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I am very close to surpassing the VAT threshold. I’ve currently taken £80,525, and my next payment is due on Thursday.

I told my client that I will have to charge them VAT on the next payment, which is £5,000, so with VAT, it’s £6k.

However, I’ve seen on the UK government website that I can’t charge VAT until I have my VAT number (https://www.gov.uk/vat-registration), which can take up to a month to arrive.

Does this mean that I am prematurely charging VAT and that I don’t have to charge my client VAT on the £5k that they will owe me? Therefore can I actually say to them that the extra £1k can be spent on the project paying me to do more work, rather than giving that £1k to HMRC?

Hopefully this makes sense, thanks in advance!

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  • Assuming your client is a VAT-registered company themselves, any VAT you charge will be reclaimed by deducting it from their own VAT bill anyway. So either way the "extra" won't be available for them to spend on the project. Either they pay it to HMRC directly as part of their normal VAT bill, or they reduce that by £1K, pay it to you, and you pay it to HMRC. (The main point of this seemingly convoluted system is to reduce evasion)
    – GS - Apologise to Monica ♦
    Jan 15, 2021 at 10:36

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The page you linked to says that while you wait for your VAT number:

You cannot charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.

You should increase your prices to allow for this and tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT.

You are going to have to pay the VAT for your sales while you wait for your VAT number, however you are not to issue an invoice with VAT on it.

In your scenario, you will need to issue an invoice to your customer for £6000. Then when you get your VAT number, reissue the invoice as a £5000 invoice with £1000 of VAT added.

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  • 4
    “Re-issuing” of course means a credit note and a new invoice. You can’t change an invoice once it’s been recorded. If you can afford it, it could be easier for everybody to just wait for your VAT number to issue the invoice (and get the payment).
    – jcaron
    Jan 15, 2021 at 13:18

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