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Vat Or Not Vat That Is The Question? . . . And Of Course Purchase Orders
5 Answers
I am a sole trader, I don't VAT as I supply a service. One company who use me alot need to generate purchase orders before I invoice them, they always supply an itemised breakdown of that month's work and they add VAT onto it. Because I don't charge VAT (neither am I registered to do so) I ignore the final cost they issue and simply issue them an invoice at sub total. Does this sound right?
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Most services are subject to VAT, but you only need to register if your turnover in taxable services is more than £79,000 a year. If you have a "small trader" exemption, you are invoicing your customer correctly.
Years ago, I ran a business as a computer consultant and charged VAT on my invoices. One customer (a former employer) was an independent financial advisor who only provided exempt services, so couldn't reclaim the VAT I charged him. Instead of invoicing him, I told him how much money I was due and he paid that to me as a share of life assurance commission (VAT exempt). I was a little dubious whether this was legal, but it was my VAT inspector who suggested it.
Years ago, I ran a business as a computer consultant and charged VAT on my invoices. One customer (a former employer) was an independent financial advisor who only provided exempt services, so couldn't reclaim the VAT I charged him. Instead of invoicing him, I told him how much money I was due and he paid that to me as a share of life assurance commission (VAT exempt). I was a little dubious whether this was legal, but it was my VAT inspector who suggested it.
So many issues................
1 - Yes, nellypope, you are doing it right. What they put on their purchase order is their problem. You invoice them for the service they requested at the price you charge.
2 - As Old_Jim has already said, I'm not sure why you seem to think the supply of a service means you "don't VAT". The supply of service is a Vatable activity (unless it's in certain select exempt areas). Whether or not you should be VAT registered depends on your turnover, not whether you supply a service or not. Lawyers and accountants supply a service but they all charge you VAT!
3 - To Old_Jim, no that's not legal regardless of what your VAT Inspector said. It's tax evasion and it's a crime.
1 - Yes, nellypope, you are doing it right. What they put on their purchase order is their problem. You invoice them for the service they requested at the price you charge.
2 - As Old_Jim has already said, I'm not sure why you seem to think the supply of a service means you "don't VAT". The supply of service is a Vatable activity (unless it's in certain select exempt areas). Whether or not you should be VAT registered depends on your turnover, not whether you supply a service or not. Lawyers and accountants supply a service but they all charge you VAT!
3 - To Old_Jim, no that's not legal regardless of what your VAT Inspector said. It's tax evasion and it's a crime.
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