Self billing of VAT

Self billing of VAT

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I'm struggling to get my head round this, and I think it is me rather than the size of the issue.

A client has been getting self bill pages from a customer, so £120 plus an invoice from the customer.  The client (I assume) pays over the VAT and the customer uses their own paperwork to reclaim the VAT paid.

Our client has now ceased to be registered, so they have sent back the VAT which was accidently self billed.  So what, now the customer sends the client £100 and doesn't reclaim the VAT?  That sort of makes sense, our client isn't VAT registered so can't charge VAT anymore, so the customer has to stop charging themselves it...

Hmmm, maybe I just needed to talk it out...  Let me know if I have erred though.  Basically, our client should only have income of £100 as above and if they have had the VAT too they should return it.

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By spidersong
25th Jul 2011 16:46

Yep.

Yes that's right.

Normally with self billing there should be an annual review to check that people are still registered so that self billers don't overclaim, and hopefully a good enough supplier/customer relationship that changes like this are notified to the self billing entity quite quickly.

So yes the clients customer should adjust their VAT recovery to make sure they don't recover any VAT on invoices after the deregistration date, and if they'd been overpaid then the client should repay them the VAT element as they're only entitled to the net amount now (unless the agreement is on a gross income basis of course, so that the client can actually get more out of it by deregistering).

 

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By Figurate
25th Jul 2011 16:52

Your logic is correct
Yes, if the client has ceased to be VAT registered, then the invoices should only be for £100 rather than £120. The client's customer should only self-bill for £100 and they will no longer have input VAT to reclaim in relation to your client's supplies.
The client should only receive £100 from their customer.

(see the HMRC link on self-billing record keeping and self-billing invoices http://www.hmrc.gov.uk/vat/managing/charging/self-billing.htm#6 )

(edit: sorry, my post crossed with SpiderSong's)

Louise
www.figurate.co.uk
www.happyaccountant.com

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Quack
By Constantly Confused
26th Jul 2011 08:45

Thanks to you both

I get it now :)

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