Self employed and Vat invoice

  • Thread starter Erik the Red
  • Start date
E

Erik the Red

Guest
Hi

Im self employed, but not registered for Vat. I might be getting a bigger job to do for another company who want Vat invoice.
It will prob take 3-4 weeks to complete the work.
Is there any way around it?
If lets say company employed me directly for 1 month and then "sacked me" when the job is done, how would that affect my tax return in October?

Any ideas? Dont really want to register for Vat as i mainly deal with private people and commercial jobs happen once in the year.

thanks
 
You can give the company an invoice, it would however just be an invoice with no VAT. There should be no reason why the company would not accept this as they would have other services on which there would not be VAT, e.g. rates, insurance etc. You supply the invoice with your name, address etc. and the work done with a total price.

The company may of course if it suited them agree to pay you as an employee, in which case you would probably be on emergency tax and you'd get a P45 on leaving which goes on your tax return along with the other regular business accounts.
 
Thanks 4 quick reply Graham, i was thinking the same about the invoice, but seems like companies might get the Vat amount back, dont they?
The job is worth few grand so it might a substantial amount to them, especially in the recent times.
I dont know much about accounting, but wouldnt a simple invoice (no Vat on it) be classified as an expense for the company?
 
I'm not sure how you see a difference.

€10,000 + VAT with a refund of the VAT is the same as €10,000

Your customer is still left with a €10,000 before tax expense.
 
The difference is, that materials bought by Erik the Red, will include VAT, which will be included in the theoretical 10k charge, which if Erik was registered for VAT, would have gotten credit for, and thus, not result in the 10k charge being as large!
J
 
If the clients were happy with a quote of 10k then the cost of the OP's materials is irrelevant.

However, I know of a few companies who have a policy of not dealing with sole traders or self employeds not registered for VAT. Pain in the backside for somebody in OP's position. Best to ask them outright what their policy is. There might be no issue here at all. Alternatively you could invoice them through a trusted friend's company (who is registered for VAT) and then invoice your friend's company with your VAT-less invoice and let him handle the VAT charge and reclaim on his books. I'm not an expert but I can't see the problem with this.
 
Whats the problem with registering for VAT. Put your mobile bills, diesel, accountancy fees, etc through and reclaim the VAT. Makes commercial sense to me.

Also, as Gumbyman said, its more credible in current climate to be VAT registered and even more so, if through a company.

Revenue have rules (namely antifragmentation) which prohibit the avoidance of VAT registration through articifical methods such as Gumbyman mentioned. However, its more for connected parties, but Revenue could take the view that you should have been registered.

If Revenue were to form this view, and you never charged VAT when you should have, you are liable. In my opinion, it is always best to register and charge VAT (where appropriate).

I would say the big issue here is that if you are not VAT registered, Revenue will probably form the view that you are an employee and not self employed. This company would then be seriously exposed to PAYE/PRSI on the grossed up amount.
 
The more I think about it, the Employee v self employed concerns are definitely driving this request.
 
Paddy199 - the OP clearly states that most of his work comes from private work and therefore it is definitely NOT in his interest to be VAT-registered as his prices can be up to 17% cheaper to the man-on-the-street than from a company who is VAT-registered.

OP - there is no reason to register for VAT unless your turnover is over the relevant threshold
 
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