No VAT invoicing
Discussion
A builders leaning on me to issue invoices where he doesn't have to pay VAT, he says as we're both VAT reg I can do this rather than him pay then reclaim it. (This is not dodging or zero rated VAT, we're both charging 20%)
Is this right? What should the invoice total show, gross or net? Will the figures on my VAT return not corresponding to each other be an issue matter or is there a different way I must account for it other than the 4 figures for vat on sales/purchases and net amounts?
Thanks!
Is this right? What should the invoice total show, gross or net? Will the figures on my VAT return not corresponding to each other be an issue matter or is there a different way I must account for it other than the 4 figures for vat on sales/purchases and net amounts?
Thanks!
Sounds odd to me and I wouldn't accept it even if it was true.
If you're both VAT registered what is the problem charging VAT and being consistent with the bookkeeping?
If you're looking for an easy way out of the situation just say your systems are set up to charge VAT if the supplier has a VAT number present.
If you're both VAT registered what is the problem charging VAT and being consistent with the bookkeeping?
If you're looking for an easy way out of the situation just say your systems are set up to charge VAT if the supplier has a VAT number present.
Teddy Lop said:
A builders leaning on me to issue invoices where he doesn't have to pay VAT, he says as we're both VAT reg I can do this rather than him pay then reclaim it. (This is not dodging or zero rated VAT, we're both charging 20%)
Is this right? What should the invoice total show, gross or net? Will the figures on my VAT return not corresponding to each other be an issue matter or is there a different way I must account for it other than the 4 figures for vat on sales/purchases and net amounts?
Thanks!
He's talking rubbish. My bet is he isn't VAT registered.Is this right? What should the invoice total show, gross or net? Will the figures on my VAT return not corresponding to each other be an issue matter or is there a different way I must account for it other than the 4 figures for vat on sales/purchases and net amounts?
Thanks!
what are you supplying to the builder ?
is he thinking of the domestic reverse charge ?
https://www.gov.uk/guidance/vat-domestic-reverse-c...
is he thinking of the domestic reverse charge ?
https://www.gov.uk/guidance/vat-domestic-reverse-c...
Edited by lepill on Monday 7th November 16:49
lepill said:
what are you supplying to the builder ?
is he thinking of the domestic reverse charge ?
https://www.gov.uk/guidance/vat-domestic-reverse-c...
^this is the chap, thanks.is he thinking of the domestic reverse charge ?
https://www.gov.uk/guidance/vat-domestic-reverse-c...
Edited by lepill on Monday 7th November 16:49
Any known how-to guides?
Wow this all looks like a headache, from what I can see I *should* be getting stopped CIS payments too - I did a few years back from a couple of contractors but then it all stopped and I was told it was an only for permanently employed subbies thing and that as a biz providing services as a % of my overall and working elsewhere too it didn't apply? Reading what I am seems it does/should?
No wonder the construction industry is awash with cash, to do anything properly seems you encounter a meticulously curated multi tiered behemoth of impediments.
No wonder the construction industry is awash with cash, to do anything properly seems you encounter a meticulously curated multi tiered behemoth of impediments.
Sounds like VAT reverse charge, rather than him trying to screw you or do something dodgy.
Reverse charge only applies when both are CIS and VAT registered and supplying service and goods that fall under CIS, (so business-to-business only), and where the CIS customer intends to make onward supplies. Rather than both of you paying/claiming the VAT to/from HMRC 'as normal', the VAT portion of the invoice gets passed along the 'chain' if you like, and will be paid ultimately by the 'end user'. The end user could be a domestic customer, or a subcontractor who isn't VAT or CIS registered.
There are more specific guidelines such as it not applying with VAT-exempt supplies or if you're on a flat rate scheme etc. but the above is the basis of it.
It can be confusing for contractors or subcontractors who just do the odd one or two here and there, but it will become second nature if you begin doing more B2B stuff.
