Delaying breaching the VAT threshold

Delaying breaching the VAT threshold

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After a good busy January I am updating my records and noticed that my turnover for the last 12 months was more than £70K fortunately I have a couple of invoices for referral fees to an IFA which are exempt (I sat in in meetings and provided income details) which take me below the VAT threshold. I know that I am going to become VAT registered soon but would like to wait a couple more months. There are two possibilities that could help me delay, can someone please confirm that they would work?

1. Delay signing off accounts with associated invoices until the beginning of the month rather than the end of a month.

2. Issuing credit notes for known bad debts? (not personally sure if this works)

Thanks

Replies (11)

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Teignmouth
By Paul Scholes
02nd Feb 2011 18:06

Depends on the tax point

It's not often realised that calculating turnover in anticipation of registration depends on the basic tax point rules and not necessarily when invoices are issued.  http://www.hmrc.gov.uk/vat/managing/returns-accounts/tax-points.htm

To my mind, delaying the signing off of a set of accounts, merely to delay the completion of work (basic tax point) is invalid, especially when you've admitted to perhaps 100,000 people that that is what you intend to do.

Fair enough if you actually complete the work say 20th of Feb but don't invoice till 6 March, the tax point will be 6 March, but any later and the tax point, and therefore your turnover, belongs in Feb.

I'm sure issuing a c.note in respect of bad debts is of no use, especially when....etc etc, see above.

Does it really cause that much grief to register?

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By petersaxton
02nd Feb 2011 23:02

Sometimes

"Does it really cause that much grief to register?"

Some people have an irrational terror of forms!

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Euan's picture
By Euan MacLennan
03rd Feb 2011 10:18

Take a holiday

If you accept that VAT registration is inevitable, I don't understand why you are so keen to delay it by just a couple of months.

However, the obvious solution is to take a long holiday to reward yourself for your hard work in January.  That will put a hole in your turnover record that will last for the next 12 months and might delay compulsory registration by even longer.

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By bduncan
03rd Feb 2011 10:59

Thanks for your respsones

"Does it really cause that much grief to register?"

To some of my clients it does as their accountancy bill will be 20% higher or I might have to receive less to keep them.

The delay is so that I can get my house in order so that I can go through my clients to see who it would effect right to them and change my billing proceedure. To the none VAT registered people I may invoice them for the years work and get them to pay by standing order, which is good for Cashflow and allows them to have one more year of VAT free accountancy fees.

"Fair enough if you actually complete the work say 20th of Feb but don't invoice till 6 March, the tax point will be 6 March, but any later and the tax point, and therefore your turnover, belongs in Feb."

Surely if I complete all of the accountancy work by the 10th Feb but do not sign off the accounts until 1st of March and invoice on 1st March then the tax point is 1st March not Feb as to me the final meeting and the signing off of the accounts is when the job is completed.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
03rd Feb 2011 11:44

Not as hard as you think

To some of my clients it does as their accountancy bill will be 20% higher or I might have to receive less to keep them.


 

Posted by

bduncan

on Thu, 03/02/2011 - 10:59

I was in the same situation and took the decision to just charge VAT on top. I haven't had a word of complaint, people just accept it as part of business. Given that many qualified and experienced practitioners/ firms will be VAT registered, it's hard for those clients to find an accountant who's not VAT registered, so going elsewhere is not an easy option for them.

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By DMGbus
03rd Feb 2011 13:31

Choice of timing - pre reg VAT claim

Two deadlines / timescales to be aware of are in relation to recovery of pre-registration input tax, and in some cases could influence someone in your situation to register earlier rather than later:-

In relation to bought in services - to the extent NOT consumed / used up can go back 6 months prior to VAT registration dateIn relation to assets / stock - can go back 4 years prior to VAT registration date

 

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Teignmouth
By Paul Scholes
03rd Feb 2011 14:18

Tax point ish

Hi BD - re the point above:

Surely if I complete all of the accountancy work by the 10th Feb but do not sign off the accounts until 1st of March and invoice on 1st March then the tax point is 1st March not Feb as to me the final meeting and the signing off of the accounts is when the job is completed.

You have hit on the grey area, ie when is the work finished?  I complete the work when I'm ready to sign off, ie when the accounts have already been OKd with the client (90% over email) and so if that were the case 10 Feb but I delayed signing and invoicing till 1 March then the tax point is 10 Feb, because the invoice is more than 14 days after the work is finished.

If however I prepare draft accounts 10 Feb ready for the meeting 1 March to discusss & (hopefully) finalise them then, yes, the work is completed (and invoiced) 1 March.

And all this because of the tax return rush!

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By bduncan
03rd Feb 2011 17:09

Thanks Monsoon

How did you inform the clients - a letter to all clients? a letter to VAT registered clients or just when they bought in their books.

My problem is that I have quoted some clients a figure without VAT and I have not done any work as yet so I will be charging them higher than I quoted.

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By bduncan
03rd Feb 2011 17:16

Thanks DMGbus

Thanks I was aware of the claiming back pre-registration input tax and was going to start a new thread nearer the time but as you mentioned it.

Could I reclaim input VAT on an annual software licence that I renewed 4 months ago? presumably I can reclaim 8 months worth. Also can I claim 80% of the input vat for the stationery order that I have only used 20% of?

I am OK with the fixed asset side as I have only been established 2.5 years.tooltip();

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By petersaxton
03rd Feb 2011 17:23

Contact all clients

"How did you inform the clients - a letter to all clients? a letter to VAT registered clients or just when they bought in their books."

A letter to VAT registered clients would be pointless unless they were on the FRS. I'd send an email to all clients and definately not wait until they brought in their books.

"My problem is that I have quoted some clients a figure without VAT and I have not done any work as yet so I will be charging them higher than I quoted."

You can't charge them higher than quoted. VAT registered if not on FRS wouldn't care though. Maybe you should send all clients an email but a different email based on their VAT situation.

You should have anticipated the problem though.

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By petersaxton
03rd Feb 2011 17:45

Input tax

"Could I reclaim input VAT on an annual software licence that I renewed 4 months ago? presumably I can reclaim 8 months worth."

It's a service so you can claim all of it if you register now.

"Also can I claim 80% of the input vat for the stationery order that I have only used 20% of?"

Yes

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