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.