VAT and sub-contracting

[thanksjaneshusbandatcaresouth]

A customer has contracted me to lead a project. I'll be subcontracting some work to a larger organisation that charges VAT.

As to my own work though, I'm not registered for VAT.

Can I invoice the customer the money with some some subject to VAT and some not?
Do I have to register for VAT?

If you are not VAT registered you can neither charge nor reclaim VAT

remove it from all of your mental considerations

right, thanks very much TP.

VAT registration duly submitted....

otherwise I'd have to pay VAT to my subcontractor without being able to reclaim it which would be a bit rubbish.

Don't forget that you have to charge it to your end client too.
Are THEY VAT registered ?

Why can't you simply invoice the customer the total price including the VAT element? That's what I used to do.

If you register for VAT that means that EVERY customer you now deal with, you will have to charge them VAT.

I think you need to consult an accountant as you will get yourself into a big hole by not knowing the ins and outs of VAT

Agree with Kitti
Have you spoken to your accountant about VAT registration will affect your whole business ?

You can’t charge your client any VAT, that is you can’t put the VAT charge on the invoice, if you’re not VAT registered.
But you’ll have to pay the sub contractor their VAT.
Have you already agreed a price with your customer cos you could bump your price up a bit to cover the extra 20% you’ll have to pay your contractor.
If you register for VAT you’ll have to charge every client the VAT but you could register on the flat rate scheme so you can’t reclaim any VAT but you’ll make a bit of money.

The flat rate scheme has changed recently, it's very hard to make money on it.

You should just pass on the total cost of the subcontractor, including VAT, to your client.

So your invoice looks like:

Thanks' work: £xxx
Subcontractors work: £yyyy
Total: £zzzz

Where £yyyy is subcontractor's total bill to you including VAT.

The flat rate scheme has changed recently, it's very hard to make money on it.
But shockingly lots of accountants do not seem to have realised.

I lost a client recently to a firm who had told him they would put him on FRS of 11% when his correct rate is the new 16.5%

HMRC are going to make a pretty penny when they start doing inspections on FRS traders.

With software there are no processing benefits to FRS any more.

Also remember that if you are Subbies, you need to get the treatment right between CIS and VAT

Nearly all my clients are VAT registered.