I have just gained a new client who has been doing their invoicing themselves. They became VAT registered in March.
Any contracts they raise are invoiced monthly up to twelve months.
Contracts that have been raised before they became VAT registered they have invoiced without VAT and continued to once they registered.
Any contracts they have gained after becoming VAT registered they have Charged VAT.
Question is:
1. Contracts raised before registering for VAT and still being invoiced monthly they should be adding VAT?
2. If they had raised a contract before becoming registered, with Invoice for whole amount and agreed monthly installments would they still have to charge VAT?
1. Contracts raised before registering for VAT and still being invoiced monthly they should be adding VAT?
2. If they had raised a contract before becoming registered, with Invoice for whole amount and agreed monthly installments would they still have to charge VAT?
Invoices issued after becoming VAT registered should be subject to VAT, regardless of when the contract began.
Question 2 is a litttle more tricky, as it will depend on the amount. If you know that by issuing the invoice you will go over the VAT threshold then you must register for VAT but the VAT registration will commence from the start of that month
eg. On 28th February Fred's turnover for the previous 11 months is 70k. He has a big invoice to issue in March of £20k, which will take him over the registration threshold. He has to register for VAT by the end of March but his VAT registration date will be 1st March, as opposed to 1st May if he had ordinarily gone over the threshold in March.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