Reverse charge only applies when both are CIS and VAT registered and supplying service and goods that fall under CIS, (so business-to-business only), and where the CIS customer intends to make onward supplies. Rather than both of you paying/claiming the VAT to/from HMRC 'as normal', the VAT portion of the invoice gets passed along the 'chain' if you like, and will be paid ultimately by the 'end user'. The end user could be a domestic customer, or a subcontractor who isn't VAT or CIS registered.
There are more specific guidelines such as it not applying with VAT-exempt supplies or if you're on a flat rate scheme etc. but the above is the basis of it.
It can be confusing for contractors or subcontractors who just do the odd one or two here and there, but it will become second nature if you begin doing more B2B stuff.
Koyaanisqatsi said:
Sounds like VAT reverse charge, rather than him trying to screw you or do something dodgy.
Reverse charge only applies when both are CIS and VAT registered and supplying service and goods that fall under CIS, (so business-to-business only), and where the CIS customer intends to make onward supplies. Rather than both of you paying/claiming the VAT to/from HMRC 'as normal', the VAT portion of the invoice gets passed along the 'chain' if you like, and will be paid ultimately by the 'end user'. The end user could be a domestic customer, or a subcontractor who isn't VAT or CIS registered.
There are more specific guidelines such as it not applying with VAT-exempt supplies or if you're on a flat rate scheme etc. but the above is the basis of it.
It can be confusing for contractors or subcontractors who just do the odd one or two here and there, but it will become second nature if you begin doing more B2B stuff.
Right, so called HMRC to clarify the procedures of this and the guy on HMRCs own VAT advice helpline informs me I can't reverse charge the builder as he isn't the end client, only the end client can be reverse charged. This makes no sense at all, for one it's the domestic VAT reverse charge, how many domestic clients having their house done up are VAT and CIS regd? (Which are compulsory)Reverse charge only applies when both are CIS and VAT registered and supplying service and goods that fall under CIS, (so business-to-business only), and where the CIS customer intends to make onward supplies. Rather than both of you paying/claiming the VAT to/from HMRC 'as normal', the VAT portion of the invoice gets passed along the 'chain' if you like, and will be paid ultimately by the 'end user'. The end user could be a domestic customer, or a subcontractor who isn't VAT or CIS registered.
There are more specific guidelines such as it not applying with VAT-exempt supplies or if you're on a flat rate scheme etc. but the above is the basis of it.
It can be confusing for contractors or subcontractors who just do the odd one or two here and there, but it will become second nature if you begin doing more B2B stuff.
I asked him to repeat this and he insisted; I think he's got it completely arse about face though, both from what I've read and the point of the scheme is to prevent fraud ie stop as many people as possible from handling VAT funds! He was pretty patronising and that usually points to one of two extremes, and it kind of felt like he was hurredly reading up as he was talking to me, I just checked the number to make sure I wasn't calling some scam line.
Oh well I guess it's another 45 minutes on hold for the 3rd day in a row tomorrow.
Teddy - I presume you're a subbie providing services to a main contractor (or at least a contractor further up the food chain).
The reverse charge legislation came into effect in 2021 - at it's simplest it means that the only party charging VAT for construction services is the main contractor to the end client - if that client is not VAT registered (ie a private individual for their home) they still bear the VAT burden (ie have to pay) but no one else down the chain has to account for VAT. The end client pays the same as they always would have done (net total plus VAT); the main contractor charges the VAT as they would have done - but they won't have any corresponding input VAT.
It's intended to simplify things, as you don't have to account for output VAT yourself, and also protect HMRC from insolvencies within the supply chain (as it concentrates the VAT liability on the main contractor - whether that's a good or bad thing is debatable of course).
There's oodles of briefings on the internet - google is your friend - but let us know if you need any links. If you have an accountant they will be able to help you.
If you've been incorrectly charging VAT since 1 March 2021 you need to get it sorted ASAP and I suggest will need the help of an accountant to do so.
