Hi there,
I am in a difficult situation and any advice and info will be much appreciated.
I am a flat rate VAT registered contractor and I have 7 non -VAT registered subcontractors working for my company.
Last month one of these subcontractors decided to voluntary register for VAT. He did a back dated registration for one year back.
As much as this is not my problem and I do not mind paying him VAT going forward, today he sent me an invoice for the last year for the value of the VAT I owe him!!!
He now wants me to pay him the VAT for the last year which I find appalling and rather frustrating.
This will have an enormous impact on my cash flow and makes me think what would happen if all my subcontractors decide to go down that route of backdated VAT registration???
Moreover, I have the suspicion that if I pay him the VAT he might leave the country and never pay the VAT to HMRC.
Does anyone here know what my obligations are and what the law says about these sort of situations? Can I refuse to pay him the VAT and what be the consequences for me?
And another thing, what happens in a situation when the contractor is flat rate registered ( me) and the subcontractor is standard rate registered?
Would I lose any money when paying them a higher rate VAT?
Thank you!!!
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