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Post Info TOPIC: Charging VAT before VAT registration
Wowee


Newbie

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Charging VAT before VAT registration
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My new client started trading in July (they have just engaged me). It issued invoices in July, and charged VAT on them, altho they had no VAT number.

Vat registration certificate came thru with effect from 1st August.

I know its illegal to charge VAT without being registered, but they didn't.
Would it be sufficient to send credit notes and refunds to those customers who paid the VAT (these are all business to business transactions, so my guess is the customers have reclaimed the VAT)?

Or do I have to report this to HMRC.  Will my clients get fined?


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Mary


Veteran Member

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What a tricky situationcry.

Your clients customers technically should not have reclaimed the VAT charged to them if the invoices didn't have a VAT number on them. Realistically they probably did and this leaves a bit of a problem. If it was my client I would advise them to issue both a credit note and refund the VAT difference, and also inform the customer that they will need to amend their next VAT return to pay back the VAT that was incorrectly claimed.

As long as the amount per customer isn't over the limit for manual corrections (I believe this is around £10K) this should be ok. Whether or not your clients business relationships will suffer as a result of this is another matter!

-- Edited by Mary at 13:52, 2009-01-21

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