VAT Catch 22 Conundrum

[numbersrule]

Hi, I seem to have got myself into a muddle prior to first VAT return.

I am a Ground Investigation Specialist and have been doing my own bookkeeping since 2015.
So I decided to train as a bookkeeper via ICB route and am about to take my M7 & M8 Exams.
On this basis I don't yet have a Bookkeeping Practice Licence.

However, in January 2023, I set up my second company so that I would be able to provide bookkeeping services for if I am able to obtain a Bookkeeping Practice Licence.
This means I have incurred some small set up costs, including some Input VAT since July 2023.
So I registered the bookkeeping business for VAT ( registration date 1st November 2023 ) with the aim of being able to claim back the small amounts of Input VAT.

This means the first quarterly VAT return ( nothing owed to HMRC as not providing bookkeeping services yet ) will need to be completed by end of February ( ie one month and seven days after 31st January 2024.)

However, when I login to Xero and call up VAT Return it is notifying my that my bookkeeping company needs to register as a Tax Agent and for an Agent Services Account before I can submit via MTD through Xero.

But because I don't have a Practice Licence yet, I can't register as a Tax Agent. I may not have completed my M8 Exam by end of February so won't be applying for a Practice Licence until after then.

It seems I cannot submit a VAT return in Xero for my own Practice without first Registering as a Tax Agent. ( even though I am not yet providing bookkeeping services to anyone other than my own companies ).

Is there any way of submitting a VAT return other than MTD? Or have all the old methods been abolished now?

Best regards

Ground Investigator

 

[Paul Kelly ICHYB]

You do have an accountant, don't you?

 

[Newchodge]

However, when I login to Xero and call up VAT Return it is notifying my that my bookkeeping company needs to register as a Tax Agent and for an Agent Services Account before I can submit via MTD through Xero.

My suggestion would be to avoid Xero. You can practice as a book keeper without any qualifications and you can send VAT returns online without being a tax agent.

 

[NicoJ]

Are you sure it's telling you you need an agent account rather than just registering for MTD?

It could be that you have set up Xero as an accountant (partner I think it is called) rather than as a separate company so it thinks you are acting on behalf of the company rather than the owner. You don't need an agent account to submit your own return, although you need to be registered for MTD. Could be a case of looking at the settings.

Alternatively, there are various softwares out there which will enable you to submit this, including bridging software (which would effectively take the figures from Xero).

 

[numbersrule]

My suggestion would be to avoid Xero. You can practice as a book keeper without any qualifications and you can send VAT returns online without being a tax agent.

Thank you Newchodge. That is news to me. I thought you had to be registered for AML supervision before practicing as a bookkeeper? HMRC have AML supervision on their list of requirements for registering as a Tax Agent.

But, all that aside, I see what you mean by avoiding Xero. I have two other very small businesses that I have set up via Quick File Affinity so as to minimise accounting software costs. I suppose I could add my bookkeeping company as another profile on Quick File Affinity to enable me to submit MTD VAT as a 'non-Practice entity' just until I can complete the Xero process in later Quarters if I am able to obtain PL.

I agree, the problem with Xero is that I am registered on the Partner Program and as a Certified Xero Adviser so there is no escape from the categorisation as a Practice even though I am not actually practicing yet really.

 

[NicoJ]

Thank you Newchodge. That is news to me. I thought you had to be registered for AML supervision before practicing as a bookkeeper? HMRC have AML supervision on their list of requirements for registering as a Tax Agent.

But, all that aside, I see what you mean by avoiding Xero. I have two other very small businesses that I have set up via Quick File Affinity so as to minimise accounting software costs. I suppose I could add my bookkeeping company as another profile on Quick File Affinity to enable me to submit MTD VAT as a 'non-Practice entity' just until I can complete the Xero process in later Quarters if I am able to obtain PL.

I agree, the problem with Xero is that I am registered on the Partner Program and as a Certified Xero Adviser so there is no escape from the categorisation as a Practice even though I am not actually practicing yet really.

You need AML, you don't need qualifications. You need to amend the Xero status, you don't need to be an agent to submit your own return.

 

[numbersrule]

You need AML, you don't need qualifications. You need to amend the Xero status, you don't need to be an agent to submit your own return.

Hi NicoJ
When on the Xero Partner program it forces all the Organisation settings through the Practice.
This means I can't access my bookkeeping Xero organisation as 'just a company'. Xero forces it to be accessed as the Practice and all the settings are via the Practice and not the Organisation.

 

[NicoJ]

Hi NicoJ
When on the Xero Partner program it forces all the Organisation settings through the Practice.
This means I can't access my bookkeeping Xero organisation as 'just a company'. Xero forces it to be accessed as the Practice and all the settings are via the Practice and not the Organisation.

