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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4207
Experience:  FCCA FCMA CGMA ACIS
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I am a self employed interior designer. I am not yet at the

Customer Question

I am a self employed interior designer. I am not yet at the threshold for paying VAT, but I am about to work on a substantial commercial design project. Costings of the project include, my design fee and then I will order and pay for the products for my client (after the client has paid me). The orders will amount to tens of thousands of pounds I imagine and there is obviously VAT included on the orders (furniture, lighting etc).
I'm assuming my client is able to reclaim the VAT back on these orders as he will be VAT registered. How do I work this if I am not VAT registered?
This is also a new build restaurant. I don't know if this makes a difference being a new build?
Many thanks.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
If your turnover reaches or approaches 82K in any one year then you must register for VAT and start charging the tax on your invoices. From the tenor of your question this is going to happen so you should register immediately to enable you to reclaim the input tax on your business purchases.
If you decide that your turnover is not going the breach the registration level and you do not register then you merely issue invoices without any VAT and the client has no input tax to reclaim. Remember that a VAT invoice would have your fee, say GBP 100 plus VAT of 20. From a cash flow point of view no VAT is an advantage to a buyer, but little else. For you you do not have the palaver of operating VAT.
I do hope that I have shed some light on your question.
Customer: replied 2 years ago.

Sorry, no this doesn't help me. I understood all of the above beforehand. Let me explain again.

I am meeting a commercial client who will want to reclaim VAT on purchases. The fact that I am not VAT registered may put him off? For example, I place various orders(on his behalf-he pays me, I then pay the supplier) of £30,000 plus VAT. My client will want to reclaim the VAT as he is a business, but as I am not currently VAT registered he won't be able to reclaim? Is there any way he can reclaim the Vat back on purchases I make? Many thanks, Lauren

Expert:  bigduckontax replied 2 years ago.

Not unless you are registered also, Lauren. VAT is a turnover tax which passes up and down the transaction chain with each successive invoice until it reaches a consumer who is not registered and trading (ie the boy who buys and eats the ice cream). That is when the VAT roundabout stops so to speak,

However, there is a way around this which would enable the commercial client to reclaim the VAT were you not registered. If arrangements could be made for you to place the orders on his authority and have him billed directly by the suppliers then the difficulty would be avoided. Suppliers would be paid and he would recover the input tax.

Customer: replied 2 years ago.

Thank you for your answer. Can i just clarify if my client paid the invoices, for example the cost on one was £100 plus VAT, would he be able to claim the full amount of VAT back? I'm sorry its all rather new to me! Also the fact that this is a new build project, does that make a difference please?

I'm good at design, just not great at tax!! many thanks.

Expert:  bigduckontax replied 2 years ago.
Some new residential builds are zero rated. That means that they are subject to VAT, but at a rate of 0%. In such situations all input taxes can be reclaimed, but there is little output tax to pay. A classic example of this is an omnibus company, bus fares being zero rated, but fuel is not so there is bags of input tax to be reclaimed; indeed such organisations make VAT returns monthly instead of the normal quarterly to ease cash flow.
So you see a zero rated supply affects the builder so an ability to reclaim input tax on purchases billed directly to him would be to his advantage.
If you are not going to breach the turnover level then you do not need to register, but in order for your client to recover then you must make arrangements as I have suggested.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.