VAT on work completed prior to VAT Registration Date

[ATM]

I have formed a new Ltd Co and registered this for VAT on the same date as the Co was formed - Lets say 1st of December for discussion sake. I didn't know you could register for VAT with a date prior to the date a Co was formed. I had already done some work prior to the Co being formed. The formation of the Ltd Co took almost 2 months as I had some problems with the first Ltd Co I formed and could not open a business bank account. These banks do not tell you why they would not give you a bank account they say they are not allowed to divulge the reasons. So after weeks of trying I had to scrap it and form a 2nd and then try all over again to open a business bank account which I have now done. I then invoiced my client for the work completed and they are refusing to pay the VAT element as they say this work was completed prior to the registration date. Obviously the Invoice date is after the VAT registration date. So work done by Me in October and November but then not invoiced until December. Is this right - can they do this?

I will be using the Flat Rate Scheme which is supposed to simplify VAT. I will collect VAT on all money in and then give the HMRC a parentage of this and keep the remainder. Obviously this VAT on some work and no VAT on some will make my Flat Rate Scheme VAT submission look odd, like I have undercharged VAT or owe the HMRC more money.

[Eric Mc]

You cannot charge VAT to a customer for work done BEFORE the VAT registration date UNLESS you notified the customer that you would be registering for VAT. This allows them to recover the VAT as soon as you provide them with a proper VAT invoice at a later date once you have received your VAT number.

In most cases, you are better off just charging VAT on the invoices you issue after your VAT registration comes through.

With Flat Rate VAT you cannot recover VAT on your costs UNLESS you want to recover VAT on capital expenditure.

Per HMRC -

15. Capital expenditure goods
15.1 Definition of ‘capital expenditure goods’ on which input tax can be claimed
Normally, capital goods are those goods which are bought to be used in the business but are not used up by it, except through normal wear and tear over a number of years — for example a van, a computer or a bottling machine but not the fuel, printer paper or bottles that go into them.

Capital expenditure goods in the Flat Rate Scheme are capital goods that would fall into the definition, but also specifically exclude any goods bought to:

resell
incorporate into other goods for onward supply
consume (or completely use) within 1 year
generate business income by being leased, let or hired
goods covered by the Capital Goods Scheme (read paragraph 15.6)
Nothing in this section allows a business using the Flat Rate Scheme to reclaim VAT on goods which it would not be able to claim under the normal VAT rules.

[ATM]

Eric Mc said:

You cannot charge VAT to a customer for work done BEFORE the VAT registration date UNLESS you notified the customer that you would be registering for VAT.

Yes I informed them of this in advance and they agreed to this.

Eric Mc said:

With Flat Rate VAT you cannot recover VAT on your costs UNLESS you want to recover VAT on capital expenditure.

I am not trying to recover any extra money from HMRC. Just using FRS in normal way. If I invoice 100k then I also collect 20k VAT. I then declare this to HMRC and based on my business type they have given with me a percentage number for the FRS. Lets say the agreed FRS rate is 15%. I collect 20% and give the HMRC 15% and I keep the rest. So back to my invoice for 100k - which is a made up amount. This is for work completed prior to VAT registration date and prior to LTD co Formed date. Invoice says work completed in Sep. Work completed in Oct. Work completed in Nov. Total is 100k + VAT. Client now says they can not pay the 20k VAT because the work was completed prior to the VAT registration date. It is my understanding that you can not register for VAT prior to the Date a LTD Co is formed.

[Eric Mc]

At the moment you may not want to recover VAT but if you are planning any capital expenditure at a future date, I thought you might like to know that you can recover the VAT if you wanted to.

It's a worthwhile feature of the Flat Rate Scheme - which many people don't realise exists.

[ATM]

Eric Mc said:

In most cases, you are better off just charging VAT on the invoices you issue after your VAT registration comes through.

So my client raises the invoices for Me. They call this self billing I think. So the first invoice was raised by them after the Ltd Co was formed but without VAT as the VAT registration confirmation had not arrived form HMRC. The understanding we agreed was they would then invoice separately and then pay the VAT only element after the VAT registration comes through. Once this arrived they asked for a copy of the registration doc. Then they said that because the registration date was after the work was done then they would not pay this, so they would not raise the invoice for this.

It is my understanding that the only relevant date is the invoice date. The invoice date is after the VAT registration date as the date of the VAT registration and LTD Co are the same.