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Where Taxpayers and Advisers Meet

Sole Trader that uses Sub Contractors. Is VAT payable

jakeykev
Posts:1
Joined:Tue Feb 28, 2017 7:52 pm
Sole Trader that uses Sub Contractors. Is VAT payable

Postby jakeykev » Tue Feb 28, 2017 8:00 pm

Hello everybody,
I run a dog walking business in UK. I'm registered as a self employed sole trader. The business turnover is 50K. I use 3 sub contractors to deliver the dog walking service. The sub contractors are all self employed and manage their own tax returns.

One of the sub contractors has informed me today that she is VAT registered through her other business work and plans to invoice me for the VAT on the cost of the Service she has provided for me for last six months. The sub contractor is named as the individual on my contract with them rather than any limited company.

I have not charged VAT to the business clients as I am not VAT registered.

So, my question is whether the sub contractor is correct in raising invoices for me to pay them total + VAT and whether I am liable for the VAT to HMRC.

Thanks.

greybags1
Posts:47
Joined:Tue Jan 31, 2017 10:41 am
Location:NE Scotland

Re: Sole Trader that uses Sub Contractors. Is VAT payable

Postby greybags1 » Wed Mar 01, 2017 3:42 pm

Firstly, you need to ascertain in what context this subcontractor is registered re her other business work. If she is a sole trader then the VAT registration is with her personally and VAT is chargeable. However, if she is in partnership with another person or is operating as a limited company then I would say no VAT should be charged since the agreement is, as you say, with her personally and not with one of these other entities. If the agreement is subsequently changed then VAT may then be due going forward.

If she is registered for VAT personally, as for historic VAT, unless mention is made of VAT in your agreement/at the outset and she has just failed to invoice you for this historic VAT (ie missed off on the invoices already raised by her and paid by you) then you are not under any obligation to pay the historic VAT. It is assumed the amount you have paid is inclusive of VAT.

Going forward you will need to pay her the VAT inclusive amount.

You are not liable to HMRC for VAT, she is. You unfortunately have an increased cost since you are not VAT registered yourself and unable to claim the input VAT on her invoices.


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