Newly VAT registered want us to pay VAT for past services.

icebergx

Hi all,

My Limited company required the services of a non VAT registered company at the start of January this year. They invoiced us and we paid them as normal.
Fast-forward to today and they just emailed, stating that they had "recently been VAT registered and they are having to back date it to the 1st Jan." Can anyone confirm that this is nonsense and we are not obliged to pay any additional VAT?
Can you retrospectively register for VAT?

Had we known about this, we probably wouldn't have proceeded with the job, so they shouldn't be allowed to back-date this, imo.

Thanks in advance.

Pennywise

Are you VAT registered yourselves? If so, you can reclaim it on your VAT return.

But if not, unless they quoted a price in the contract as being "plus VAT", then no, you don't have to pay it as it is beyond the price you agreed to pay. If their contract/quote said anything to the effect of "vat exclusive" or "plus VAT", then yes, you do have to pay it.

paddyrg

Pennywise, would it have even been legal for the non-registered (at the time) business to add "plus VAT" to their invoice?

angryparcel

Pennywise wrote: »

Are you VAT registered yourselves? If so, you can reclaim it on your VAT return.

But if not, unless they quoted a price in the contract as being "plus VAT", then no, you don't have to pay it as it is beyond the price you agreed to pay. If their contract/quote said anything to the effect of "vat exclusive" or "plus VAT", then yes, you do have to pay it.

You are wrong.
You can only add and charge VAT when you are registered for VAT, if you are not registered then you cannot charge VAT.

when you register for VAT you can claim the VAT on invoices that you already paid what include VAT for a certain period, but you cannot go back to a company/person and say i have just become VAT registered so the invoice you paid last month i now have to add VAT too.

00ec25

angryparcel wrote: »

when you register for VAT you can claim the VAT on invoices that you already paid what include VAT for a certain period, but you cannot go back to a company/person and say i have just become VAT registered so the invoice you paid last month i now have to add VAT too.

you must charge VAT from the effective date of registration

that means if you sent out invoices before being given your VAT number you MUST then go back and account for the VAT on the invoices dated after whatever the effective date was given as. That means you may well have to retrospectively invoice a client who has already paid if you sent out a non VAT invoice whilst waiting for the VAT registration to come through.

unless you wish to take the hit to your own margin, you would thus raise an additional invoice for the VAT only in respect of the original invoice
https://www.inniaccounts.co.uk/guide/managing-invoices-whilst-waiting-for-vat-registration/#.WTWVzmjyvDc

or you can follow the HMRC method...

https://www.gov.uk/vat-registration/overview

While you wait
You can’t charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.

You should increase your prices to allow for this and tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT.

Pennywise

paddyrg wrote: »

Pennywise, would it have even been legal for the non-registered (at the time) business to add "plus VAT" to their invoice?

I said contract/quote, not invoice.

paddyrg

Pennywise wrote: »

I said contract/quote, not invoice.

Ah ok, I see the distinction.

2bFrank

This happened to me when I registered for VAT, had to wait a few weeks for my number, and you cannot charge VAT without the number.

I didn't quite understand, even though my accountant explained it to me, so I issued my invoices without the VAT added, thinking I just start charging VAT when I get my number, which isn't the case. I had to reissue my invoices, but take the hit myself (e.g if I originally invoiced for £100, I reissued the invoice for £83.33 plus VAT to make it £100).

You have paid the invoice, and they have made the mistake, it is up to them to sort it out, not re-charge you.

motorguy

2bFrank wrote: »

This happened to me when I registered for VAT, had to wait a few weeks for my number, and you cannot charge VAT without the number.

I didn't quite understand, even though my accountant explained it to me, so I issued my invoices without the VAT added, thinking I just start charging VAT when I get my number, which isn't the case. I had to reissue my invoices, but take the hit myself (e.g if I originally invoiced for £100, I reissued the invoice for £83.33 plus VAT to make it £100).

You have paid the invoice, and they have made the mistake, it is up to them to sort it out, not re-charge you.

^^^^^^

Thats exactly it.

For every £100 they invoiced, they've been effectively getting £83.33 plus VAT.