I’m faced with having to VAT register for one specific reason – so “I” can be paid amounts that include VAT.

As I understand it, VAT registration is mainly for a 3-monthly statement about what I’ve SPENT from that registered account.

I’m assuming that my quarterly statements will therefore be simply blank because all I’m using the registration for is the specific payment to “me” from one specific source…

Any advice?

“I” can be paid amounts that include VAT.

‘You’ won’t be getting ‘paid vat’. ‘You’ will be collecting vat for the government. Every quarter you’ll tell them how much vat you’ve collected for them and pay it to them, minus any vat you’ve paid on business expenditure.

AFAIK you don’t need to be registered for this, but I’d talk with your Accountant first.

You can only be paid a sum that includes VAT if you issue an invoice that includes VAT shirley?

For example, we are VAT registered and the majority of our suppliers are VAT registered so we get a bill that includes the nett value of the invoice + VAT (for example, £100 nett + £20 VAT = £120 bill).

However some suppliers are not VAT registered (as their annual earnings are below the amount where VAT registration is a requirement) so we just get a bill for £100.

Ah, I see. Thanks macruiskeen.

My payee is VAT registered and I’ve asked them to ask their A/c dept if they’re legally required to pay me VAT as I’d rather not get involved all that tedious farting about….

Are they, d’you think?

I’m faced with having to VAT register for one specific reason – so “I” can be paid amounts that include VAT.

As I understand it, VAT registration is mainly for a 3-monthly statement about what I’ve SPENT from that registered account.

I’m assuming that my quarterly statements will therefore be simply blank because all I’m using the registration for is the specific payment to “me” from one specific source…

Any advice?

This makes no sense. If you have a client that is VAT registered, if you charge them ex VAT (because you’re under the threshold) then they’ll pay exactly the same amount as if you charge them inc VAT and they reclaim the VAT. The only thing different will be the short-term cashflow.

If you are VAT registered then you have to add VAT to every invoice and then pay that to HMRC every quarter (whilst reclaiming VAT on purchases). Unless you’re on flat rate VAT, then you don’t get to reclaim but you don’t pay HMRC the full 20% (though you still have to charge it).

My payee is VAT registered and I’ve asked them to ask their A/c dept if they’re legally required to pay me VAT as I’d rather not get involved all that tedious farting about….

VAT is determined by the company doing the selling, not the buying. My company is VAT registered so we charge VAT on everything we sell within the EU. Anything we purchase can be with or without VAT – some of our smallest suppliers aren’t VAT registered so there is no VAT on their invoices. The other invoices have VAT, which we reclaim.

I’ve asked them to ask their A/c dept if they’re legally required to pay me VAT

No they are not legally required to pay you it and you are *not* being paid it, you are collecting it (if you are VAT registered) on behalf of HMRC.

The only reason to be VAT registered if you’re under the threshold is if you sell products which don’t attract VAT (like most food). Then you can reclaim VAT on purchases but don’t have to add it to your prices, so it’s a win win. I am not an accountant though!

Mr Woppit I appreciate you don’t want the admin but its tax collection on behalf of the government. If you are not VAT reigistered as you are a small business then the government losses out on that tax. (I think its all complicated with offsets but not every company can offset vat paid/received – depends on their busines flow. My last major employer was not vat neutral, it paid much more than they charged so was a net contributor)

Edit: What John says

It sounds like your client does not understand how VAT works.

if you’re under the threshold

Probably worth reinforcing this. There’s a limit below which you don’t have to be VAT registered, and it’s quite high – about 80 grand I think.

It sounds like your client does not understand how VAT works.

Well, it IS the BBC… 😉

There’s a limit below which you don’t have to be VAT registered, and it’s quite high – about 80 grand I think.

Well, that would make it all worth the effort, but beyond a sudden media explosion or a one-off payment by Bono, it probably won’t rise to those heights!

Thanks everybody.

If you (your choice, unless you are over the threshold) are registered, then you bill your client and include VAT on your invoice to them.
You (if registered) gain the opportunity to reclaim the VAT on purchases made from VAT registered suppliers.

Some public organisations require their suppliers to be VAT registered – this might be where it’s getting complicated? Have the BBC got a policy that requires you to be registered in order to supply them?

One route, if/when registered would be to do the quarterly return you mention – once you’ve done a couple it’s easy enough. There may be advantage to the flat rate scheme, but I think that’s changing so you’ll have to explore that in the context of your business (the rates vary depending on what you do).

You can de-register from either scheme fairly easily, so if its a requirement for a contract you could dip in and out (but i wouldn’t make a habit of that…)

“There may be advantage to the flat rate scheme, but I think that’s changing so you’ll have to explore that in the context of your business (the rates vary depending on what you do).“

It’s changing as part of the continued crackdown on contractors, creating a new 16.5% rate for businesses with “limited costs”. Which is most if not all PSCs. AFAIK other sectors – i.e. “real” businesses – are unaffected.

