One of my clients - an IFA - has just registered for VAT. Some of his income is VATable - some is exempt - I'm comfortable with the partial exemption side of things.
My issue is that he works through a company which is essentially a group of IFAs with a centralised admin/finance team. Basically, his clients pay the central company, that company deducts a fee and passes the remainder on to him - emailing him a breakdown of the income in the form of a spreadsheet. My client doesn't issue an invoice. The central company retained any VAT and dealt with that side of things.
Now that he is VAT registered, they are passing the VAT on to him and the spreadsheet indicates a breakdown of income and VAT. How would I best document this? The only thing I can think of is by preparing VAT invoices to reflect the data on the spreadsheet - attaching a copy. The invoices will never be sent but kept as part of my client's VAT records. Would this be enough to satisfy the VAT man? Does anyone have any other suggestions? Have I missed something obvious? (quite likely as I'm struggling to get my head round this!)
You could play with Pseudo invoices to keep everything sweet.
The documentation from the central admin team enough evidence of the income and VAT received?
I would record the original sale as the amount received which excludes the commission taken by central admin.
Think of it in a similar way to a IT consultant working through an agency where the only part that is real is the amount received. The amount that the agent charges the client is nothing to do with the amount that the agent pays the consultant so the only real transaction is the one between the agent and the consultant even though the work done is between the consultant and the end client.
In short, yes, create the invoice to keep everythng tidy and ignore anything to do with what central admin charges the end client which is nothing to do with your client.
Hope that makes sense,
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.
Thanks for the info Rob - I'd never heard of self-billing - more reading for me I think!
I think it would be fair to say that the studying/exam process seems to only scratch the surface of all the scenarios you come across in the real world! Feel like I've learned far more post study than I ever needed to pass exams!!
It's all in the detail Cluck. Though I know what you mean - the exams are bare bones indeed.
I signed up this morning an IFA who works in exactly the same way as yours - not currently registered, but it might come to it next year.
Fortunately all they want from me for now is an analysis of the residuals received from the 'umbrella' company on an ongoing basis but you never entirely know where any job will lead.
Surely the company needs a VAT invoice for their records, so the spreadsheet should either be a self-billing invoice, or they'd expect to receive an invoice from your client.
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