Sole Trader and VAT!!!!

CatKnap

Hi all,

This is my first post so please be gentle! I have a job at the moment (low income <15k:() and I have a chance to do other work and hopefully generate some extra income (circa 10k:)). Not much some might say but it all helps.

Anyway, having looked through the various websites (boards.ie and revenue.ie etc.) it would appear that setting up as a sole trader suits my circumstances. However, I have one thing that I am unsure of:-

My new customers will want me to invoice them with a VAT number. Does that mean I will have to register for VAT :(and fill out the forms every 2 months. It seems like a lot of hassle given that I am doing grossly under the normal guidelines for VAT...having said that I understand where my customers are coming from...they need to be able to claim it back properly...any advice???

Many thanks,

Jennifer:)

rugbyman

if your existing job is in the paye sector, then your sideline (10k p.a.) is not enough for you to need to register for vat.

your customers will get an invoice from you for an amount without VAT. Not a problem to you or them.

Rugbyman

CatKnap

Hi Rubyman,

Many thanks for the reply. Yes, I am currently in the PAYE sector. Unfortunately, the customer wants a VAT number and the vat displayed as an amount on the invoice. He said it is just in case they ever get audited for VAT that they can show that each VAT amount is correct and that there is a link with VAT numbers from them to me....does that make any sense??

Many thanks,

Jennifer

dbran

Hi

You need to explain again to your customer that you are not VAT registered because you are below the threshold for VAT registration. Therefore you do not have a VAT number and therefore cannot give them a VAT invoice or a VAT credit.

You are in all other respects "above board" as you are registered for income tax with revenue and there should be no problem with them claimimg the expense against their income tax in the normal way.

You should note that giveing a false VAT invoice makes you liable to pay the VAT irrespective if you are registered or not.

Kind Regards

dbran

kenbrady

CatKnap wrote: »

Unfortunately, the customer wants a VAT number and the vat displayed as an amount on the invoice. He said it is just in case they ever get audited for VAT that they can show that each VAT amount is correct and that there is a link with VAT numbers from them to me....does that make any sense??

dbran wrote: »

You need to explain again to your customer that you are not VAT registered because you are below the threshold for VAT registration. Therefore you do not have a VAT number and therefore cannot give them a VAT invoice or a VAT credit.

The customer doesn't understand the vat system. Now I would be careful about how you go explaining it to him.

The way it should work is; you send him an invoice and he pays it with no vat involved.
You can explain the reasons why, not VAT registered.
+ It will improve his cash flow.
+ Less work as no vat to process

kenbrady

dbran wrote: »

You should note that giveing a false VAT invoice makes you liable to pay the VAT irrespective if you are registered or not.

You must include your vat number on the invoice if you charge vat. I always check these just to make sure and it would tell you if company is not vat registered.
http://ec.europa.eu/taxation_customs/vies/

CatKnap

Hello again,

"Kenbrady", would I be correct in assuming from your post that I will need to register for VAT and do the paperwork every two months? As I said they want to see xxx EUR + VAT @ 21%...so I will be charging VAT and they (the customer) will want to reclaim it back (hence I presume the need for me to have a VAT number for the time when an audit happens).

Once again, many thanks for all the replies from everybody.

Regards,

Jennifer:)

Sonnenblumen

CatKnap wrote: »

Hello again,

"Kenbrady", would I be correct in assuming from your post that I will need to register for VAT and do the paperwork every two months? As I said they want to see xxx EUR + VAT @ 21%...so I will be charging VAT and they (the customer) will want to reclaim it back (hence I presume the need for me to have a VAT number for the time when an audit happens).

Once again, many thanks for all the replies from everybody.

Regards,

Jennifer:)

Any 'VAT invoice' ie includes VAT, must clearly show the VAT amount charged, the VAT % rate and the registered Vendor's VAT number.

However, in your case you do not need (below Turnover threshold) to register for VAT, in which case you will be submitting invoices without any ie NO VAT. Your customer should understand this.

Anyways, bi-monthly VAT returns are quite simple to complete.

suey71

I may be totally wrong here but could Catnapp not just register for VAT even though she knows she might not reach the threshold this year.

This way she has her VAT No. and keeps her customers happy.

She can now claim the VAT back on any products that she purchased for her business.

She just fills out in the VAT form that she made under the threshold sales this 2 month period.

This is the way I see but I could be wrong.

If I am sorry.

A little green myself.

Thanks.

Savman

kenbrady wrote: »

The customer doesn't understand the vat system.

+1

You can invoice them for X amount and just have a box that says zero VAT charged. Something like this:
Fee for Services €500
VAT €0

So you are making it clear this customer can never try claim for a VAT refund or landing you in hot water.

Nuttzz

Savman wrote: »

+1

You can invoice them for X amount and just have a box that says zero VAT charged. Something like this:
Fee for Services €500
VAT €0

So you are making it clear this customer can never try claim for a VAT refund or landing you in hot water.

