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Where Taxpayers and Advisers Meet

Do I need to be VAT registered?

silly-putty-3000
Posts:5
Joined:Tue Aug 16, 2022 10:15 am
Do I need to be VAT registered?

Postby silly-putty-3000 » Tue Aug 16, 2022 10:19 am

Hi,

I'm a contract developer currently contracted with with a business in Canada. This is my sole contract at this time. According to the VAT regulations, I should register for VAT if my VAT taxable turnover is greater than £85k.

My understanding is that because the business is based in Canada, they're VAT exempt and in turn the income from this contract doesn't contribute towards that £85k figure.

Is my understanding correct?

Kind Regards,
Me.

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: Do I need to be VAT registered?

Postby les35 » Wed Aug 17, 2022 12:41 pm

Your conclusion is correct!
Since your client is a business based outside the UK, the 'Place of Supply' rules mean your sales are deemed to take place in Canada. You should check the Canada tax rules to make sure you are not liable to register there.
But, you are entitled to register for VAT in the UK. This will allow you to claim VAT back on any costs incurred in the UK.

silly-putty-3000
Posts:5
Joined:Tue Aug 16, 2022 10:15 am

Re: Do I need to be VAT registered?

Postby silly-putty-3000 » Wed Aug 17, 2022 12:53 pm

That's great - thanks very much :)

silly-putty-3000
Posts:5
Joined:Tue Aug 16, 2022 10:15 am

Re: Do I need to be VAT registered?

Postby silly-putty-3000 » Wed Aug 17, 2022 1:10 pm

Are there any downsides to registering for VAT when I don't technically need to?

I know the immediate benefit is that any computer supplies I purchase means I can save the VAT. I also understand that if I do any work here in the UK, I would need to charge VAT.

Is there anything else to be wary of?

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: Do I need to be VAT registered?

Postby les35 » Wed Aug 17, 2022 1:28 pm

The main risk, as you say, is that you would have to charge VAT to UK customers. That is no problem if they are corporates.

You might also consider using the Annual Accounting scheme if your input tax is low and you could stand the cashflow loss. That would mean a single VAT Return, ideally coinciding with your accounting year. I have come across a few small businesses doing this, and submitting a single 'repayment' Return at each year end. This minimises administration and you get a cheque back after the year end.


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