To be a partner you must have at least one client, you are saying you don't have any clients so you need to inform Xero that the settings on the company are incorrect.

 

[numbersrule]

You do have an accountant, don't you?

Yes, of course!
The ground investigation business has an accountant.
The bookkeeping company hasn't appointed an accountant yet due to minimal activity so far.

 

[numbersrule]

To be a partner you must have at least one client, you are saying you don't have any clients so you need to inform Xero that the settings on the company are incorrect.

I didn't say I have no Clients. My ground investigation business is a Xero organisation and is a Client of the bookkeeping company in terms of the Xero set up and to comply with the Xero rules.

 

[NicoJ]

I didn't say I have no Clients. My ground investigation business is a Xero organisation and is a Client of the bookkeeping company in terms of the Xero set up and to comply with the Xero rules.

Which is it? If you have clients that you are submitting VAT for then you should have an agent account. If you are just doing the bookkeeping for your own company then they aren't a client so you're technically breaching the terms of your Xero account.

Never mind - you have been given several options on this thread. Now you've noted you have an accountant for one of your businesses this is another option, asking them to submit on your behalf.

 

[numbersrule]

Which is it? If you have clients that you are submitting VAT for then you should have an agent account. If you are just doing the bookkeeping for your own company then they aren't a client so you're technically breaching the terms of your Xero account.

Never mind - you have been given several options on this thread. Now you've noted you have an accountant for one of your businesses this is another option, asking them to submit on your behalf.

No I am not breaching the terms of my Xero account.

I have access to the ground investigator Xero organisation in my role as a ground investigator and so can submit the ground investigator VAT MTD returns via the ground investigator Xero organisation.

So I am not submitting ground investigator VAT returns in my bookkeeper role really.

However, in terms of the bookkeeper Xero organisation it has the ground investigator registered as a Client. But the bookkeeper practice has not yet submitted a VAT return on behalf of the ground investigator.

Anyway, Happy New Year everybody, I'm off out for a drink.

 

[DWS]

Not really what you were asking but why register the bookkeeping business for VAT in the first place?
For a new business gaining clients will always be a challenge especially in the bookkeeping/accountancy sector which is saturated at the moment with new start ups.
Unless you have a gap in the market where the clients you will be working for are already VAT registered I think you may well be pricing yourself out of work when you have to add VAT to your fees.
I have an accountancy practice , although I only work though it part time, I am well below the VAT threshold and wish to keep it that way because the majority of my clients would not be able to claim the VAT back if I charged it.
An additional 20% on your prices could mean a big difference in a very competitive market!

 

[numbersrule]

Not really what you were asking but why register the bookkeeping business for VAT in the first place?
For a new business gaining clients will always be a challenge especially in the bookkeeping/accountancy sector which is saturated at the moment with new start ups.
Unless you have a gap in the market where the clients you will be working for are already VAT registered I think you may well be pricing yourself out of work when you have to add VAT to your fees.
I have an accountancy practice , although I only work though it part time, I am well below the VAT threshold and wish to keep it that way because the majority of my clients would not be able to claim the VAT back if I charged it.
An additional 20% on your prices could mean a big difference in a very competitive market!

My understanding is that a bookkeeper has to be VAT Registered in order to submit VAT returns on behalf of Clients.

This is why the Xero set up also forces Tax settings through the Practice.

I intend to have a single hourly charge rate which will be

+ VAT for VAT registered Clients

Including VAT for non VAT registered Clients

 

[DWS]

My understanding is that a bookkeeper has to be VAT Registered in order to submit VAT returns on behalf of Clients.

This is why the Xero set up also forces Tax settings through the Practice.

I intend to have a single hourly charge rate which will be

+ VAT for VAT registered Clients

Including VAT for non VAT registered Clients

No, bookkeepers and accountants do not need to be VAT registered to submit VAT returns for clients.

 

[numbersrule]

No, bookkeepers and accountants do not need to be VAT registered to submit VAT returns for clients.

It seems to me that this is not true when you provide bookkeeping services and submit VAT returns via Xero.

 

[DWS]

It seems to me that this is not true when you provide bookkeeping services and submit VAT returns via Xero.

I do not use Xero to submit my clients VAT returns but I would be amazed if what you say is indeed the case, where is the logic that an accountant needs to be VAT registered?
Are you sure that you are not confusing this with having to have a ASA in order to submit through MTD?

 

[numbersrule]

I do not use Xero to submit my clients VAT returns but I would be amazed if what you say is indeed the case, where is the logic that an accountant needs to be VAT registered?
Are you sure that you are not confusing this with having to have a ASA in order to submit through MTD?

Many thanks DWS. Yes, I see now.

