Q: I have not been charging VAT on my product and services, I recently got registered for VAT I have been billed for 3 months yet I have only been charging VAT for 3 weeks. What can I do?
Oct 11 2005
Answered by: Clive Lewis Ask a question
It is not clear how you “have been billed for 3 months VAT yet have only been charging VAT for 3 weeks”. I take this to mean that you were late registering for VAT and received an estimated assessment from HM Revenue and Customs. There is a legal issue and some practical issues in considering whether the VAT is recoverable. The legal issue concerns the terms in your contract covering the period (2 months and 1 week) when you should have been charging VAT on your sales. If the contract included the clause regarding the selling price “the price plus any VAT which may be chargeable” you are entitled to attempt to recover the VAT on the sale. If the clause did not include that phrase you cannot recover the VAT you have been levied by HM Revenue and Customs. The practical issue is primarily to do with knowing which sales have been subject to the VAT levy and which customers to invoice.
Whatever happens the estimated assessment from H M Revenue and Customs will be “put aside” when you eventually submit your VAT return for the first period, by which time you should be in a position to know whether the VAT on the sales in the 2 month 1 week period is recoverable. If is not recoverable the VAT estimated assessment will stand for the first 2 months and 1 week together with the actual VAT outputs (VAT on sales) of the period up to the end of the first VAT period.
Footnote
Businesses must register for VAT if their turnover for the previous 12 months exceeds the threshold (basically, a turnover of £60,000 pa applicable from 1 April 2005). Businesses with a lower turnover can “voluntary register” (no lower limit). Once you register you will be given a VAT registration number and notified of the registration date from which VAT should be charged on your supplies. The registration date is usually the first day of the second month after your taxable supplies went over the registration threshold. If you have been late in registering for VAT the registration date may have already passed and you will be issued an estimated assessment by HM Revenue and Customs.
Two Public Notices which offer relevant advice are:
Notice 700/1 - Should I be registered for VAT
Notice 700 - The VAT Guide
These can be located at www.hmrc.gov.uk
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