I operate as a limited company. I provide interim management for large organisations. I secure each contract via Recruitment agencies, to whom I submit an invoice on a day rate basis. I don't invoice my clients at all. My "income" (turnover) falls below the VAT threshold but the Recruitment agency pays my day rate plus VAT. Intuitively, I feel that I should pay this VAT to HMRC however as I am not obliged to register for VAT, what is my best option?
Replies (6)
Please login or register to join the discussion.
Not VAT
Unless your invoices show VAT on them, what has happened is the recruitment agencies have overpaid you and you should probably refund them. It's not VAT unless you've charged VAT on your invoices.
But on the other hand .....
On the other hand, it may be in your interest to register voluntarily.
Either way, the "VAT" is not yours, it belongs to either HMRC or your agent.
Take a look at the Flat Rate Scheme
Although your client (the recruitment agency) may have an issue in that they understand they are paying VAT yet would neither have a VAT invoice nor self-billing arrangement in place to substantiate their VAT reclaim.
Seems a bit loose on the part of the recuitment agency.
That's what I thought ...
Although your client (the recruitment agency) may have an issue in that they understand they are paying VAT yet would neither have a VAT invoice nor self-billing arrangement in place to substantiate their VAT reclaim.
Seems a bit loose on the part of the recuitment agency.
... but, as the creditor the responsibility of notifying them that they have overpaid you and you are not VAT registered is yours, deliberately keeping money you know is not due to you is theft so the sooner you get this sorted the better.
As mentioned looks like the best option is to back date a flat rate scheme registration and trouser the profit!
FRS does indeed look good and may well be the best option but take care to look at all the options.
FRS rates are based on averages within certain sectors and your business may not be average.
So ...
I agree with bajones that it is not VAT and with the Lion that it is not yours to keep, so pay it back to the agent.