VAT Registered - Invoicing while still waiting for VAT Number

[Rita F]

We have just registered a company and as we expect that the turnover will exceed the VAT threshold, we registered for VAT immediately. I now realise that we are obliged to charge a daily consulting rate inclusive of VAT with appropriate notes referring to Paragraph 4.1 of Section 700/1 and issue a VAT invoice when a VAT number is issued.

Is this likely to cause severe delays in settlement of our invoices? And should we issue a cancellation credit note and reissue the invoice with VAT broken out and quoting the VAT number when issued.

I would appreciate any help and information on how to handle this.

Thanks in advance,
Rita F

[3pic]

Most people waiting a VAT number will issue a VAT inclusive amount (if fee is £100, invoice shows £117.50 - but not broken down as VAT). A statement of 'this is not a VAT invoice' would be suffice as well. This way you collect theamount for you and the VAT amount which you'll need to repay later on.

When VR number arrives, issue a VAT only invoice for the £17.50 on an official VAT invoice (with the new VAT number of course). You already have the £17.50 collected and in your bank and the raising of the VAT only invoice will put the transaction into your VAT account properly - so you can pay over on your next VAT return.

There shouldn't be any problems with your clients other than they'll be paying out the VAT (even though it's not actually VAT on your 1st invoice) and cannot reclaim that VAT until you issue the VAT invoice later down the line.

The alternative is to issue an invoice for £100.00 only with an understanding to raise the VAT element (£17.50) when you have a number (ie, in the contract you have with client, to charge VAT at a later point) - but this shifts the burden onto you and your client may disappear in the meantime leaving you with the VAT to pay so the first method is the better approach.