Invoices and VAT

Andy, Firstly are you actually VAT registered? If you arnt registered you don’t need to dealing with VAT. Compulsory registration kicks in at an annual t/o of £58,000. Before that level registration is optional and may be helpful in some circumstances, especially if you have lots of expenses with VAT on them, as you could then reclaim these amounts. Generally speaking if you are VAT registered you would need to add VAT to all your UK invoices. For EU invoices you need to add VAT unless they are a VAT registered customer who provides you their VAT number. If its outside the EU, sales are zero rated, meaning you still need to have a VAT line, but it will be at a rate of zero %. If you need some help getting to grips with the regulations, I am happy to have a quick chat/email with people. Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

Hello James Thanks very much for taking the time to reply. Firstly, in answer to your question, we aren’t currently registered for VAT. But as we expect our turnover to exceed the £58k threshold within the next few weeks, and in order to reduce our cost base, I intend to become VAT Registered within the next few days. Bearing that in mind, could you possibly confirm whether my understanding of the following is correct in light of your response? O - Until I’m VAT registered, can I still include a VAT line on my invoices at 17.5% for purchases within the UK, and 0% for purchases outside the EU? O - What are the implications, if any, if I include a VAT line at 17.5% on invoices for purchases outside the EU? O - Could you expand a little on your comment ‘For EU invoices you need to add VAT unless they are a VAT registered customer who provides you their VAT number’ – do I still include a VAT line but at 0%? And what would I do with their VAT number? Again, thanks James for your help. Much appreciated. Kind regards Andy

Andy, Until you are VAT registered, you must NOT add any VAT to any invoices. When you register you will be given a start date, from which time VAT should be added, and VAT can be reclaimed. Some pre registration VAT may also be re-claimed on your first return. (I wont go into this as this is a fairly big topic on its own, but worth bearing in mind) If you add VAT for sales outside the EU, you will be charging your customers a higher price than you need to, and this wont be of any benefit to you as you will need to pay the VAT over to HMCE. For intra-EU invoices, you would include a line at 0% as you suggest. The vat number is used as evidence that they are VAT registered and that you have the right to charge zero vat on their invoice. Their VAT number would be normally included on your invoice (I cant recall of the top of my head if this is a requirement but this is normal practice). There isn’t anything else to do with this number unless you are asked to complete intrastats (government statistics which are a pain) As you have a reasonable complex VAT set up I would suggest you do take some formal advice to ensure you don’t fall foul of the regulations, it can be quite a complex topic. Alternatively one free way to get some help is to have a chat with the HMCE helpline; they are actually really helpful, especially to new companies trying to get it right upfront. Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

That's a great help James...thanks for your time and advice. Andy