Sending a one-off invoice to a company for some freelance work. What do I do for VAT?

[JoeyJoeC]

I am sending an invoice for £800 to a travel company for some work I done on a holiday brochure. It is actually the first invoice with the completion invoice to be sent in the new year.

 

I am full-time employed now, but just done some work on the side.

 

I have used a template from online to make a quick invoice, but do I need to add anything for VAT?

[honeybee13]

Hello Joey.

 

I'm not an expert, but there's a minumum you earn before you need to charge VAT, I understand. I'll have a look online for you.

 

HB

[JoeyJoeC]

Hi honeybee,

 

Yep I'm sure there is a much higher amount I need to earn before I need to be VAT registered.

 

I put "N/A" next to the VAT on the invoice.

 

More importantly, do I need to pay tax on this one-off?

[honeybee13]

Here you go, HMRC and one from a student website that seems to have a clear explanation. I think it would still apply.

 

https://www.gov.uk/vat-registration/when-to-register

 

http://www.taxguideforstudents.org.uk/working/self-employed/do-i-have-to-pay-vat-if-i-am-self-employed

 

HB

[andydd]

I think the VAT limit is £84k per year so not near that yet.

 

Yes, you'd need to register for tax and then sign up to the online system, for the year april 2014-april 2015, you have to do it online and pay before jan 2016, sooner if you do a paper return.

 

Youd also need to sign up for NI, when you do self employed work, they set up a DD and you pay NI monthly but its quite low, not sure what happens in your case when you do one off or odd jobs, the system appears to be set up assuming that someone is self employed permantaly, its gets confusing if you do one offs or chop and change as ive found out.

 

Don't forget that when doing the tax return you can offset amounts for travel/food, etc so you pay less tax.

[JoeyJoeC]

As this is a one off. I don't want to register as self employed if I am going to do 1 job for a company. I have a full time job.

 

I once took part in a medical trial paying £2000+ and didn't pay tax on that. Nothing came of it.

 

I'll take my chances I think.

[honeybee13]

Hello again.

 

andydd knows more about this than I do, but it's definitely taxable. Could Joey declare it as income without going through the self-employed rigmarole?

 

HB

[andydd]

Im no expert..Im filling in my tax return and im totally confused !

 

There does appear to be no obvious provision for people who do one off jobs, whether its taxable would depend on what else you earnt in that period.

 

In theory it doesn't hurt to be registered with hmrc and fill it a tax return each year and if you havnt worked or all your other jobs have been PAYE then you wont owe any tax BUT the tax return process is somewhat confusing plus you'd still need to fill in all the PAYE jobs and to further confuse matters, the NI is done separately and this is just a basic amount paid monthly and taken out by DD.

 

Maybe there is a process to claim it but without declaring it/paying extra tax, you can for example get upto £4000 by subletting rooms etc without paying extra tax, Im not sure whether you are supposed to 'declare' this to the tax office or not.

[andydd]

Honeybee's links about just deal with VAT but there are other links that deal with Self Employment > http://www.taxguideforstudents.org.uk/working/self-employed/am-i-employed-self-employed-both-or-neither but there is no clear answer although it does say "One-off activities

 

You might be neither employed nor self-employed if you just receive casual amounts for doing something every now and then. For example, if on a one-off basis you made a wedding dress for a friend and she paid you for doing it, any profit on making the dress would be casual earnings and you would show this as 'any other income' on your tax return.

" but this doesn't help as most people just do PAYE and don't fill in a yearly tax return (unlike the US for example).

 

I myself ran into issues a few years back when unemployed, I was offered some short contract roles, these are nearly all on a self employed basis, but generally the job center assumes if you are FULLY self employed than you cant just sign on during lean periods, but this isn't what I was doing..I was just accepting some temp jobs that came along.

[JoeyJoeC]

Thanks Andy.

 

I have previously paid in cheques for £2000 from some medial trials I took part in, this was 5 or 6 years back and I've heard nothing about it. I'm sure £800 won't hurt.

[slick132]

Hi JJC,

 

Regardless of what's happened in the past, any income that you get from any sources should be declared to HMRC.

 

If they don't send you a tax return to complete, it is still your obligation to tell HMRC of income that you receive, from whatever sources.

 

You have no need, and no right, to charge VAT unless you are registered for VAT.

