Submitting first invoice, do I charge VAT?

[finallynaptime]

First time freelancing, agreed a daily rate, will invoice as sole trader. VAT didn't occur to me until looked at invoice template I am using. Would my employer assume that it was included in the daily rate we agreed. Or is it normal for free-lancers to add it on top? I'm providing business services (recruiting) if that makes a difference. Any help massively appreciated

You can't charge VAT unless you are registered. Are you?

Are you VAT registered?

if you are, you SHOULD know about these things and if you havn't done your home work, go do it NOW.

You don't HAVE to be VAT registered unless your turnover is above a threshold.

REALLY REALLY - go and do some homework on self employment, the HMRC website is good place to start. If you don't know what your covering in your charges to customers and what you have to keep records of and what you can off set against tax you can end up losing money rather than making it.

Only have to VAT register if turnover >£70,000 in a 12 month period.

Second the HMRC website and they do free workshops too

Thanks!

You need to find out about IR35 too. The way you are using words like 'employer' and 'daily rate' makes me think that you need a lot of help - you might like to look at the Professional Contractors Group.

Oops, didn't read the OP properly - IR35 not relevant as a sole trader, it is the company that you are working for that is probably heading for trouble when they have a PAYE audit.

Doing your homework is a good suggestion, it's not much fun, but it really does help and you have to know. I don't like it much myself but can recommend a free course from your local HMRC (see website). It's about income tax, and how to set yourself up. Very useful indeed and quite fun as you meet all these other sole traders in your area too.

Usually you mention in your offer your price £XXX,- excl. VAT). If you don't expect to earn under a certain threshold, you wouldn't normally have to charge VAT (unless, indeed, you register to do so). In the VAT line you would say N/A. If you do charge VAT, and forgot to mention it in your offer, it's actually normal to add it to the invoice regardless. That's what all business bills look like, and companies get the amount returned

Hi I've just done exactly the same thing, charged someone a fee and not included VAT but not been specific with her.

Now I'm not sure about this and am an absolute beginner as well but, although you don't have to register for VAT until you've reached the 64K turnover mark, I think it benefits you to do so as if you don't charge VAT you won't be able to claim VAT on expenses to your business. Or am I completely wrong?

I'm booked on the course by the way, maybe that will help.

It is true that if you don't charge VAT you won't be able to claim VAT on expenses to your business.

But if you don't have many expenses with VAT on it might not make much difference. And you will be able to make more profit at a lower price to any clients that are unable to reclaim VAT (individuals, charities, banks...)

Basically it depends on the nature of your business and the nature of your customers. The course will help.

Thanks mranchovy,

I've quoted my first customer and am thinking I should add that VAT onto her invoice as part of the service. If this doesn't put her off I could also claim for a flat rate VAT for my first year, and any tools I buy (I'm a gardener) I will be able to reclaim for.

Unfortunately the work I do is seen as a 'cash' type job, like cleaning, but I do think the benefits are more for me, as it will enable me to build up my business with tools/phone/other expenses.

In my other home (the ebay discussion boards) I have written a guide to self employment...
Not sure if I'm allowed to link to it here but I believe it comes up on google...

If your supplying businesses that can reclaim the vat get on the VAT FRS (Flat Rate Scheme). It'll improve your turnover by 2%.

so £200 in every £10,000.

This is for BarbieGrows - if you are working as a gardener and will mostly be working for the general public rather than other VAT registered businesses then you probably do not want to register for VAT unless you have to as registering will make you 17.5% (20% from 4/1/11) more expensive than other non-registered gardeners that you may be competing against assuming you both charge the same basic hourly rate. Yes you could claim back the VAT on stuff you buy - but you may lose business if you are more expensive than others in total. You have to register if your turnover goes over the threshold in the 12 month period.

Naptime - on the other hand - if you are mostly working for VAT registered businesses then you may wish to register voluntarily as there will be no cost to your clients as the VAT flows through them. You are unlikley to have that many VAT costs yourself so the flatrate scheme may be good for a business like yours.

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