Mr Optimistic started a sole-trader IT consultancy service and duly registered for VAT. Soon after doing that, he also was offered and commenced a part-time salaried position. Meanwhile, he got some business in his consultancy, and charged the customers VAT. However it quickly became clear that, with his part-time job taking a bit more of his time and the salary paying his bills, he was not going to be doing that much consultancy and would not reach the 12-month VAT threshhold anytime in the foreseeable future. So, he wonders, shoud he be charging any VAT at all, and if not, what should he do about the VAT he did charge his customers (which was only charged recently and would be due to be paid to revenue in the next few weeks).
Registered and charged VAT, but under threshhold
- Thread starter TBFrank
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newirishman
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If he is registered for VAT then he (must?) should charge VAT, doesn't matter if he is below the threshold. You must register for VAT if you are above the threshold, but you can elect to do so if you are below the threshold.
Any VAT that has been charged and collected must be passed on to Revenue (very simply put). He can't just keep it or return to his customers.
Any VAT that has been charged and collected must be passed on to Revenue (very simply put). He can't just keep it or return to his customers.
Thank you newirishman. That is what he thought. He's now thinking of remaining registered, and continuing to collect VAT, simply because he thinks being VAT registered makes his business appear a little more established and worthy of the rates he hopes to charge (albeit for limited volumes of work). He reckons the admin overhead is just about worth that. Does this seem reasonably sensible, or is there a downside/gotcha he could be missing?
I can tell that having a VAT registration is like having herpes as you never ever lose it. I had a business that required a VAT number but when I ceased that business and closed it all down I thought that was that. I later required a business that I need to apply for a tax clearance cert each year but not need VAT and yet the revenue would still issue the cert in my old VAT number saying that it at the time was the biggest amount of tax they used to receive. After a long while a finally got them to update their records but was told if ever I apply for a new VAT number they bring up the herpes one
newirishman
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I don’t see much of a downside to charging VAT, especially if you are mainly selling to business customers. Can’t see there being too much of an admin overhead, assuming that he is doing proper book keeping, ideally using some accounting software. Which should be default behaviour anyways.
Of course, it means that the books need to be kept up to date to ensure VAT deadlines are being met etc. Not sure if this would count as a downside
