Can I Claim VAT Back from an Agency

samjocky

Hi

I am a one man Ltd Company who invoices an Agency each month for days worked on a contract.

I am about to register for VAT with good old HMRC. My accountant says that I should now put on my invoice my daily rate PLUS 17.5% VAT. He says it is the law and that the agency will not be able to refuse to pay it. My question is, I have been invoicing this agency for a few years now (as a non-VAT company) and I fully expect to get a "speak to the hand" attitude over this.

What can I say to the agency in order to overcome what I expect to be a confrontation? After all, forewarned is forearmed and all that!

Thanks in advance

Gertie_Walker

As your accountant says, you are now registered for VAT and you have to charge VAT to your clients. Your clients will have to pass the VAt on to HMRC. There is no debate about it.

paulwf

I would imagine they would be VAT registered so they wouldn't care two hoots whether you charge VAT to them or not. Check this before you start worrying over nothing.

Savvy_Sue

Gertie_Walker wrote: »

As your accountant says, you are now registered for VAT and you have to charge VAT to your clients. Your clients will have to pass the VAt on to HMRC. There is no debate about it.

I don't pretend to understand the workings of VAT, but surely it's not the OP's clients who pass the VAT he charges onto HMRC, but the OP himself passes the VAT he charges onto HMRC, while the agency pass any VAT they have to charge onto HMRC?

paulwf

Savvy_Sue wrote: »

I don't pretend to understand the workings of VAT, but surely it's not the OP's clients who pass the VAT he charges onto HMRC, but the OP himself passes the VAT he charges onto HMRC, while the agency pass any VAT they have to charge onto HMRC?

Yes it all depends on who is VAT registered. Best to start from scratch:

If you are VAT registered you reclaim VAT on purchases that incur VAT and add VAT onto invoices you generate (if applicable). You pay HMRC the net between the VAT from turnover minus VAT on expenses.

If you aren't VAT registered you can't reclaim the VAT you pay on expenses but don't add it onto invoices either.

VAT doesn't get passed on up the chain as such, it all depends on your VAT status.

Premier_2

samjocky wrote: »

Hi

I am a one man Ltd Company who invoices an Agency each month for days worked on a contract.

I am about to register for VAT with good old HMRC. My accountant says that I should now put on my invoice my daily rate PLUS 17.5% VAT. He says it is the law and that the agency will not be able to refuse to pay it. My question is, I have been invoicing this agency for a few years now (as a non-VAT company) and I fully expect to get a "speak to the hand" attitude over this.

What can I say to the agency in order to overcome what I expect to be a confrontation? After all, forewarned is forearmed and all that!

Thanks in advance

You cannot issue vat invoices until you are actually registered for VAT.

When you are registered, then you will have to issue VAT invoices.

Of course, it's up to you whether you decide to add VAT to your usual rate, or decide your usual rate includes VAT (resulting in you receieving less yourself). I know which I would prefer, and as already mentioned, as long as the agency is already registered for VAT, they won't care if you add VAT to the amount they currently pay you.

Either way, you must issue a fully compliant VAT invoice after you are registered ... but not before.
(My experience is that most agencies in such a situation would want to see a copy of your VAT certificate before paying you any VAT)

hippyadam

Don't sweat it, if they are VAT registered they claim it back anyway :beer:

Slinky

Slightly off topic but something you might want to look at if your accountant hasn't mentioned it, is joining the flat rate scheme for VAT. Depending on what industry you are in and how much VAT you are paying out on goods/services you are buying in, you might find it beneficial to be on the flat rate scheme where you pay a percentage of your turnover to HMRC rather than everything that appears on your invoices. If few of your expenses incur any VAT for you to claim back, you might find you can actually make some extra money. I invoice at 17.5% but only page 10% of my turnover to the VATman. Few of my expenses are VAT rated, so I make a nice bit of extra money on this scheme.

The rate you pay to HMRC varies according to the industry you are in, so you'll need to check.

JasonLVC

hippyadam wrote: »

Don't sweat it, if they are VAT registered they claim it back anyway :beer:

Not always the case. The agency may not be VAT registered or make partially exempt supplies....for reassurance, the OP just needs to have a quick word with his customer(s), in this case, the agency and let them know he's going to be VAT registered in future.

If it's a mandatory registration there's nothing he can do BUT charge VAT, but if it is a volunatry registration and he may annoy his only supplier by registering, there are other alternatives.

Flat Rate Scheme is a definite one to investigate, can be quite lucrative.

isplumm

Slinky wrote: »

Slightly off topic but something you might want to look at if your accountant hasn't mentioned it, is joining the flat rate scheme for VAT. Depending on what industry you are in and how much VAT you are paying out on goods/services you are buying in, you might find it beneficial to be on the flat rate scheme where you pay a percentage of your turnover to HMRC rather than everything that appears on your invoices. If few of your expenses incur any VAT for you to claim back, you might find you can actually make some extra money. I invoice at 17.5% but only page 10% of my turnover to the VATman. Few of my expenses are VAT rated, so I make a nice bit of extra money on this scheme.

The rate you pay to HMRC varies according to the industry you are in, so you'll need to check.

Hi,

I work in the IT business & am on the flat rate scheme - works well for me ....

Mark