quick starting up with VAT query

[zipzap]

Just wondering if anybody knows - I've just started a limited company - having been forced to in order to invoice an agency through whom I've had some work.

The accountant said to be vat registered as it was money back on stuff - but he put the date starting registration after the date I did the work.

From what I can see on the govt / tax sites, I can't charge vat if I do the work and I am not registered - fair enough. Now I am registered, I do, simple.

But - what happens in the interim period - when an invoice is sent out for work done before vat registration happens but gets paid after vat registration? Is the fact that I sent the invoice date out before vat registration enough so that I don't have to pay vat or will I have to pay vat on any money I get after the vat registration date - in which case do I need to stick vat on the invoices which will be paid after the vat registration date even though the work was done beforehand?

Hope that makes sense!

Just don't want to get stuffed by not charging vat and then discovering that I should have and I have to forfeit a chunk of earnings!

Would have clarified with accountant but he's on holiday for a couple of weeks and I was hoping to get invoices out before then!

thanks in advance...

First of all, it is possible to ask for a registration to be backdated when you apply: you should have discussed an appropriate date with your accountant. It might be possible to get HMRC to amend or accept an new application for registration from an earlier date, but I have no personal experience of this. Note however that you cannot backdate the registration before the date of incorporation of the company.

The important question is when did you start incurring costs with VAT on? If you want to reclaim this VAT, the effective date of your registration needs to be at the earliest date.

But any invoices that you issue now should have today's date on them anyway (or perhaps the 28 February, or another date in the last 2 weeks - this is not entirely true, the rules for Tax Points are complex but this assumtion will do for now). I assume that the VAT registration date has already passed? In which case the invoices HAVE to have VAT on them anyway.

HMRC hardly ever let you change the VAT-registration date once they've issued the certificate so I wouldn't rely on that. The basic rule is that any invoices you issue before the registration date will not have VAT on them, any invoices you issue after will have to have VAT calculated on them.

You can claim back VAT on items you bought up to three years prior to VAT-registration if you still own them at the VAT-registration date (for example your business computer) if you still have the VAT invoice.

Thanks for that.

VAT Date was just after the company was registered - xmas intervened so had to wait for bank people to come back from holiday to set up proper bank account and then I hadn't realised that accountant was waiting for stuff from me so he did do it and back date it but the first bit of work was done before the company registration came through (previously self employed and got screwed by an agency insisting on having an invoice from a limited company rather than a self employed contractor).

invoices are hopelessly late - have been waiting around for things and then getting told different info and then getting caught out by snow/illness/half term/etc and forgot so am now just getting to do it and realising it has all got horribly complicated because I have left it so long. I know I only have myself to blame.

I was just assuming that I would send the invoices dated as they were supposed to be dated and put a payment by date on them that would give them about a month to pay from when I finally got around to sorting them out so it would look like there was a 90 day payment term on if you see what I mean, rather than a 30 day one.

How would the IR know when the invoices were issued?

I haven't really incurred any big costs with vat on - just a couple of train fares - and as the work was before the company was incorporated I don't think it would make a difference anyway from what MrA said. I've held off from buying a new computer and 'big' things until I knew that I had my vat registration through (and had got around to sending out invoices to get the money in!)

Thanks again!

Just wanted to clarify - am not intending to diddle anything on the vat, was just trying to sort it out to keep it simple because of my incredibly useless inefficient manner and untimeliness of sending out invoices that should have been sent out months ago

There is no VAT on train fares!

Thanks hf - looks like I am going to have a very simple VAT return then as so far train fares have been my only expense )

But it's just me being late sending the invoices - they are sitting on my computer waiting to go, just got delayed by other things / forgetfulness, in the same way that my xmas thank you cards are still sitting here having not quite made it to the post box as the last couple needed addresses digging out and I haven't found them yet.

which I guess gets me back to - how do the IR know when you send out invoices? Will they know that they went out later than they should have done - what would have happened if they were paper invoices that had got lost at the bottom of my handbag and took a month or two to get into the post box?

anyone? Just wondering how they will know when I sent out my invoices... (I forgot to do it at the right time - can I back date them?)

Well, technically your VAT-date is the earliest of
a) invoice date;
b) date of work done;
c) date of payment
but there is a 14-day grace period between date of work done and date of invoice.
In practice the invoice date often ends up being the VAT date as nobody has the desire to track actual dates of work done.

Also, as your first VAT quarter probably runs to either February or March (based on the info given) then I don't think HMRC cares one way or another whether you date your invoice Jan or Feb. Therefore I would just date the invoices based on when they should have been going out in the first place (and depending on whether your VAT-reg started before or after that point you either add VAT or not).

Hope that makes sense

Also, are you working for only one company, in their premises, using their equipment and follow their office rules and so for a long period of time? This has nothing to do with VAT, I'm just asking because if you do... and there are specified conditions HMRC looks at, then you can be considered to be an employee of that company, which would mean a significant tax liability for you.
That is the only reason I can think of why they would insist that you work through your limited company rather than as a self-employed individual. The basic reason is that if HMRC find that you are effectively employed then somebody has to pay the extra employment tax. If you're self-employed then they (i.e. your customer) would have to do that but if you're working through a company then the extra tax would be paid by you (well, by your company but that is your money in there).

If there is another reason for you to work through a ltd company then I'm sorry to be prying, I just thought I'd warn you. If you think this might apply to you then ask your accountant about the IR35 legislation and he should be able to explain things to you and determine whether there's a risk HMRC would look at your situation or not.

I have to be honest and say that unless you are regularly buying a lot of VAT rated goods or plan to have a turnover over the VAt threshold I can't see any advantage to being VAt registered other than it makes your services more expensive.

Its OK if you are only working for a VAT registered company but if you ever do any work for someone who is not VAT registered it can make you expensive.

We are avoiding being registered (by staying under the turnover) as we have to charge 17.5% more for our services.

wow, thanks for all the info.

Riksti - yes, have to be limited company because of the IR35 regs - and I've been doing work for a couple of companies (and am hoping to work for some others too if I manage to get the work and figure out childcare too!). The companies I have been working for (one agency, one company directly) will only let you work for them if you are a limited company to protect themselves. Partly where this issue arose - I'd previously been a sole trader (only doing very occasional work due to unexpected maternity break) and it had never been an issue. Discovered after the fact that I hadn't got company for first contract back so was always playing catch up.

And accountant never mentioned sending in invoices within a timeframe; fact that they are now over three months late with the vat registration popping up in the middle seems to have hugely complicated things. Maybe it never occurred to him that somebody could be quite so disorganised .

vat quarter runs to end of march but should have issued invoice in dec so maybe I will just issue it when it was supposed to be issued as you suggest and leave vat off, other stuff subsequently has got vat on and is fine.

Think I should be OK on the IR 35 thing - I have gone into their offices or clients for meetings but done a lot of the work from home on my own equipment.

IslandofSodor - only planning on buying computer kit really, nothing major. Accountant said it would be a good idea so I just followed his advice, will see how the first year goes and see if I really need to be. So far all the people I have been working for have been vat registered so hasn't been an issue.

I can see that I am going to have to get seriously organised otherwise I am going to end up with real problems with things being late.

thanks again everyone.