It's also more complicated if you provide goods as well as services - but we'll leave that for now.
The reverse charge legislation came into effect in 2021 - at it's simplest it means that the only party charging VAT for construction services is the main contractor to the end client - if that client is not VAT registered (ie a private individual for their home) they still bear the VAT burden (ie have to pay) but no one else down the chain has to account for VAT. The end client pays the same as they always would have done (net total plus VAT); the main contractor charges the VAT as they would have done - but they won't have any corresponding input VAT.
It's intended to simplify things, as you don't have to account for output VAT yourself, and also protect HMRC from insolvencies within the supply chain (as it concentrates the VAT liability on the main contractor - whether that's a good or bad thing is debatable of course).
There's oodles of briefings on the internet - google is your friend - but let us know if you need any links. If you have an accountant they will be able to help you.
If you've been incorrectly charging VAT since 1 March 2021 you need to get it sorted ASAP and I suggest will need the help of an accountant to do so.
It's also more complicated if you provide goods as well as services - but we'll leave that for now.
sleepezy said:
Teddy - I presume you're a subbie providing services to a main contractor (or at least a contractor further up the food chain).
The reverse charge legislation came into effect in 2021 - at it's simplest it means that the only party charging VAT for construction services is the main contractor to the end client - if that client is not VAT registered (ie a private individual for their home) they still bear the VAT burden (ie have to pay) but no one else down the chain has to account for VAT. The end client pays the same as they always would have done (net total plus VAT); the main contractor charges the VAT as they would have done - but they won't have any corresponding input VAT.
It's intended to simplify things, as you don't have to account for output VAT yourself, and also protect HMRC from insolvencies within the supply chain (as it concentrates the VAT liability on the main contractor - whether that's a good or bad thing is debatable of course).
There's oodles of briefings on the internet - google is your friend - but let us know if you need any links. If you have an accountant they will be able to help you.
If you've been incorrectly charging VAT since 1 March 2021 you need to get it sorted ASAP and I suggest will need the help of an accountant to do so.
It's also more complicated if you provide goods as well as services - but we'll leave that for now.
This is a very good summary and advice. Tbf, once you get your head round it, it is quite simple.The reverse charge legislation came into effect in 2021 - at it's simplest it means that the only party charging VAT for construction services is the main contractor to the end client - if that client is not VAT registered (ie a private individual for their home) they still bear the VAT burden (ie have to pay) but no one else down the chain has to account for VAT. The end client pays the same as they always would have done (net total plus VAT); the main contractor charges the VAT as they would have done - but they won't have any corresponding input VAT.
It's intended to simplify things, as you don't have to account for output VAT yourself, and also protect HMRC from insolvencies within the supply chain (as it concentrates the VAT liability on the main contractor - whether that's a good or bad thing is debatable of course).
There's oodles of briefings on the internet - google is your friend - but let us know if you need any links. If you have an accountant they will be able to help you.
If you've been incorrectly charging VAT since 1 March 2021 you need to get it sorted ASAP and I suggest will need the help of an accountant to do so.
It's also more complicated if you provide goods as well as services - but we'll leave that for now.
You also need to ignore the naming - Domestic (nothing to do with owner/occupier residential property) Reverse (it doesn't reverse anything) Charge (it is not a charge).
There are some good and easy to understand guides to it on the websites of various accountants. I'd post a link to ours but not sure if it's the done thing on here and seen as indirect advertising. We've got plenty of contractors and subs as clients who ask questions regarding it now and then.
The more you read of HMRC's guidance on it, the more overwhelming and complicated it can sometimes seem.
But yeah, do you have an accountant?
The more you read of HMRC's guidance on it, the more overwhelming and complicated it can sometimes seem.
But yeah, do you have an accountant?
