Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • wickmesh
    • By wickmesh 26th Apr 17, 1:54 PM
    • 22Posts
    • 14Thanks
    wickmesh
    Sole Trader - VAT Registration?
    • #1
    • 26th Apr 17, 1:54 PM
    Sole Trader - VAT Registration? 26th Apr 17 at 1:54 PM
    Hi all,

    I am a sole trader, trading in the UK, invoicing only UK companies. I work as a consultant with (currently) one main client. I began working for them in June 2016, after a period without a client.

    My total invoices since June 2016 are approaching £85k - which is the current VAT threshold I believe. What I am struggling with is how much of what I've invoiced counts towards the VAT threshold - and thus do I need to register right now (as the total of my invoices approaches £85k) or can I put it off until later (when the total of only parts of my invoices get close to that amount)?

    1) Is it quite simple and the answer is "the sum of everything I've invoiced for over any 12 month period"?

    2) Or do I need to look more closely at my invoices and work out totals of each category within them? Is it a sum of two of these categories? I can divide my invoices into 3 basic categories:

    a) Hourly rate (easy, that is VATable and I'd add 20% to this if I became VAT registered - that makes sense to me)

    b) Mileage (I charge mileage at the std rates - 45p up to 10k/tax year then 25p thereafter - which my client pays). Is this VATable? If I become VAT registered, do I add 20% to this charge for my client?

    c) Expenses (On which I have paid VAT at the rate charged to me by the supplier, and then passed on the whole charge to my client. E.g. food, meals, hotels, road tolls, materials bought for my client.) This I am struggling with - does it count towards the threshold? If I become VAT registered, do I pass on these expenses with VAT, or without VAT and claim it back myself?

    I would much appreciate some advice please from those wiser than I!

    Many Thanks
Page 1
    • Pennywise
    • By Pennywise 26th Apr 17, 2:05 PM
    • 8,998 Posts
    • 16,244 Thanks
    Pennywise
    • #2
    • 26th Apr 17, 2:05 PM
    • #2
    • 26th Apr 17, 2:05 PM
    No, you don't break it down like that. It's based on total invoicing regardless of what you're invoicing for. The only thing you could exclude (assuming no exports, no exempt sales or "out of scope" sales), would be genuine disbursements, i.e. where you've bought something on behalf of your client and you invoice them for the exact amount.
    • wickmesh
    • By wickmesh 30th Apr 17, 9:50 AM
    • 22 Posts
    • 14 Thanks
    wickmesh
    • #3
    • 30th Apr 17, 9:50 AM
    • #3
    • 30th Apr 17, 9:50 AM
    Thank you Pennywise, that is very clear!

    I'm not quite at the threshold yet but I won't delay contacting HMRC and registering.

    The only question left is how I charge VAT to my client - do I charge it on mileage (2b) and expenses (2c) as well please?

    Thanks
    Wickmesh
    • Wet_Weekend
    • By Wet_Weekend 30th Apr 17, 12:13 PM
    • 13 Posts
    • 3 Thanks
    Wet_Weekend
    • #4
    • 30th Apr 17, 12:13 PM
    • #4
    • 30th Apr 17, 12:13 PM
    Thank you Pennywise, that is very clear!

    I'm not quite at the threshold yet but I won't delay contacting HMRC and registering.

    The only question left is how I charge VAT to my client - do I charge it on mileage (2b) and expenses (2c) as well please?

    Thanks
    Wickmesh
    Originally posted by wickmesh
    Once you are registered for VAT, you charge VAT on all taxable supplies.

    HMRC will provide you full info when you register ... or better still, speak to your accountant

    Expenses are usually something that employers pay to employees
    • bris
    • By bris 30th Apr 17, 5:27 PM
    • 6,720 Posts
    • 5,757 Thanks
    bris
    • #5
    • 30th Apr 17, 5:27 PM
    • #5
    • 30th Apr 17, 5:27 PM
    The 85k is based on turnover but as a sole trader you would be better to base the year end on the end of the financial year at the 5th April. So start this year from the 6th April.
    • wickmesh
    • By wickmesh 10th May 17, 5:20 PM
    • 22 Posts
    • 14 Thanks
    wickmesh
    • #6
    • 10th May 17, 5:20 PM
    • #6
    • 10th May 17, 5:20 PM
    The 85k is based on turnover but as a sole trader you would be better to base the year end on the end of the financial year at the 5th April. So start this year from the 6th April.
    Originally posted by bris
    Thanks - but yes and no...

    HMRC make it very clear that the 85k threshold is based on any 12 month period, so I'd be OK (not exceed the threshold, at least for now) if I could go by tax years but I cannot!

    As for the charging periods, it I expect it will suit me to pay yearly rather than quarterly, but it will make no difference to me whether I base my year end on the tax year, or from when I registered for VAT... in fact if anything it will be easier to base it on from when I registered.
    • 00ec25
    • By 00ec25 10th May 17, 8:54 PM
    • 4,545 Posts
    • 3,922 Thanks
    00ec25
    • #7
    • 10th May 17, 8:54 PM
    • #7
    • 10th May 17, 8:54 PM
    OP, when you do reach the VAT threshold it might be worth while you familiarising yourself with this in advance:

    as wet-weekend says, what you are calling mileage and "expenses" are more correctly simply your costs and if billed to your client are indeed part of your turnover for VAT purposes so you will be adding VAT to the values when you do register and bill for them

    the only time you do not add VAT to the values on your bill is when the item is a disbursement. That is a special term as explained in the link, everything else is simply a "cost" which you are passing on to your client.

    https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers
    • wickmesh
    • By wickmesh 10th May 17, 9:02 PM
    • 22 Posts
    • 14 Thanks
    wickmesh
    • #8
    • 10th May 17, 9:02 PM
    • #8
    • 10th May 17, 9:02 PM
    OP, when you do reach the VAT threshold it might be worth while you familiarising yourself with this in advance:

    as wet-weekend says, what you are calling mileage and "expenses" are more correctly simply your costs and if billed to your client are indeed part of your turnover for VAT purposes so you will be adding VAT to the values when you do register and bill for them

    the only time you do not add VAT to the values on your bill is when the item is a disbursement. That is a special term as explained in the link, everything else is simply a "cost" which you are passing on to your client.

    https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers
    Originally posted by 00ec25
    Thank you - yes that makes a lot of sense!
    • martindow
    • By martindow 11th May 17, 11:46 AM
    • 7,121 Posts
    • 3,939 Thanks
    martindow
    • #9
    • 11th May 17, 11:46 AM
    • #9
    • 11th May 17, 11:46 AM
    Have you discussed with an accountant the pros and cons of voluntarily registering? If you deal with VAT registered companies you may well be better off registering now rather than waiting until you're forced to. You could well have been best to have registered at the outset.
    • wickmesh
    • By wickmesh 11th May 17, 11:58 AM
    • 22 Posts
    • 14 Thanks
    wickmesh
    Have you discussed with an accountant the pros and cons of voluntarily registering? If you deal with VAT registered companies you may well be better off registering now rather than waiting until you're forced to. You could well have been best to have registered at the outset.
    Originally posted by martindow
    Thanks - probably more useful advice to those who have that option, as I am at the point of being forced to register - hence I have done so. But to be honest, I never thought the business would be doing so well as to need to be registered!
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,266Posts Today

7,944Users online

Martin's Twitter