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FLAT RATE SCHEME - INVOICING ANOTHER SOLE TRADER ALSO ON THE FLAT RATE SCHEME

FRS

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Hi

Im a sole trader in the entertainments industry nd registed on the Flat Rate Scheme for VAT.  I frequently have artistes perform at my shows for an agreed fee set in advance.  Most of these people are not regisitered for VAT. But maybe 1 in ten are and they often ask me to pay VAT on to op the fee ageed (even where it was expressly stated that the fee "includes any VAT"). My question is: Are there any provisions or exemptions when the invoicee and the invoicer are both on the FRS?

I ask because when I pay an artsist VAT on top, I cant claim any of it back and so it repsresents an extra cost to me. Equally I think they are required to invoice me for 20% VAT but under FRS will only actually be apying 12.5%. 

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RLI
By lionofludesch
31st Jul 2016 17:12

No, whether the payee is on FRS makes absolutely no difference whatsoever. You should charge 20% VAT to your fee whether the customer is registered on the output/input method, on the FRS or unregistered. VAT liability depends on you, not your customer.

I've no idea what you mean when you say you pay VAT on top of a fee that includes VAT. Please explain more fully, perhaps putting some figures on it.

You're correct that you can't claim any VAT you pay (subject to some limited exceptions). If that leaves you out of pocket, it's always open to you to leave the FRS scheme. It's your choice to be in it, it's not the Hotel California and you can leave when you like.

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Replying to lionofludesch:
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By bigdaddy
01st Aug 2016 10:23

Ok thanks. I meant that the artist or their agent didn't read the original offer of work properly and then in order to protect goodwill in the relationship i sometimes compromise by 'adding' vat to the original amount. So say fee £100 but they didn't realise that included vat i may pay them £120

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Replying to bigdaddy:
RLI
By lionofludesch
01st Aug 2016 10:56

Maintain goodwill ? Well, that's for you to decide but you make your own contract terms worthless by agreeing to do that.

But - sure - it comes out of your pocket so you'll have no VAT problem with HMRC.

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Replying to bigdaddy:
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By legerman
01st Aug 2016 16:21

bigdaddy wrote:

So say fee £100 but they didn't realise that included vat i may pay them £120

How can it already include VAT? The invoice is for you to pay and if the supplier is VAT registered then they must add VAT to their invoice. Otherwise the artiste is only getting £83.33 for their services, not £100

You take the hit on the VAT as you would with any other VAT registered supplier, which is why you pay a reduced rate of VAT to HMRC.

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Replying to legerman:
RLI
By lionofludesch
01st Aug 2016 16:41

legerman wrote:

How can it already include VAT?

Well, I inferred that the OP had a contract (so he thought) to pay a specific fee, whether or not it contained VAT - in the same way that a householder may agree a fee of £50 to a plumber to fix a dripping tap. The householder would expect to pay £50; whether the plumber is VAT registered is of no interest to him.

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By JCresswellTax
01st Aug 2016 09:34

Uh oh, I think we have discovered a case of an un-represented doing things wrong!

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Replying to JCresswellTax:
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By bigdaddy
01st Aug 2016 10:24

thanks for your reply. would you be able to explain why?

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By Portia Nina Levin
01st Aug 2016 16:50

Surely your accountant would have discussed this with you at the outset?

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