Preparing for VAT reg - what can go wrong?

Am a non-VAT-reg agent for VAT with HMRC - when I VAT-register, will new VAT agent acc be necessary?

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As a non-VAT registered Ltd company, I have been an agent for VAT returns for clients for HMRC for over a decade, with an agent code with 2 letters/4 numbers (rather than my VAT number being the agent ID as I understand to be the norm for others, as I don't have one).
When I need to VAT register myself, is this going to mess up/delete my non-VAT-registered-HMRC-agent details and will I have some horrible mess of needing a new VAT-registered-HMRC-agent-account and then to re-authorise all clients (without missing any VAT filing deadlines?)? Or does the new ASA system etc make the old agent codes/system/etc nearly redundant? I can only find a couple of old posts about people trying to deregister, where it seemed to be agreed a new agent-code and re-authorisations would be needed.

Are there any problems with me offering non-VAT-reg clients the opportunity to prepay next year's tax return (without VAT), in the month before my VAT registration date? The date for VAT purposes (prior to my registration) should be the earlier of when funds are received, or when the work is done, so I think this is a small saving I can offer my smaller clients for one more year at least? I will likely cross the threshold in January and register from 1st March. As these will be "Fees paid in advance of work to be performed and that are clearly identifiable as such" I understand this does not fall subject to client monies rules (ICAEW).

Also interested to hear other sole practitioner/small practice experiences with registering for VAT, was it easier than you thought, did you lose any/many clients, any regrets, did growth go well for you afterwards? Have you de-registered again since?

Thanks in advance for any answers.

Replies (9)

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By Open all hours
23rd Sep 2023 04:58

1. Always prepare as best you can for the worst. HMRC (along with most large institutions) seem determined to make every process harder than it ever needs to be.

2. We didn’t bother helping clients for ‘one more year’. Fully appreciate you would want to, we wanted to but decided instead to sell it to them as a compliment that they were looked after by a successful, growing practice.

3. On the basis that the compliment worked, we soon far exceeded the threshold, didn’t lose anyone and never looked back. Aim high and go well above the threshold as soon as possible. This is easier now it is frozen.

Crack on, good luck, but assuming that your registration is due to demand you’ll be making your own luck through your own endeavours, as we did, despite the VAT threshold being pitifully low.

Thanks (1)
By Matrix
23rd Sep 2023 05:58

We still have the same agent account and code from pre registration. I am not sure if anything has changed as it was all pre ASA.

I would look again at the tax point.

They have saved money by not paying VAT all these years. One client said she couldn’t afford it so her fees became VAT inclusive, I don’t think any personal tax clients left and one exempt client moaned. Overall you get VAT back and greater perception so don’t overthink it all.

Thanks (1)
Replying to Matrix:
By JoannaU
26th Sep 2023 12:14

Same here. When I knew that I was likely to become VAT registered, I emailed all my non-VAT registered clients to let them know that if they gave me all their information by a certain date, I would endeavour to complete the accounts / return before I went VAT registered. I also billed on account those I did not manage to complete. A lot of clients took advantage of this (I had 78% of my tax returns completed by the end of November last year, compared to the normal 50%/60% which was refreshing) and I only have one client who may not use me this year to the additional cost.

I did consider reducing my fees by a margin to help out some of the clients however I then remembered that my fees are already very competitive and, as Matrix said, they had had the benefit of no VAT for 15 years!

I did look at all my clients / fees and worked out that, although 78% of clients are not VAT registered, they only account for 40% of my income, which, as an accountant, I found a bit interesting.

No change re the ASA account - everything just continued as before.

Thanks (1)
By lionofludesch
23rd Sep 2023 10:44

"Are there any problems with me offering non-VAT-reg clients the opportunity to prepay next year's tax return (without VAT), in the month before my VAT registration date?"

I would definitely be interim billing non-registered clients for work done before the EDR.

Prepaying, though. Something in the back of my mind says you can't create a tax point by prepaying, because you can only create a tax point if you're a taxable person. Jason will know.

Thanks (1)
Replying to lionofludesch:
By janelm
23rd Sep 2023 11:05

Thanks for your thoughts. I understood a prepayment to be receiving a deposit/advance payment for services, and I thought the date for VAT purposes is the date it is received (Value Added Tax Act 1994, Section 6 (3) and (4)) but wanted to check this is definitely ok/relevant prior to being VAT registered.

My Ltd and VAT clients pay monthly via standing order, but self-assessment I usually invoice on completion. Registering from 1st March should make it a clean break between self-assessment years so there won't be much work in progress (but yes I will certainly make sure everything is billed that can be).

Thanks (0)
Replying to janelm:
All Paul Accountants in Leeds
By paulinleeds
27th Sep 2023 20:50

I investigated taking deposits before my firm was VAT registered, to help a few non-VAT registered clients and not charge them VAT.

From memory, and VAT advice obtained at the time, it doesn't work; something about continuous services provided by accountants and the tax point, even if you bill for each specific annual accounts, Tax Return each year.

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Replying to lionofludesch:
By rmillaree
24th Sep 2023 10:51

Prepaying, though. Something in the back of my mind says you can't create a tax point by prepaying, because you can only create a tax point if you're a taxable person. Jason will know.

Yep i would agree one would neeed to check the detail -its sunday and i cant be bothered to find out today so lets hope Jason confirms. My memory thinks that under some circumstances if clients are billed and pay then you might get away with it - unless i have seen the detail though i wouldnt trust my own memory and i know guidance is tricky to follow as not evrything is the same when not vat registered ref tax points- plus not sure if its different rule for continous services too. I see janelm has kindly provided a link so hopefully that confirms its ok.

Thanks (1)
Replying to rmillaree:
By lionofludesch
24th Sep 2023 11:03

I think I'm thinking of the rule that says a tax point is not created by an invoice which shows no tax.

Thanks (0)
By bettybobbymeggie
23rd Sep 2023 19:46

Given HMRC don't know their @rse from their elbow I'd be astonished if they identified the link between your agent account and your application for VAT registration. I'm still using the same agent account & ASA as I was before.

I think about 20% of clients by fee income were non VAT-registered - some grumbled in the expected way but I didn't lose anyone. A few suddenly wanted their tax returns done in the month before my registration date but most just accepted it.

As has been said, I think it makes your practice more authentic so I felt strangely proud when I got to the threshold.

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