When invoicing a client it is important to decide at what time the supply of services actually took place. To do this you use what is known as the ‘time of supply’ or ‘tax point’ rules. These rules are especially important when the rate of VAT changes, such as on the 1st January 2010. In short, Value Added Tax is due on whatever comes first, the date of invoice or the date of payment.
If you invoice a client on the:
- 30th December 2009 for work undertaken in December 2009 you will need to invoice at the rate of 15%
- 1st January 2010 for work undertaken in December 2009 you will need to invoice at the rate of 17.5%
- 15th January (example) for work undertaken over the 1st January 2010 (e.g. 10th December 2009 to 10th January 2010) you will invoice all work in 2009 (e.g. 10th December 2009 till 31st December 2009) at 15% and all work in 2010 (1st January 2010 till 10th January 2010) at 17.5%
On top of changes to the rate of VAT those Limited Company Contractors with an annual turnover (exclusive of VAT) of £100,000 or more will need to prepare to submit VAT Returns online and make payments electronically from the 1st April 2010. If you are a Contractor and you are planning on registering a Limited Company for VAT from the 1st April 2010 (regardless of turnover) you will have to file VAT Returns and make payments electronically.
Although registering for VAT online may seem like a big headache initially (i.e. going back and forward over Government Gateway documents and passwords!) it can actually save a lot of time and effort in the long run. By registering for VAT online and making payments electronically you can:
- Save a lot of time and effort
- Avoid costly mistakes
- Make sure you do not miss a deadline (the HMRC will charge a financial penalty (normally £100 – £250) for non payment of VAT or missing a deadline)
- Ensure payments are processed (you receive a submission confirmation from the HMRC)
For more information please see .
If you operate a Contractor Limited Company and are looking for professional Accountancy services please contact Commonwealth Contractors today on 0330 390 9021 or Submit your details now and we will get right back to you. We partner with Chartered Accountant Partners who specialise in dealing with Contractor Limited Companies.