And if you find you do need to be VAT registered (as twicethechips says, some organisations require this – although it has *NOTHING* to do with having to pay you VAT, it is a simple ‘tick box’ on a form for some admin clerk to confirm when they set you up as a supplier) look at using something like Freeagent to do your books – it is dead simple and it will do all your calculations and even submit the return to HMRC for you.

And if you do need to be VAT registered, don’t forget to put every allowable expense of yours through the books (for example, you buy a new laptop – put it through the business and claim 20% back).

Remember it’s you as the trader, or company, that registers for VAT so that means charging VAT on all your vatable sales whilst you’re registered.

Ah, I see. Thanks macruiskeen.

My payee is VAT registered and I’ve asked them to ask their A/c dept if they’re legally required to pay me VAT as I’d rather not get involved all that tedious farting about….

Are they, d’you think?

they cant force you to become vat registered to accept their payment plus the vat.
invoice them with no vat (because you are presumably under the threshold) and then they will have to pay you with no vat added.
as somebody who has to do their own vat returns i would be right pissed if somebody forced me to go through the registration/return/deregistration procedure just because they are too lazy to pay ex vat.

lets not forget they will be paying our loads of payments with no vat (and reclaiming no vat on them)
so yours will just be another one of those payments.

flat rate VAT registered here, the folk I invoice don’t care as they are VAT registered already. There is a slight saving in IT contractors and the like as I’m not typically buying and reselling. But there is a lower limit – £2k – for VAT reclaim on e.g. laptops.

just because they are too lazy to pay ex vat.

I can’t see how it could be laziness – it takes no more or less effort to pay one contractor a bill with VAT on it than another with no VAT.

For the OP it might be more about vat efficiency of the client than ‘paying you VAT’. If you’re billing an organisation in some instances suppliers who are vat registered are better value.

If you’re supplying labour only it doesn’t really matter.
1 days work for
£100
or
£100+vat (£120)
is in fact the same price for the buyer – £100 – once they settle their own vat return

However if your labour has other additional costs – such as if you drive a supertanker and your bill include a large amount of fuel.

£100 labour
£10,000 fuel

Total £10,100

or

£100+vat labour
£8333.33+vat fuel (i.e. £10,000)

£1686.66 vat

Total
£10119.99

So for a non-vat reg customer the difference is about £20, but for a vat registered customer the difference is nearly £1700.

If they had to choose between a non-vat registered supertanker driver and one who was the vat registered one would actually be much cheaper even though they are charging the same price for the same service.

If they had to choose between a non-vat registered supertanker driver and one who was the vat registered one would actually be much cheaper even though they are charging the same price for the same service.

Isn’t the supertanker driver supposed to charge VAT on his total fuel bill (inc. VAT, e.g. £10000 + VAT)?

Isn’t the supertanker driver supposed to charge VAT on his total fuel bill (inc. VAT, e.g. £10000 + VAT)?

Yes – it is up to the supplier to invoice with the correct VAT charged. For example, if you bought a pair of adult shoes and a pair of children’s shoes, it is up to the person that provided the shoes to charge the correct VAT (ie, 20% VAT on the adult shoes, 0% VAT on the children’s shoes. They can’t just group them up as ‘misc. shoes’ and charge 20% on the lot.

And to the person that receives the goods (in the case of the OP as his client is VAT registered) it doesn’t matter if VAT is charged as they will simply claim it back from HMRC anyway.

Isn’t the supertanker driver supposed to charge VAT on his total fuel bill (inc. VAT, e.g. £10000 + VAT)?

As in charge vat on top of the whole cost of their fuel? Buy Fuel at £10,000 inc vat and sell it at £10,000+vat. No – as they can reclaim the vat they paid of the fuel themselves so they can offer it as a supply to their customer at the non-vat price but they have to charge appropriate vat on the whole invoice. In practice though you’d usually have some mark up or handling cost of being responsible for sourcing and supplying that fuel. But someone isn’t compelled to bill they material they supply at (cost+vat)+vat. In my example I was suggesting the fuel was a straight forward expense.

Otherwise as a raw material changed hands through various stages of production:
from mined ore> smelted aluminim> tubes ->frame > bike >distributor > shop you’d be paying vat on vat on vat on vat on vat.

Its ‘value added tax’ the tax each person in the chain pays to the HMRC is the difference between the cost of the raw materials and services they purchase and value of the service or product they supply. In other words the value that they add at their point in the supply chain not the whole value of the supply.

I used to be VAT registered (well below the threshold) because at the time it made excellent sense – on the flat rate scheme I could charge 20% VAT but only paid 11.5 or 12%. Some admin overhead but it was definitely worth it. No idea what the flat rate rates are these days, mind.

It sounds like your client does not understand how VAT works.
Well, it IS the BBC…

Quite possible that you’re dealing with somene at the BBC who doesn’t understand how VAT works. The finance team was gutted and outsourced over a number of years so there was very little financial knowledge left.

I don’t remember VAT registration being a requirement though it’s likely the flat rate scheme would work in your favour anyway.