Teddy Lop said:
Right, so called HMRC to clarify the procedures of this and the guy on HMRCs own VAT advice helpline informs me I can't reverse charge the builder as he isn't the end client, only the end client can be reverse charged. This makes no sense at all, for one it's the domestic VAT reverse charge, how many domestic clients having their house done up are VAT and CIS regd? (Which are compulsory)
I asked him to repeat this and he insisted; I think he's got it completely arse about face though, both from what I've read and the point of the scheme is to prevent fraud ie stop as many people as possible from handling VAT funds! He was pretty patronising and that usually points to one of two extremes, and it kind of felt like he was hurredly reading up as he was talking to me, I just checked the number to make sure I wasn't calling some scam line.
Oh well I guess it's another 45 minutes on hold for the 3rd day in a row tomorrow.
This is a good/easy guide. https://assets.publishing.service.gov.uk/governmen...I asked him to repeat this and he insisted; I think he's got it completely arse about face though, both from what I've read and the point of the scheme is to prevent fraud ie stop as many people as possible from handling VAT funds! He was pretty patronising and that usually points to one of two extremes, and it kind of felt like he was hurredly reading up as he was talking to me, I just checked the number to make sure I wasn't calling some scam line.
Oh well I guess it's another 45 minutes on hold for the 3rd day in a row tomorrow.
lepill said:
You also need to ignore the naming - Domestic (nothing to do with owner/occupier residential property)..
There are two definitions of 'Domestic':1) relating to the home, house, or family
2) relating to a person’s own country
The latter applies in this case, and I suspect that's to differentiate this from EU Reverse Charge VAT schemes.
wheelerc said:
There are two definitions of 'Domestic':
1) relating to the home, house, or family
2) relating to a person’s own country
The latter applies in this case, and I suspect that's to differentiate this from EU Reverse Charge VAT schemes.
Fair enough, thanks all for the help so far.1) relating to the home, house, or family
2) relating to a person’s own country
The latter applies in this case, and I suspect that's to differentiate this from EU Reverse Charge VAT schemes.
Have given up on the vat helpline, despite several calls involving several hours on hold and speaking to several of their children, it seems that no-one there actually understands or can offer guidance on the this, simple questions with yes/no answers have them waffling away about flow charts and vat notices, and that randoms on a car fanciers forum have more help to offer... I had one of those depressing this-is-an-I'm-old-waypost, as I pondered why the tax line has so many useless kids instead of people who can help.
All I really need need is a bit of confirmation on a few points so I know my paperwork is correct, you're running at 2:0 with the vat people so make it a clean sweep for me...
1:. I issue my standard vat invoice to the builder with the net + vat amounts but instead of gross amount I insert net amount, and I need to include:
"Reverse charge: client to pay VAT to HMRC"
Client CIS no
Client VAT no
2:. Vat return. My business is now mixed with reverse charging and VAT paying clients.
Box 1 vat due on sales: I include only the vat I've invoiced and collected.
Box 6 net total sales: this is all my invoiced, both vat paying and reverse charge clients
Box 2/7 stay the same as I'm not employing any reversed charge services.
Will it matter that the net invoiced and VAT due don't corroborate? What if my builders up to mischief, what's my potential exposure, could I be made accountable to pay the VAT if he doesn't?
Although I guess a lot of this will be a moot point if the software -only/ no manual returns thing goes ahead? On the topic of which, which would be the easiest to use package for a pretty small biz?
Teddy - I've just received another invite to one of the regular HMRC briefings on reverse charge - I think you can probably use the attached link below.
https://register.gotowebinar.com/rt/54498617404763...
https://register.gotowebinar.com/rt/54498617404763...
sleepezy said:
Teddy - I've just received another invite to one of the regular HMRC briefings on reverse charge - I think you can probably use the attached link below.
https://register.gotowebinar.com/rt/54498617404763...
The webinars are quite good, worth you watching I think.https://register.gotowebinar.com/rt/54498617404763...
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