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Reply With QuoteYour best ringing the tax office but what what i have found out through various sources is
If you are none vat registered and your Commissions and your PPC Spend add up to more than the VAT threshold you will indeed need to register for vat.
Bit confused by various vat registration issues and was wondering if someone else knew where I will stand..
Im a sole trader / not vat-reg'd.
Most of my commission is vat exempt so take the following example:
Vat exempt comms: £50k
Vatable comms: £35k
Total comms received: £85k
From reading on HMRC I wouldn't need to register for VAT in this instance, would I need to inform them about it though?
Lets' add PPC costs into the mix, £30k for a 12 month period (not there yet but if trend continues I will be). Google currently dont charge VAT as Ive told them I use it for business purposes and from reading past topics Ill need to add the spend onto my received commission as no vat is payable.
Vat exempt comms: £50k
Vatable comms: £35k
Total comms received: £85k
PPC expenses: £30k
So, non-taxable supplies are still below threshold but my PPC plus vatable comms are £65k = I'd need to register for VAT here?
I'd then need to self assess 17.5% on the extra £5k and assuming the numbers stay consistent every year from now I'd have an extra 17.5% added to my expenses or will that remain the same ie. no tax payable?
My vatable comms will have the 17.5% added once I get registered so that's no problem, but what I don't get is how i deal with Adwords and the tax situation, is there none as it's a service and not a product so in effect I'd not lose any money via extra tax and so nothing changes?
Your best ringing the tax office but what what i have found out through various sources is
If you are none vat registered and your Commissions and your PPC Spend add up to more than the VAT threshold you will indeed need to register for vat.
Ok thanks. Im wondering if I become vat registered will that mean my PPC will effectively have 17.5% added onto it? Or perhaps there's no vat payable on the PPC services whatever your situation if it's for business purposes inc. being registered. How I currently seem to see it is..Originally Posted by Bod
Non vat-reg = no vat payable (+refund) and you simply add it to your income totals.
vat-reg = no vat payable as google don't pay you the vat to pay back to hmrc.
Also the PPC spend gets added to both the income and expenses. This seems more confusing than it should be, everyone and their accountant has conflicting ideas yet surely there's a definitive answer after all this time from the tax office?
Mind boggling.
I would also love a definitive answer to this one.
I haven't yet responded to the question "Are you using Adwords for business purposes?" and will probably become VAT registered in the next month or 2.
James
This is something I would like to know about too. Was happily using Adwords for years, am self employed and not VAT registered.
Adword system asked me to select if I was a business or individual, and then got an email weeks later saying they wouldn't be charging VAT from then onwards.
I asked them about it and they just pointed me at the FAQ page which didn't answer anything so haven't used Adwords since.
Wish I could just switch the option back to individual but it's disabled. Might just set up a new account.
VAT makes things so confusing. Luckily almost all my sales are made through SEO at the moment, so it's not a problem.
I don't see why you would add your commissions and PPC spend together to work out if you're over the threshold? We're working out turnover, which is simply the total earned by a business before deducting any expenses, right? So why would you add your expenses and income together to get your turnover?
Surely it's simply if your total commissions (before deducting expenses) are over £61,000 (as of 1st April) then you need to register for VAT?
I am not currently VAT registered, but I queried the Google VAT situation with HMRC by email as follows (question one was specifically about the VAT refund paid to me by Google):
1. Will I be liable to pay UK VAT on any refund I receive in respect of the Irish VAT I have paid, even if I am not VAT registered in the UK?
2. Going forward, if I am not VAT registered, but Google are no longer charging me VAT and I need to self-assess the VAT due, will there be any VAT due to be paid if I am not VAT registered in the UK?
3. I understand that the amount Google charge me for advertising (excluding VAT going forward) will need to be taken into account in determining when and if I reach the threshold of £60,000. So hypothetically for example, if my commission is £40,000 and Google charge me £21,000 for my advertisements (totalling £61,000), I would be over the threshold and would need to register. Please could you confirm if this is the correct understanding?
4. At the time I reach the threshold and register, I assume that for VAT self-assessment purposes, I would add 17.5% onto the amount Google charge me for advertising and this would be the amount of VAT output tax due to HM Revenue & Customs on the Google advertising. Is that the correct understanding?
The email response I received from HMRC was as follows:
I can confirm that the advertising service you receive from Google is regarded as an electronically supplied service as detailed at Item 3 of VAT Information Sheet 04/03 - Electronically supplied services: a guide to interpretation.
VAT Information Sheet 01/03 - Electronically supplied services and broadcasting services: New EU place of supply rules - paragraph 4.1 states that the place of supply is "where the customer belongs when electronically supplied services are received by a customer who belongs in a Member State, but in a different country (EU or non-EU) to the supplier, and who receives the supply for business purposes" therefore Google are applying the correct VAT treatment as the place of supply is the UK where you belong.
Paragraph 9.1 goes on to say "if you are a UK customer receiving these services for business purposes, you will be required to account for VAT using the reverse charge procedure if you receive the services from an overseas supplier (except, in certain circumstances, where they are used and enjoyed outside the EC)".
However as you are not VAT registered you should follow the guidance at the same paragraph which states "if you are not already registered for UK VAT, the value of any broadcasting or electronically supplied services supplied to you in the UK, for use in your business, by a supplier outside the UK, must be added to the value of your own taxable supplies in determining whether you should be registered".
Therefore with reference to the above the answer to each of your questions is:
1. You will only be liable to pay UK VAT on the refund you receive if, after taking the value of the supplies into account in your taxable turnover, you are liable to register for VAT from an earlier date.
2. You will only be liable to pay UK VAT once you are registered for VAT.
3. Your understanding is correct in that you will need to take into account the value of the supplies from Google. I must stress that you will need to go back to the date of the refund from Google to look at this to ensure you have not exceeded the registration threshold of £60,000.
4. Your understanding is again correct, you would apply 17.5% to the value of the supply from Google and this would be the amount to be paid to HMRC as output tax. Further guidance on the reverse charge can be found in public notice 741 Place of supply of services section 15.
All our public notices and VAT Information Sheets can be accessed on www.hmrc.gov.uk.
I hope this helps, but if you're still unsure, I would contact HMRC directly by phone or email.
Interesting, thanks for that. I guess my understanding of "turnover" isn't quite right or as simple as I first thought.
Hi everyone - I went through determining the right way to handle VAT a few years ago .
These are the steps I take and how I fill in the boxes.
Firsly I look to my business bank statements and add up all the amounts deducted by Google. These obviously do not have VAT added to them because I told Google I was VAT registered.
Once I have this figure I times it by 0.175 this gives me the number I need to put in Box 1. For example if I have been paid by CJ, I need to look at their self billing invoices to see how much I also need to add to this figure. In fact if you have been invoicing work during the quarter you need to add the VAT you have received as well.
Box 2 is zero
Box 3 is the sum of Box 1 and 2
Box 4 is basically VAT you are basically claiming back, so this includes the Adwords total times 0.175 as inputted in Box 1. If for example I bought some computer equipment I would add the VAT here. Also your broadband supplier will have added VAT to your bill so I usually add half here because the other half I say is for personal use.
Box 5 is the difference between Box 3 and Box 4. If it is a negative number you need to send the VAT man this amount, if it is positive you will receive that amount within 2 weeks of submitting your return.
Box 6 is the total amount of revenue received so here you would but the CJ commission minus the VAT. Plus you put the total amount you have spent on Adwords.
Box 7 is Box 6 plus all things like computer equipment, mobile phone , boardband but minus the VAT.
Hope this helps.
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