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Posted Tue, 24 Nov 2020 19:27:38 GMT by Kevin Eldred
I started a new business supplying Aluminum Glazing products to residential customers. It is doing well and we are going to hit the VAT Threshold after just a couple of months. The problem is.. On a successful sale we create an order of intent that the customer signs. This is a contract stating that they except the terms and price and commit to the sale(subject to a survey when applicable). This is broken down into a number pf payments. 1, Survey fee to measure up, check site and produce Architectural drawings. This is non refundable and only charged when required. 2, Deposit payment of 50% of the contact. (we pay this over to our supplier to begin Manufacture of products. (these are always bespoke items so are non re-sellable). 3. Interim payment of 40% prior to the delivery of the goods. (we use some of this to pay the balance owed to the manufacturer for them to release goods to us). 4. final 10% on completion of the installation of the goods. The process from contract to delivery and installation of goods can be 9 to 14 weeks. This means that when we register for VAT some customers will have agreed a price and have a contact ex-VAT but with 1 or 2 stage payments still to make. We obviously cant ask them to pay VAT on subsequent payments for contracts signed prior to registration. or does VAT only need to be applied to contracts signed after registration. Surely we don't have to stop trading for 14 weeks to avoid the overlap. I would be grateful if anyone could offer advise.
Posted Fri, 27 Nov 2020 11:19:10 GMT by HMRC Admin 10
Hi

When you register for VAT you will only have to account for VAT from your effective date of VAT registration.

I would advise to have a look at our rules on tax points, these are found in VAT notice 700 section 14.

Whether you need to account for VAT on sales will depend on when the tax point is.

If the tax point if prior to your date of VAT registration, then you will not have to account for VAT on these sales.

If you determine that that the tax point is after your date of registration, then you will need to account for VAT on those sales.

It will be a business decision if you choose to say the price is inclusive of VAT or add VAT on top of the price that you have advised the customer of:

Time of supply (tax point) rules

Thankyou.

Regards.

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