VAT - Sole trader

K_2008

Hi,

I've recently registered as a sole trader and am unsure about my requirement to register for VAT. Can someone please explain:

1) What happens if I don't register for VAT but end up going over the threshold (€37,500 for services).

2) If you do register and pay VAT every 2 months or so, what happens if at the end of the year you don't go over the €37,500 threshold, do you get a refund?

3) Are there any good template invoices available online?

Thanks for the advice, as this is all new to me.

dbran

Hi

If you go over the threshold you are obliged to register for VAT. As soon as you are aware that your annual turnover is likely to go over the threshold you need to register. If you do not register and you are subject to an inspection by the revenue then you will be liable to pay the VAT you should have paid on the total sales that you made in the period. You may not be entitled to any VAT on the purchases that you made in the period.

If you fall below the threshold, subject to some conditions you can then deregister. You will not be able to clam back the Vat that you charged customers while you were registered for VAT.

Kind Regards


dbran

K_2008

Thanks for that. So, if you realise you might go over the limit towards the end of the year and register for VAT late, do you have to pay VAT on all previous sales for the year also? - I'm guessing you do.

dbran

Hi

Once you realise you are going to go over the threshold on an annual basis you must register.

One could have good months and bad months so deciding on a monthly basis alone does not necessarily mean you have exceeded the threshold.

You are only liable to pay VAT on your sales from the date of registration onwards.

Regards


dbran

K_2008

Thanks dbran,

So it seems as though it might be best to leave it late then (if unsure) as you avoid paying VAT for most of the year.

But I guess this is offset by the fact that you can't claim your own VAT back for business expenses etc. So if your running costs are low and sales are high and you're in or around the threshold, it's probably best to leave it late to register I'm guessing.

Regards,

dbran

Hi

It all depends on who your expected customers are.

If you expect to be selling to vat registered persons then it dosent matter if you charge them vat as they will just reclaim it when they do their vat return. You can also claim back the VAT on your purchases thus reducing your costs also.

if you are selling to non-vat registered persons then the additional vat charged will be a cost to them which may make you uncompetitive. So if this is the case you might want to hold off registering until you have to.

Kind Regards


dbran

K_2008

Thanks dbran, I think I understand it a lot better now.

Regards,

smeharg

dbran wrote: »

Hi
...
if you are selling to non-vat registered persons then the additional vat charged will be a cost to them which may make you uncompetitive. So if this is the case you might want to hold off registering until you have to.
...

Rather than make you uncompetitive it may make you artificially competitive. If you're never going to reach the registration threshhold than that's not a problem. But if you do, and suddenly must add VAT to your sales what do you do? Hike your prices by 13.5% or 23% or absorb the VAT?

K_2008

In my case it's only one main client/company at the moment (who are registered for VAT), so my price will include VAT which they can claim back. If I didn't charge VAT I would get paid less and not have the option of claiming back my own tax deductions, so registering seems to make sense to me now. Interesting point re non VAT registered clients though.