VAT invoice question / Photography

shylock300

Hi all,

I've just started adding VAT to my invoice as I've recently VAT registered my small business. Depending on the job, I get a pre-determined agreed fee, so for example £100 for a day. Before I was VAT registered, this is what I'd invoice for and get paid. Now I'm a bit confused as to how I write up my invoice, more specifically the total. I think I've been doing it wrong.

I've been told it should be £100 + VAT = £120.

Should my invoice total say £120 or £100 + VAT? Do I get paid £120?

Also if any of my clients aren't registered, will they pay me the total minus VAT?

It's a bit confusing so apologies if this seems really daft.

Wywth

shylock300 wrote: »

Hi all,

I've just started adding VAT to my invoice as I've recently VAT registered my small business. Depending on the job, I get a pre-determined agreed fee, so for example £100 for a day. Before I was VAT registered, this is what I'd invoice for and get paid. Now I'm a bit confused as to how I write up my invoice, more specifically the total. I think I've been doing it wrong.

I've been told it should be £100 + VAT = £120.

Should my invoice total say £120 or £100 + VAT? Do I get paid £120?

It's a bit confusing so apologies if this seems really daft.

It depends on what you agree with your customer in advance.

If it is a business customer, it is customary for prices to be quoted excluding VAT.

In which case you would now charge £100 + £20 VAT = £120


If it is a consumer, then it is usual to quote a fully inclusive price

In which case you would invoice as £83.34 + £16.66 VAT = £100

(Both assume you are supplying standard rated VAT items or services)

But you need to be clear when quoting for the job / agreeing a contract price.

Wywth

shylock300 wrote: »

Hi all,

I've just started adding VAT to my invoice as I've recently VAT registered my small business. Depending on the job, I get a pre-determined agreed fee, so for example £100 for a day. Before I was VAT registered, this is what I'd invoice for and get paid. Now I'm a bit confused as to how I write up my invoice, more specifically the total. I think I've been doing it wrong.

I've been told it should be £100 + VAT = £120.

Should my invoice total say £120 or £100 + VAT? Do I get paid £120?

Also if any of my clients aren't registered, will they pay me the total minus VAT?

It's a bit confusing so apologies if this seems really daft.

You just added this bit, so:

Before you were registered, what did you pay when you are billed? e.g. in a supermarket? :cool:

shylock300

Hiya,

Thanks for the reply. I should probably explain further. I work in the film/photography industry it's half and half - some are VAT registered, others are sole traders. The way it works is, depending on the budget, you get told what the rate is. This is just a flat rate, so this is why I'm confused about how I invoice my clients.

If they're not VAT registered, then do I invoice for the inclusive price, so to speak?

Mistral001

shylock300 wrote: »

Hiya,

Thanks for the reply. I should probably explain further. I work in the film/photography industry it's half and half - some are VAT registered, others are sole traders. The way it works is, depending on the budget, you get told what the rate is. This is just a flat rate, so this is why I'm confused about how I invoice my clients.

If they're not VAT registered, then do I invoice for the inclusive price, so to speak?

Why did you become VAT registered? Was it due to your turnover? Or was it because you wanted to claim back the VAT on supplies etc.

Your problem is a very real one as when running a business you cannot really charge a client one rate for a service and then charge another client a different rate for the same service. This I think is what you are contemplating to do. Maybe it is particular to your business. if it is then you maybe need to ask around what others in the business do.

shylock300

Mistral001 wrote: »

Why did you become VAT registered? Was it due to your turnover? Or was it because you wanted to claim back the VAT on supplies etc.

You problem is a very real one as when running a business you cannot charge a client one rate for a service and then charge another client a different for the same service (although sometimes you can give a discount for a particular reason). This I think is what you are contemplating to do. Maybe it is particular to your business. if it is then you maybe need to ask around what others in the business do.

Long story but I became a limited company and yes, I wanted to claim back the VAT on supplies etc. As a freelancer, it's the nature of our business, depending on the job, the rate is/can be different. Everyone else I know is registered as a sole trader, otherwise, I'd be asking them for help. Thanks anyways.

Any freelance photographers about that could shed some light?

Mistral001

If your non-VAT registered clients insist on you charging them the same then you will have to charge them 83.3333% of what you are charging them before VAt registration and then that will mean that when you add on 20% VAT to you will come up with the original figure you were charging. It will mean a drop of 16.67% in your income for work you have done for non-VAT register clients.

shylock300

Mistral001 wrote: »

If your non-VAT registered clients insist on you charging them the same then you will have to charge them 83.3333% of what you are charging them before VAt registration and then that will mean that when you add on 20% VAT to you will come up with the original figure you were charging.

It will mean a drop of 16.67% in your income for work you have done for non-VAT register clients.

Thanks, that's what I thought and have been doing but I just wanted to double check.

nikki1520

Have you considered using the flat rate scheme -it's not worthwile for everyone, but it makes things a lot simpler if the percentages stack up for you

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#4

shylock300

I am on the FRS. At least I got one right.

I think this is where my confusion arose because I thought I could just invoice my clients as normal (without worrying about VAT) and then work out my VAT at the end of the year.

Pennywise

shylock300 wrote: »

I wanted to claim back the VAT on supplies etc.

shylock300 wrote: »

I am on the FRS. At least I got one right.

But if you're on the FRS, you can't claim back VAT on your supplies (except expensive equipment over £2k per item) - the VAT you pay is a percentage of your total turnover.

shylock300 wrote: »

Long story but I became a limited company and yes, I wanted to claim back the VAT on supplies etc. As a freelancer, it's the nature of our business, depending on the job, the rate is/can be different. Everyone else I know is registered as a sole trader, otherwise, I'd be asking them for help.

VAT is the same whether you're a limited company or a sole trader. Nothing to stop you asking your sole trader colleagues as their VAT will be exactly the same as yours is as a limited company. You didn't become a limited company just to register for VAT did you - if so, there was no need!

But to your original question, you have to pay over 1/6th of your total sales less VAT on expenses if you're not on the FRS scheme, or whatever percentage of your sales if you are on the FRS scheme. VAT has to be charged to all customers and will be 1/6th of the total invoice value, whether they're VAT registered businesses or domestic customers. Normally, people add the VAT for business customers and absorb the VAT (i.e. reduce your price and profit) for non VAT registered customers. Unless, of course, you can increase your prices to everyone (i.e. non VAT customers too), but if you could do that, you'd have done it already wouldn't you!

Maybe time to sit down and re-work the numbers to make sure that VAT registration will actually benefit you. In fact, if it was only VAT that led you to become a limited company, you should also re-work the numbers for that too, and revert to sole trader if your benefits aren't going to outweigh the extra costs and hassle of being limited (i.e. accountants fees, etc)