mixture of Vat registered and non registered businesses, then you need to get some further advice.

HTH

Graham

 

[barry.hynd]

Hi Joe,

It may also be worth considering the flat rate scheme as in certain circumstances it can actually benefit your business. You essentially given a percentage rate which you then declare on your turnover. Say for example 12%. If you dont have may outgoings then this allows you to charge 17.5% vat and you keep the difference.

I would voluntarily register as it does have a positive impact on the perceived scale of your business.

 

[Alpha]

Hold on lets go back one step.

Joe is involved in recruitment and psychometrics.

Firstly what is the value of your purchases?

I would guess that they are not going to be substantial (even taking into account start up items such as laptop etc.) (Perhaps Joe could let us know what he thinks this will amount to)

His knowledge of vat (and probably book-keeping/accounting) would appear to be small. The costs involved in keeping records and making the vat returns might well outweigh the vat recovered. (Not much point in doing it if that is the case)
I do accept that he would have to keep and record/pay for recording accounts any way..

Again he would have to pay an accountant to decide if the fixed rate scheme MIGHT be beneficial to his current situation.

A little more detail of Joes current situation would be required before deciding the best course of action.