I'd have to disagree with this, if you are not vat registered do not put anything about VAT on it, there are rules governing zero rated vat and not being registered is one of them, all you want is Fee for Services €500 on the invoice

Lorelei

suey71 wrote: »

I may be totally wrong here but could Catnapp not just register for VAT even though she knows she might not reach the threshold this year.

This way she has her VAT No. and keeps her customers happy.

She can now claim the VAT back on any products that she purchased for her business.

She just fills out in the VAT form that she made under the threshold sales this 2 month period.

This is the way I see but I could be wrong.

If I am sorry.

A little green myself.

Thanks.

You have hit the nail on the head exactly.
Also by registering for VAT Jennifer can claim VAT she pays back.
The paperwork is maximu 3 rows of figures to be entered on a form the VAT inspector sends every 2 months.
Your calculation is amount paid minus amout taken i.
If the amount paid is more than that taken in then you claim a rebate which they normally pay within 10 days.
If the amout taken in more than paid then you send the VAT people ac heque for that amount.
You can register for VAT even if trading below the threshold.
If your dont register for VAT then you wait until the end of the year when the VAT you have paid is set as a business expense and you may or may not receive anything back.
By registering for VAT any overpayments will be paid to you within 2 weeks of sending your return, this helps your cash flow.
Personally as a business I would not buy from anyone who is not VAT registered, as I have to sell with VAT.
Also check what the VAT rate is you need to charge is it 13.5% or 21% if the former, remember that most purchases you make will be at 21% so the chances of your getteing refunds are increased.
Any problems phone them in Limerick they are a great help.

AMPSound

This was a great, well explained thread. A question that many, including myself have. Thanks to all.

I know it has probably been mentioned before, but what is the turnover threshold for VAT?

Axwell

VAT Thresholds.

http://www.revenue.ie/en/tax/vat/registration/index.html#reg3

AMPSound

Thanks very much.

For others too lazy to click:

The principal thresholds applicable are as follows:

(a) €37,500 in the case of persons supplying services,
(b) €37,500 for persons supplying goods liable at the 13.5% or 21.5% rates which they have manufactured or produced from zero rated materials,
(c) €37,500 for persons making mail-order or distance sales into the State,
(d) €41,000 for persons making intra-Community acquisitions,
(e) €75,000 for persons supplying goods,
(f) €75,000 for persons supplying both goods and services where 90% or more of the turnover is derived from supplies of goods (other than of the kind referred to at (b) above) and
(g) A non-established person supplying taxable goods or services in the State is obliged to register and account for VAT irrespective of the level of turnover.

tombull82

this could be sticky'd as it does come up quite a bit..

bonkers1

We have just registered for VAT.

The threshold is €37,500., we have just got a refund for nov/dec, but is you do not meet this €37500 in the 12 months you have to repay any VAY refund recieved. Got this from tax office.

Also training to be accountant, customer does not need a vat invoice, they just want one so they can claim back vat, if they dont have one they just cant claim VAT

wishful thinker

Lorelei and suey are correct.

If you are concerned about registering for VAT, you should know that there are procedures know that simplify the returns procedure.

• Businesses making total annual VAT payments of less than €3,000 became eligible to file VAT returns and make their payments on a 6 monthly basis; and
• Businesses making total annual VAT payments of between €3,000 and €14,400 became eligible to file VAT returns and make their payments on a 4 monthly basis.

What are the benefits to businesses?
The benefits for qualifying businesses are two-fold:

• Improved cashflow by only having to make payments at the end of each quarter, 4 monthly period or 6 monthly period as appropriate.
• Reduced costs of administration through less frequent filing of tax returns.

kes83

This is a really good thread and fair play to everyone who has contributed.

Im in similar position to OP, as in im in a full-time job and looking to setup part-time business. My job brings in approx 30k per annum. This is included in the threshold of 37.5k yea? So if I happened to earn 8k (for example) in the same year from my part-time business then I would be required to register for VAT, am I right?

wishful thinker

kes83 wrote: »

This is a really good thread and fair play to everyone who has contributed.

Im in similar position to OP, as in im in a full-time job and looking to setup part-time business. My job brings in approx 30k per annum. This is included in the threshold of 37.5k yea? So if I happened to earn 8k (for example) in the same year from my part-time business then I would be required to register for VAT, am I right?

No....you are incorrect.

the threshold relates to your trading income from your part-time business.......not your income inclusive of your full-time job income.

e.g.supply of services threshold €37.5k
trading income 40k --- register for vat
trading income 20k --- do not need to register for vat

regardless of your income from you FT employment

tombull82

wishful thinker wrote: »

No....you are incorrect.

the threshold relates to your trading income from your part-time business.......not your income inclusive of your full-time job income.

e.g.supply of services threshold €37.5k
trading income 40k --- register for vat
trading income 20k --- do not need to register for vat

regardless of your income from you FT employment

+1