VAT invoice question / Photography

martindow

shylock300 wrote: »

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.

HMRC used to run courses on VAT for newly registered businesses. If they still do it would be well worth you going on one I think.

Your invoices must include certain information - someone will be along soon with the full details soon. Under 250 Pounds you don't have to separate out the VAT but the invoice should have your VAT number on it. Over 250 you must detail the nett and VAT elements and it is probably best to do this for VAT registered clients regardless of the value.

You need to sort out your accounts to take into account VAT from the start.

googler

From past experience, it's not worth registering for VAT until you have to.

Yes, you can claim back the VAT on purchases, but you have to balance this against giving HMRC the tax on your sales, allied with the obligation of completing a VAT return, and, depending on how the business has been going, possibly sending your payment to HMRC at the same time.

If the business is going well, your income will outweigh the expenses, and you'll be sending money to HMRC four times a year. The only circumstance HMRC sends money to you is when your expenses exceed income, and if that persists, your business won't last long anyway.....

For a small business operating largely with manual accounting methods below the mandatory VAT threshold, it's not worth the effort, IMHO.

shylock300

Thanks all. I knew some of that info all already but wanted to make sure I hadn't screwed up somewhere along the line.

Brassedoff

wow, talk about people being confused!

Percy1983

I really wouldn't have registered for VAT, as your mostly a service with very little product costs you will be taking in a lot of VAT and not paying much out, in turn you have increased you prices by 20% which won't bother VAT registered companies but will effect individuals to which you will have to reduce prices.

InsideInsurance

Percy1983 wrote: »

I really wouldn't have registered for VAT, as your mostly a service with very little product costs you will be taking in a lot of VAT and not paying much out, in turn you have increased you prices by 20% which won't bother VAT registered companies but will effect individuals to which you will have to reduce prices.

On the flat rate scheme they will make a VAT profit. Depending on their turnover and their industry this can be a reasonable sized amount.

Obviously this needs to be balanced by how many of the clients aren't VAT registered and how price sensitive they are. If they arent price sensitive and accept the bottom line of the invoice increasing because their supplier is now VAT registered then it would be better to be registered.

Insurance companies can recover a tiny proportion of the VAT paid as their main product, insurance, is VAT exempt. That said, I have only ever known them talk to contractors/ consultants about their net rates and never heard the question of if they are VAT registered or not come up either in my interviews or associates.

wil471

Without wishing the confuse the issue further and certainly not answering the original question at all...but I was wondering why nobody has mentioned the VAT Cash Accounting scheme ?
(have of search on the HMRC website for Cash Accounting)
With standard VAT the return is based on the invoice dates (for both input and output) while under Cash Accounting you calculate the payments due to HMRC based on your actual expenditure and actual receipts. In the former you have to pay the VAT on an invoice you raise regardless of when you receive the payment which can be a problem if you have late payers.
I would have thought that for a small business with little cash reserves the Cash Accounting is definitely worth looking at.

InsideInsurance

The problem is you cannot use the cash scheme in conjunction with the flat rate scheme. Given the OP says their costs are minimal then flat rate would probably be better for them unless cashflow is a major issue.