Invoices raised before VAT registration

[Ian Drummond]

Hi All,

I am in the process of deciding when to register for VAT (voluntary registration) and I'm struggling with the best time to do it...

I have a summer events business which has grown to the point where most of my customers are VAT registered or public authorities.

These customers always take months to pay, so I'm just wondering:

1) If I invoice my current sales now and the payments come through when I’m VAT registered, do I have to pay the VAT on those payments?

2) If these customers do not have to pay VAT on my services am I still able to claim the VAT on the expenses for these jobs?

My apologies if this has already been answered, I can't find anything relevant after searching the boards, Google, etc...

Many thanks in advance...
Ian

 

[MJ Holohan]

It will probably take a couple of weeks to get your VAT registration number.

From the date you register you can reclaim VAT on purchases but should also start to charge VAT to customers. The correct way to do this will be to reissue invoices once you have your VAT number. Alternatively - how often do you invoice customers?

Not completely correct but probably the most practical would be to add VAT on the invoice in the interim but obviously you won't have a VAT number..

 

[Ian Drummond]

Thank you for such a quick reply, much appreciated...

I invoice my customers a month in advance of the day we deliver our service...

Here's the scenario:
If I invoice 20 customers today for future work (July), then I register for VAT on June 30th (my end of month admin day). I would be claiming VAT on the expenses for the invoiced events in July, does this mean VAT would be due on these invoices?

A cheekier way to look at it would be:
I invoice 20 customers today with no VAT on their invoices.
I register for VAT tomorrow and start claiming the expenses straight away...
All my June invoices are already issued without VAT, plus the extra 20 I've just issued for July, yet I get to claim expenses from tomorrow...?

 

[MJ Holohan]

Second one works. Just a matter of timing

 

[Ian Drummond]

Thank you kindly...

 

[TheCyclingProgrammer]

You must account for VAT on all invoices dated on or after your VAT registration date.

If you believe you will be sending invoices after the registration date but don’t yet have your VAT number you could explain to your customers and invoice them with a 20% markup in the price and a note VAT REGISTRATION PENDING.

Then when you have your VAT number you can reissue invoices for the net plus VAT.

This is the HMRC recommended approach but it depends on your clients. They won’t be able to reclaim the 20% extra you charge on the original invoice (because it’s not VAT) until you’ve reissued proper VAT invoices.

 

[John Hemming]

You need also to decide whether to account for VAT on a cash or accruals basis. (ie when you are paid/pay invoices or when you issue or are issued invoices).

 

[Victoria_V]

Here's the answer to the VAT question you asked me to look into earlier on:

A) Hey there! Until you have received a VAT registration number, you will not be able to raise any invoices with VAT on them and subsequently charge VAT to your customers or reclaim any VAT paid on your purchases.

According to the HMRC, you could charge your customers the VAT as an increase in the price of the goods/services that you are selling them and then when VAT registration number is received, you can cancel the original invoice and reissue a new VAT invoice.
You can go back up to 4 years to reclaim VAT on purchases for goods that were purchased or 6 months for services that were purchased.

Once you are registered for VAT and have received a VAT registration number, there are a number of VAT schemes you can register yourself on.


Some of them are listed below:

Standard vat scheme- You charge VAT on any invoices you raise and then every quarter, you submit a VAT return and pay the VAT to the HMRC regardless of whether your customer has paid you or not.
Cash Accounting scheme- You only pay HMRC the VAT on any invoices you raise once your customer has paid you.

A full list of the VAT schemes what the criteria is to register for each of these VAT schemes is available on the gov.uk website

 

[SERC1204]

Until you have received a VAT registration number, you will not be able to raise any invoices with VAT on them and subsequently charge VAT to your customers or reclaim any VAT paid on your purchases.

Keep in mind that you can reclaim VAT on pre-registration purchases, subject to certain conditions: https://www.gov.uk/vat-registration/purchases-made-before-registration

 

[Victoria_V]

Keep in mind that you can reclaim VAT on pre-registration purchases, subject to certain conditions:

Thanks for catching that (and for the link)! It is very nuanced so I will definitely make sure to look into that