Vat Or Not Vat That Is The Question? . . . And Of Course Purchase Orders

[nellypope]

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?

[The Builder]

Nelly, because you're not registered, then any invoices you issue should never have VAT added to them, regardless of what is on their paperwork.

How they account for the difference on their purchase orders is their problem.

[ummmm]

That sounds right.

[nellypope]

Many many thanks :-)

[Old_Jim]

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.

[Skyline D]

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.