Do I charge VAT when invoicing an agency for my work?

I do some freelance work on the side and up to now have only dealt directly with end-customers, where I invoice them for the service provided plus VAT (say EUR100 for my work + EUR21 VAT = EUR121).

I have just completed a job which I got through an agency. How do I now invoice the agency, seeing as it must yet add its cut before invoicing its end-customer, which eventual price presumably should still have 21% VAT on it?

Do I still invoice for EUR100 for my work + EUR21 VAT = EUR121, as I am still providing a service and what the eventual customer gets charged is the agency's concern?

Or do I invoice for EUR100, because the agency is going to add an overall 21% after adding its cut (and presumably, pay it to the Revenue Commissioners)?

I reckon it's the former, but I'm asking you mavens here, so that I don't look like a business ignoramus when dealing with this agency and also so that I don't find out later that I have to stump the 21% up out of my fee to keep on the right side of the law (and agencies don't pay well in the first place, either).

Your experience and advice would be appreciated.

Hi Polar, Yes if you are VAT registered then you must add VAT to all of your invoices. The agency will simply add on their margin and VAT when they charge the client.

Matt

you have to be over the threashold for providing services 25k euro i think before you charge vat to your customers .
check revenue site under "who has to register for vat "for threasholds ....good luck.

setemupjoe said:

you have to be over the threashold for providing services 25k euro i think before you charge vat to your customers .
check revenue site under "who has to register for vat "for threasholds ....good luck.

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Gone up to 35k from 1st March.

You don't have to be over the threshold. Even if your turnover is less than the threshold you can voluntarily register for VAT. This makes sense if your customers are VAT registered, and you have reclaimable VAT costs yourself.

I haven't registered for VAT, as my turnover will be fairly small over the course of the year, but I know I am still obliged to charge VAT and to stump up for it to the Revenue. I just need to be sure that I charge it to the agency, no matter what they end up charging the client for.

Polar, When you say "I haven't registered for VAT, as my turnover will be fairly small over the course of the year, but I know I am still obliged to charge VAT and to stump up for it to the Revenue" this makes no sense to me. If you are not VAT registered then you should NOT be charging VAT, to do so you are breaking the law. Can I suggest you get some proper advice from an accountant.

BetterBiz said:

Can I suggest you get some proper advice from an accountant.

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Please do, asap.

The Revenue leaflet IT49 says that if my turnover is under EUR27,500, I don't have to register for VAT. It doesn't say I am exempt from having to charge or pay VAT..?

My turnover is going to be small - EUR3-6k. I'm not keen on stumping up for an accountant for that size of an income. An accountant would probably laugh at me with that income!

I don't have any reclaimable costs, either.

If you are NOT VAT registered than you do NOT charge your clients VAT, however you do have to pay VAT on things you purchase.

If you are VAT registered then you charge your clients VAT and you are able to reclaim VAT you have paid out on purchases.

If you are VAT registered the VAT you have charged your clients is greater than the VAT you have paid on the purchases then you owe the difference to the revenue.

On other hand if you are VAT registered the the VAT on your purchases is greater than the VAT you have charged your clients then the revenue owes you a refund.

If you are not registered for VAT then you don't (and shouldn't) charge VAT to your customers.

Even if your income is low I would suggest that you ring an accountant and ask for a brief training meeting of approx 2 hours. This should cost you less than €200 but could save you a lot more. One thing the revenue are extremely keen on is that people do not charge for VAT when they are not registered. The person paying the VAT will possibly reclaim the VAT and the revenue will then be out of pocket. They are also very against copies of sales invoices being issued without them being clear that they are copies. They fear that the purchaser could reclaim the VAT twice.

dont register for vat/dont charge vat..........no large vat outlay on expenses incured in the course of producing this income so no point in getting into vat at all.FORGET ABOUT VAT! wish i could.

Everyone, thanks for your help. My current clients will no doubt be happy to be charged less than my original quotation, which included VAT.

By the way, does this mean that if I don't have to charge VAT, that a company would be better off contracting with me than with a larger, VAT-registered contractor which would have to charge a 21% higher final price? Until I reach the VAT registration threshold, that is?

no its the same for them coz the big company just passes it through there system . pays the vat then claims it back or more likely deducts it from its vat liability. since you dont charge vat they dont pay or claim back or deduct so it has the same net effect on them. its no advantage or disadvantage to you or them just a different way .

To each of you who posted these helpful replies - thanks! You've saved me an awful lot of hassle.

Yes it's very straightforward.
You just bill the agency and ensure that you put vat on your invoice.