My client has a number of staff on PAYE and a further staff who are self-employed. Without going into whether they should be classed as self-employed as per HMRC (as that is not the issue here) can someone please tell me whether a timesheet can be submitted in lieu of an invoice each month and whether the posting should be zero-rated (as they are not VAT registered) or Exempt from VAT as they are considered wages by the employer?
Think of the self employed workers as suppliers rather than employee's and this will help to get your head around the difference.
The self employed workers supply a service. It is invoiced and you pay for their services without any indication that they have the rights or obligations of an employee.
Have to ask though, are these actually sub contractors coming under CIS? In which case you have a different follow up question to ask.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
that is good advice, and I guess leads me to a conversation that needs to be had with the employer - who "used to be" a bookkeeper so is a little tricky to tackle on issues that she has set-up and I challenge.
This doesn't fall under CIS but thanks for the suggestion.
To answer the VAT bit of the question, it would be "out of scope" of VAT because the person making the supply is not VAT registered. (The payments aren't considered wages/salary if the person is self-employed.)
(By the way, I, too, would ask for invoices, rather than timesheets.)
To answer the VAT bit of the question, it would be "out of scope" of VAT because the person making the supply is not VAT registered. (The payments aren't considered wages/salary if the person is self-employed.)
(By the way, I, too, would ask for invoices, rather than timesheets.)
Hi Louise
First of all, welcome to the forum
You have just opened up an old debate with that statement.
Can you confirm that you are saying that if a business (be it soletrader, partnership, ltd co) is not registered, and is not require to be registered, that any supply they make is "outside the scope" of VAT?
If you are, then somewhere in the dim distant past there is a thread that debates this, where I was in the same camp as you.
Since then though I have been pursuaded that this is not the case, and that the supply is included on returns (with no VAT). This was confirmed by a phone call to HMRC VAT helpdesk. Admitedly it was the second phone call I had made regarding this subject, the first phone call resulted in being told they were outside the scope.
I have never felt completely at ease with this, and have always felt that if a supply was made "outside the scope" then how can it be bought back in? So if you have any definitive information that confirms this, I would be interested in seeing it.
Thanks for the welcome. Um, sorry, didn't meant to open an old debate, though, lol.
Yes, I've always treated non-registered traders as "out of scope" due to a sentence on the HMRC website, (in the section "VAT rates explained: standard, reduced, zero, exempt") which says:
"Goods and services that are outside the scope of UK VAT includes anything you:
sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered"
Logically, then (in my view ;) : If an un-registered seller supplies something to a VAT registered business, that supply doesn't suddenly cease to be "out of scope" just because a VAT registered business purchased it. (In the same way that if a VAT registered person sells something to a non-registered person, it doesn't suddenly become "out of scope").
Sorry that's probably not the most elegant explanation, but it seems logical to me and has "stood up" through several VAT inspections.
Your answer was elegant, that was my original logic but after two conflicting answers from HMRC (one agreeing, and one disagreeing) it left me a tad confused , I decided then to follow the majority but have always felt "nervous" that it wasn't correct.
I have not tried it yet but I had thought of requesting a definitive answer from HMRC but they will only respond to an actual case, not a scenario.
I would look on it as "supplies/services" are "supplies/services" whether or not the person suppling them is registered for VAT and as such should be included in the VAT return as the "supplies/services" of themselves are not outside the scope.
Hi there, I would agree with Shelia that it should be included on the VAT return; as I understand it, it is the service/goods supplied which dicates the VAT and not whether the supplier is VAT registered or not. I could open another debate on here which I think has been covered before, should the vat code on sage be t1 and no vat input (which I use) or some people I know use T0 on sage?
It wasn't my intention to restart the debate. I just thought Louise may have had something definitive, that would help me. I respect everyones view on this but just can't quite be swayed either way. I currently do include supplies from non registered entities but it just doesn't "feel" right.
With regard to the Sage code, I do not think it matters a great deal if T1 @ 0%, or T0 is used. I use VT+ for most of my clients, and it does not use codes at. It is either a percentage, or no VAT (It is preset for "outside the scope" transactions). The only time there is an option for VAT (other than a percentage to use) is to let the system know if it was an EU sale or purchase.
, I decided then to follow the majority but have always felt "nervous" that it wasn't correct.
