Invoice Question In Regards To Materials For New Buisness

[ritchiehulse]

Hi

Started up a new company, im limited but not as of yet vat registered. I have been asked to quote for a job which i would supply and fit the materials.
materials cost £500
Labor cost £200

so i would invoice the client £700

now i have already paid vat on the materials, when i get paid into my business account will i have to set aside 20% for the entire bill of £700 or just 20% of the £200 labor costs.

Thanks i really appreciate it

 

[Octopus]

What is your turnover expected to be in the next 12 months?

 

[ritchiehulse]

prob around 50k, could be more but atm i am not vat registered. I do have a meeting with a account to discuss but this job offer wants a quote tomorrow as they are in a rush and will open great doors for me

 

[Octopus]

The VAT threshold is £83k if my memory serves me correctly so you pay out on what you buy, but don't add it to what you invoice.

A meeting with an accountant sounds a good move

 

[Dynamoaccounts]

This is definitely one to discuss with your accountant, it may or may not be advisable to be VAT registered depending on whether your customers are also registered.

Usual way to do it is to invoice the labour and the materials (net of vat) total these up then add 20% vat to the total. The cash effect would be that you'll have to pay over the 20% on the labour as the VAT on the materials will net off. There's a few ways to do it but the net effect should be that you'll likely only have to pay over to HMRC the VAT on the labour.

Unless of course you're going fixed price all inclusive type work.

 

[boffy35]

Hi Ritchie,

Your turn over is too low for VAT registration so don't worry about it.

When you become VAT registered, you add VAT on to all relevant charges, so if you are working in the UK for UK customers, that will be everything you invoice. Don't forget that once registered all of your quotes will show VAT added to all relevant charges, remembering to quote materials nett, that is without VAT, then adding it back in when you charge VAT on the whole quote.

VAT registration allows you to reclaim VAT on business purchases, but as your customers pay the VAT on materials, you only really save on business expenses like fuel, so if you have a turnover of over 83k you have to register, if you have considerable business expenses not including materials, it is worth applying even with turnover less than 83k, otherwise stay clear as it is a pain in the arse to account for.

Talk it through with your accountant

 

[Darkwood]

I became VAT registered when I set up and was purely due to my customer base, I was well under the threshold for registering but as I do industrial to mainly large companies then it was in my interest to become registered as this allows them to claim VAT back on my services.

When you invoice a job you usually invoice it excluding VAT in the breakdown and you show the total VAT to add per section you list charges then the total VAT owed on its own then the total sum at the bottom including VAT.

You would do good getting some software like Quickbooks that does it all automatic for you and all you do is type in the pre-VAT values.. if you do get this then buy the full suite in one go, don't do the pay monthly option as you never really own it and after a few years you have payed for it 5 times over and then some.

Your invoices will need to carry you VAT registration no' by law so don't forget to add it somewhere.

The disadvantage to been registered is doing regular work for customers who cannot claim back VAT (domestic) as you will have to charge 20% more on labour than someone who isn't registered hence you become uncompetitive so while you are not required to become registered, you need to think long and hard on making such a move, I would go with the advice given on discussing this with your accountant as there are many pitfalls in been registered including having to pay the VAT each quarter on all submitted invoices even if you haven't yet been payed but there are systems out there that allow for you to only submit payed invoices thus you need to discuss this with someone in the know (Cash accounting method).