How can I get round the vat rise in January?

leveller2911

escortg3 wrote: »

Sales that span the change in rate

There are special rules for sales which span the change of rate. If you provide goods or services before 4 January 2011 and raise a VAT invoice after that date you can choose to account for VAT at 17.5 per cent. You don't need to tell HM Revenue & Customs (HMRC) if you do this

The change of rate rules may be used where you provide goods or perform services before 4 January 2011 and raise a VAT invoice and, in some cases, receive a payment after the rate change.
So, for example, if you issue a VAT invoice on or after 4 January 2011, for goods you provided, or services that you completed before 4 January 2011, you can, if you wish, apply the 17.5 per cent rate.

http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-rise-guidance.pdf#page=7

Thats from hmrc.gov website so i am correct that i can apply the 17.5% VAT rate for work done in dec 2010

Thanks for the link ,having read the whole page its typical of HMRC , all wishy washy and never black and white.Personally I will be charging 20% on any invoices raised on or after 4th Jan.

leveller2911

chrismac1 wrote: »

The tax point for goods is normally the date of delivery, and for services the date the work was done - unless paid for in advance when the tax point is the payment date. Some examples:



I'm a Joiner and make/fit Joinery ,have been vat registered for 8yrs and my accountant has always told me the important thing is the date when the invoice is raised and not when the work was carried out,Either 1:my Chartered Accountant is a knob 2: There are different rules for different industries so personally I'm confused


Having phoned the HMRC on numerous occasions over the years I have absolutely no confidence in them as they will NEVER give you an answer , they always refer you to a page in the vat book...

chrismac1

"For services, the date when the services are considered to be supplied for VAT purposes is the date when the service is carried out and all the work - except invoicing - is finished."

If you simply Google "tax point services" and go to the HMRC link that comes up you will find your way eventually to this text. As another poster has pointed out, the HMRC website has been written by someone clueless about web surfing - probably just a load of copying and pasting from printed manuals, I guess.

I doubt that your ACA is a knob, normally this sort of thing doesn't really make much difference especially in a trade like yours. The clients I really work hard on this with are those for where there can be a big difference if they get it wrong - for example one client is a kitchen fitting company which will normally charge 25% deposit on getting the order, the balance on installation. So this business has 2 tax points on most orders, and often those tax points come either side of a VAT quarter end. In your case, hopefully you get 95% plus of your invoices out within a few days of completion of the work so the technical difference between tax point and invoice date is not a big deal.

There are no different rules for different industries, but some sectors will have a tougher time of this than others. A big civil engineering contractor in the Olympic village is very unlikely to have a contract milestone on January 3rd. In these cases, best practice is to have a QS valuation to back up the split of the invoice - which should be fine, as for large contracts the QS should be doing a monthly valuation anyway.

John_Pierpoint

If it is Business to Business it doesn't much matter, as far as HMRC are concerned; it is us poor s0ds the private consumers who have to pay the 20% tax eventually. I suppose if you are offering personal services then most of your invoice will be "value added", so you too might get into the 15 - 20% band?
If you are in business it is good practice to bang out invoices within 24 hours anyway.
There is a danger with supplying big organisations (like Ford) who self bill and will pay you what their computer says not what your computer thinks.

JasonLVC

Hello all!

The basic tax point rules for GOODS are that the tax point is created upon i) dispatch of goods, ii) receipt of cash or iii) when the invoice is issued whichever comes first.

For SERVICES its a bit different becuase there is no 'delivery of goods' as such and so it is harder to pin down the tax points which is why the building trade operates with interim certificates or requests for payment, where the customer is billed in stages.

So for services, the tax point is either the date cash is received or the date when the supplier issues an invoice - whichever is earliest.

So the builder can start the job, issue a request for payment for say 20% of the total cost. When the customer pays that request, THAT is the tax point, the date the cash is paid and so on each time until the contract is paid in full.

HMRC stipulate you have to apportion works that span the VAT rate change but I know from experience that you can bend these rules becuase realistically HMRC will never know what amount of work you did in December and what you did in January (within reason).

Let me explain, if you're having 7 double glazed windows fitted to your home, front is done in December, rears done in January. Provided the supplier has ordered all the stock in December, HMRC will not know exactly when those windows were installed - they dont' go through diaries, so you can push most of the work into December, even though some took place in January.

But if the supplier orders the stock for the fronts in December and orders the stock for the rears in January it'll be easier for HMRC to trace an install dte, so a bit of common sense needs to prevail.

So to answer the OP's question, if they cannot get the works at least started in December, then alas, the whole works will be billed at 17.5%

JasonLVC

[QUOTE=leveller2911;39020266Wheres_Jason_LVC??_when_you_need_him......[/QUOTE]

Sorry about that, as you can imagine, very busy at the moment! - but thanks anyway!

I wouldn't say your accountant is bad, but not many accountants are specialists in the field of indirect tax.

The tax point is when the cash is received or when the invoice is raised, so if you get paid cash on 12th November, that needs to go on your November period VAT return, even if you don't get around to raising the invoice until December (so if you went by invoice date alone, you'd be paying the VAT over one month too late in my example).

Take advantage of the fact you work in a service industry. Issue requests for payment (these are not VAT invoices as they will state "Not a VAT invoice on them"). This doesn't create a tax point as it isn't an invoice. Once customer pays you, that locks the tax point and you then issue a proper VAT invoice to them.

This is good if you do a lot of work on credit terms (30 days, etc) as it means you don't have to pay the VAT man until you get paid, but if your main clients are the public where they pay you cash up front then its not such a benefit as you'll already have the cash to pay the VATman as client will have paid you directly on the day.

leveller2911

JasonLVC wrote: »

Sorry about that, as you can imagine, very busy at the moment! - but thanks anyway!

I wouldn't say your accountant is bad, but not many accountants are specialists in the field of indirect tax.

The tax point is when the cash is received or when the invoice is raised, so if you get paid cash on 12th November, that needs to go on your November period VAT return, even if you don't get around to raising the invoice until December (so if you went by invoice date alone, you'd be paying the VAT over one month too late in my example).

Take advantage of the fact you work in a service industry. Issue requests for payment (these are not VAT invoices as they will state "Not a VAT invoice on them"). This doesn't create a tax point as it isn't an invoice. Once customer pays you, that locks the tax point and you then issue a proper VAT invoice to them.

This is good if you do a lot of work on credit terms (30 days, etc) as it means you don't have to pay the VAT man until you get paid, but if your main clients are the public where they pay you cash up front then its not such a benefit as you'll already have the cash to pay the VATman as client will have paid you directly on the day.

Your Late, been waiting here since last night.......:D

seriously though cheers M8........