Xero is directing me to create an ASA.

But I can't create an ASA until I have AML Supervision.

As I am part way through the ICB route to a Practice Licence I intend to attempt to follow that through to a conclusion with a ICB Practice Licence and ICB AML Supervision.

In the meantime I have solved the MTD VAT January 2024 requirement by doubling up with Quick File Affinity for my bookkeeping company accounts just for this VAT quarter.

Then if PLA successful I will revert back to Xero for next MTD VAT quarter.

In conclusion, and in hindsight, bookkeeping company registered for VAT too soon.

 

[numbersrule]

..................You can practice as a book keeper without any qualifications.

That's interesting.
I did my own bookkeeping for ground investigations for 8 years without any formal bookkeeping training.
Then for the last year I have been doing Level 2 and then Level 3 training.
The training has made an enormous difference to my understanding of accounting and bookkeeping principles.
If anyone were to ask me 'do you need qualifications to be a bookkeeper?', I would probably say yes, it would probably be a good idea. Training is a way of nipping bad habits in the bud.
Anyway, it's not rocket science so there is nothing to fear from trying to obtain qualifications and it can't be a bad thing.

 

[Newchodge]

That's interesting.
I did my own bookkeeping for ground investigations for 8 years without any formal bookkeeping training.
Then for the last year I have been doing Level 2 and then Level 3 training.
The training has made an enormous difference to my understanding of accounting and bookkeeping principles.
If anyone were to ask me 'do you need qualifications to be a bookkeeper?', I would probably say yes, it would probably be a good idea. Training is a way of nipping bad habits in the bud.
Anyway, it's not rocket science so there is nothing to fear from trying to obtain qualifications and it can't be a bad thing.

So what? You can practice as a book keeper without qualifications.

 

[TheSkyisGray]

Just login to Xero as the company and not the accountant.

 

[numbersrule]

Just login to Xero as the company and not the accountant.

Thanks TheSkyIsGray. You may be right!
I'll look into that and be in touch again.
At present I think I only have a Practice Login.

 

[numbersrule]

All sorted.?
@ TheSkyIsGray, I just needed to invite myself into my own organisation with a different email address.
When Xero create a Partner Account they just start with a Practice Login without an Organisation Login. This scenario happens when you create a Practice that didn't previously exist as an organisation.

 

[numbersrule]

Which is it? If you have clients that you are submitting VAT for then you should have an agent account. If you are just doing the bookkeeping for your own company then they aren't a client so you're technically breaching the terms of your Xero account.

Never mind - you have been given several options on this thread. Now you've noted you have an accountant for one of your businesses this is another option, asking them to submit on your behalf.

Hi NicoJ
I am sorry for all the confusion on this one. See above, I got sorted in the end as per above posts. Thanks for your input.
I can also see now that bookkeepers don't need to be VAT Registered to submit VAT returns. I think it was something I read on a different Forum ( LOL ? ).
I am now in two minds about whether my bookkeeping should be voluntarily VAT Registered and am considering de-Registering.
One factor against de-Registering is that my ground investigation company is VAT Registered but I suppose that shouldn't be a problem because the two companies are in completely different industries.
A strong factor for de-Registering is that VAT Reg would be a handicap when trying to attract non-VAT Registered bookkeeping Clients.
I think I'll probably de-Register.

 

[numbersrule]

My suggestion would be to avoid Xero. You can practice as a book keeper without any qualifications and you can send VAT returns online without being a tax agent.

Hi Newchodge
Xero has some issues, I agree, but most of the time it comes up with answers if you persevere!

 

[numbersrule]

Not really what you were asking but why register the bookkeeping business for VAT in the first place?
For a new business gaining clients will always be a challenge especially in the bookkeeping/accountancy sector which is saturated at the moment with new start ups.
Unless you have a gap in the market where the clients you will be working for are already VAT registered I think you may well be pricing yourself out of work when you have to add VAT to your fees.
I have an accountancy practice , although I only work though it part time, I am well below the VAT threshold and wish to keep it that way because the majority of my clients would not be able to claim the VAT back if I charged it.
An additional 20% on your prices could mean a big difference in a very competitive market!

Thanks DWS
HMRC have confirmed VAT Reg is cancelled as of 01.02.2024
Just one quarterly return to submit and owe zero.

 

[numbersrule]

Just so the Forum is aware, Ground Investigator has a new UKBF Identity as B2 Bookkeeper.

There seem to be a lot more queries about bookkeeping and accounting on UKBF compared with the number of posts about ground investigations.

Necessity is the mother of invention.

So I've reinvented myself.

First and foremost, I remain a ground investigator and always will, because once a ground investigator, always a ground investigator.

B2 Bookkeeper will be my UKBF Identity going forward.