# Should a self-employed person register for VAT?



## taponavillus (12 Dec 2007)

i retired august and have a pension of 30k a year. i have taken on a contract with a firm for 3 months investigating their property portfolio. i expect that the contract will be renewed. the contract states that i must pay my own prsi ,tax ,etc. the price that i charge them is supposed to include vat.
i expect if the contract is renewed then i would earn about 40k for 12 months.
i have registered with revenue comms as self employed. do i need to register for vat. what are the benefits of vat or otherwise. would appreciate any assistance in this matter. my wife also works and earns about 80k a year. many thanks.


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## Graham_07 (12 Dec 2007)

VAT registration thresholds for services currently at €35,000pa, increases to €37,500pa from 01/05/08 ( per the budget) This means that 
- you do not have to register if turnover below threshold
- you may register if you wish even if turnover below threshold
- you must register if turnover is expected to exceed threshold in a 12 month period

Your or your wife's other pension/employment income is irrelevant in arriving at the threshold but this or any other self-employment of yours would be relevant. 

If your customers are all VAT registered then any VAT you charge is recovered by them. 

If, as you say the price for this contract is deemed to include VAT, i.e. that is the gross you receive, then if you register for VAT that comes out of your invoice and your real sale is the net amount. If you do not register for VAT, your sale is the gross amount. This may not make it worthwhile to register while under the threshold, especially if your VAT rate is 21% ( some services are at 21% and not 13.5% as are many others ) 

If you could charge the VAT on top of the contract price ( again recoverable by the customer if they are VAT registered) Then the VAT does not become a cost to you. In that instance, it sometimes makes sense to register when under the threshold, but only really if you have a lot of VATable costs which you could then recover the VAT on. 

If the customer is not VAT registered then VAT charged by you is a cost to them and if you register then you have to suffer the VAT if you cannot increase your gross to compensate. 

Given the amounts you mention and the initial 3 month term, and the possible , but only possible €40K in a 12 month after that, with the new registration threshold from May 08 being close to that at €37.5K, it would not seem worthwhile to get into VAT at this point. 

Other posters may have other views on this.


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## taponavillus (12 Dec 2007)

many thanks for your input it is very much appreciated


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## ButtermilkJa (13 Dec 2007)

I agree, it would only benefit you if you your client was also VAT registered and if you could claim back VAT on some of your running expenses. In that case there is an arguement that it makes sense to register, as your client won't care about the VAT you charge and any saving on your expenses can only be good.


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## myate (13 Dec 2007)

On a similar matter with VAT, does anybody here knows if there's a penalty or something if you haven't registered but go slightly over the threshold? I'm trying to stay below, but may come close. My accountant would probably tell me, but I'll try here first. Thanks!


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## Graham_07 (13 Dec 2007)

myate said:


> On a similar matter with VAT, does anybody here knows if there's a penalty or something if you haven't registered but go slightly over the threshold? I'm trying to stay below, but may come close. My accountant would probably tell me, but I'll try here first. Thanks!


 
Your "closeness" to the threshold must be monitored regularly, i.e. you can't just start off, knowing you have a threshold of say €35,000 for services and at end of year, discover turnover was €50,000 and say oops beter register now. You need to monitor the rolling average turnover so if turnover after 3 months is say 12,500 , thats possibly going to give you a 50,000 annual which is over the limit so go register from then on. Revenue are not terribly worried about the initial few months there but if you blatently go way over then there will be a problem. Basically you can become liable for the VAT included in the sales which you should have charged out. I'd check with your accountant and make shure that they have sufficient information on sales to date and anticipated futre sales for the year to see how close you are likely to be.


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## taponavillus (13 Dec 2007)

thank you for your advise much appreciated


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## bogota400 (11 Nov 2008)

About to trade without being registered for VAT - as at this stage of the year, I won't get anywhere near the threshold.

My question is this;

When invoicing or issuing receipts, does it matter to me if client is VAT registered or not.  Do I need to spell out that no VAT has been charged and write it on the invoice/receipt? Whats the standard practice?


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## myate (11 Nov 2008)

Sorry to jump in with a off-topic (slightly) but rather than start a whole new thread.
It was mentioned above that the threshold is 37.5K from May 08 - so does anyone know if that 37.5K applies for the whole of 2008 for accounting purposes. I'm threading a fine line this year, so need to stay under. To save hassle for myself I'm registering 1st Jan 09. Didn't think I'd be so close this year.
Thanks


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