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I'm a self employed web developer working in London, UK. Currently I'm not VAT registered but am approaching the current VAT threshold. I'm wondering if anyone knows what is involved in becoming VAT registered? and if they have any advice?

Basically my current contract wasn't supposed to last as long as it has (originally only supposed to be 2 months), and has now been rolling for close to a year - 11 months so far. The problem obviously is that I can't really just turn around to my client and ask for a 20% extra rise in what I'm being paid... So my other choice is to absorb the VAT myself, but is this even allowed?

I've been reading up online as much as I can but nothing I've found really gives me a hand with the actual reality of suddenly switching from one state to another... I'm amazed that more tax information sites don't deal in examples!

Having always dealt with my own tax return I don't have many resources when it comes to financial information so any advice would be much appreciated. Even if it's to recommend a reliable london-based accountancy firm that deals with web professionals.

Thanks.

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    Why exactly can't you charge your client the VAT? Isn't that the law? – littleadv Sep 27 '12 at 19:54
  • Well I'm not sure... I guess it is. But it seems like something that would put the client in a tricky situation if they have a fixed budget to work with - especially as they've been cutting down on their expenditure. I realise that some of this amount could be claimed back, but ... still, I guess I'm just looking to see what other people's experience has been. – Pebbl Sep 27 '12 at 20:03
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    If your client is a VAT registered company, which is most likely, they don't mind paying VAT at all. Every pound VAT they pay to you comes straight out of their own VAT bill. So if they owe £20,000 VAT to the tax man and they pay you £5,000 VAT, then they owe the tax man only £15,000. No reason to worry about that at all. – gnasher729 Dec 17 '14 at 2:02
  • And hmrc.gov.co.uk really has all the answers. If you choose the simplified VAT scheme, you actually make quite a bit of money from this (at least 5% of your bills tax free totally legal straight in your pocket for minimal work). – gnasher729 Dec 17 '14 at 2:04
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If you have been dealing with you tax returns till now, registering for VAT wouldn't make it any more different. Registering for VAT is simple, you fill up a form with the details and you would get your VAT registration form along with your VAT number in a week or so. Chances are you would be paying under the Flat Rate Scheme.

You would need to file your VAT returns quarterly or yearly maybe. HMRC would mail you to remind you of an impending VAT filing you need to do. If you want to go for an accountant, which doesn't seems so from your case, there are loads of them. But ask for proper advice and reviews before you join one. Most of them charge quite heavily, even though knowing that your books wouldn't be that complicated compared to real companies.

Regarding charging for VAT, you cannot file VAT returns if you aren't charging VAT, your invoices would be missing VAT charged. You would have a lot of explaining to do to the taxman. Actually your client mayn't be that wary of paying VAT if you ask them to, because it would make them go against the law and I don't think they would allow it.

  • Thanks for the info.. all sounds perfectly logical to me, I'll guess I'll just have to see how things go - and treat businesses as businesses :) – Pebbl Oct 9 '12 at 12:31

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