 

Edited December 19, 2014 by slick132
typo

[andydd]

I wonder whether there are limits or even guideines for this ?

 

What if someone makes a few hundred quid from ebay or a car boot sale (but doesn't do it as a business) ?. Should this be declared in theory ?

 

The trouble is that the HMRC process is very long and very confusing even if you end up owing nothing.

[slick132]

I wonder whether there are limits or even guideines for this ?

 

What if someone makes a few hundred quid from ebay or a car boot sale (but doesn't do it as a business) ?. Should this be declared in theory ?

 

The trouble is that the HMRC process is very long and very confusing even if you end up owing nothing.

 

Hi Andydd,

 

There's a selection of simple examples here - http://www.hmrc.gov.uk/guidance/selling/examples.htm

 

These examples deal with the selling of items at car boot fairs and internet auctions. There is often doubt about how and when a hobby becomes a business but it appears to hinge primarily on Intent and on Commerciality.

 

The onus is on the individual to declare income or a business to HMRC. If anyone is in doubt about whether they need to declare, they can seek guidance from HMRC or an accountant or tax specialist.

 

JoeyJoeyC should be in no doubt that the income for work done on the brochure is both declarable and taxable.

 

Income received from clinical trials is not taxable if the payments are for reasonable costs of participating in the trial, including costs of travel and subsistence. However, if the amount paid exceeded such reasonable costs, the income should be declared to HMRC under Self Assessment as a tax liability may arise.

 

The fact that you've banked cheques in the past and not been found out does NOT mean it's ok or safe to continue to hide income from HMRC.

 

[andydd]

Thanks that's useful although Id hazard a guess and says that 90% of the population are pretty unaware of this. This is no doubt due to the way the UK tax system operates, Im sure that the vast majority of people have or have only had PAYE jobs and therefore don't do anything as regards to paying tax every year, this is different to the US and I assume some other countries where EVERYONE fills in an annual tax return.

[slick132]

Agreed, and there are 2 ways the UK tax system catches folk out.

 

1. It is the taxpayer's responsibility to report any relevant income to HMRC within prescribed time limits, whether you are sent a tax return form to complete, or not.

 

2. Unlike criminal law, HMRC can and do assume your are guilty until proved innocent.

 

Ignorance of the tax rules aren't a defence accepted by HMRC.

 

[BazzaS]

As this is a one off. I don't want to register as self employed if I am going to do 1 job for a company. I have a full time job.

 

I once took part in a medical trial paying £2000+ and didn't pay tax on that. Nothing came of it.

 

I'll take my chances I think.

 

Just put aside the tax component, so you can pay it when you do your self-assesment tax return as per your other thread - http://www.consumeractiongroup.co.uk/forum/showthread.php?424023-Unregistered-from-self-assessment-twice-still-getting-letters&p=4530462&viewfull=1#post4530462

Edited December 20, 2014 by slick132
sorted link

[numbers666]

I suggest that you register for self employment. It's not that difficult to fill the form in and file. Add the figures from the P60 into employed earnings. Add the additional earnings in.

 

Many companies that contract work out to self employed persons - freelancers are more often requesting to see UTR numbers as part of their due diligence processes.

 

Not related to this topic, I can see a requirement for all taxpayers brought in to file a tax return yearly, to bring us in-line with other countries' methods.

 

Don't forget, as you file a self assessment, you can also claim back expenses of doing business, so could negate the tax due on self employed earnings anyway.

 

Travel costs ? Phone Costs ? Home Office ? IT costs ?

 

N

[andydd]

I suggest that you register for self employment. It's not that difficult to fill the form in and file. Add the figures from the P60 into employed earnings. Add the additional earnings in.

 

Many companies that contract work out to self employed persons - freelancers are more often requesting to see UTR numbers as part of their due diligence processes.

 

Not related to this topic, I can see a requirement for all taxpayers brought in to file a tax return yearly, to bring us in-line with other countries' methods.

 

Don't forget, as you file a self assessment, you can also claim back expenses of doing business, so could negate the tax due on self employed earnings anyway.

 

Travel costs ? Phone Costs ? Home Office ? IT costs ?

 

N

 

Indeed, although seeing as HMRC are struggling as it is god knows what would happen if they had another 20 million odd returns to deal with !

[ericsbrother]

for the invoice you put "VAT not applicable". This will stop the company trying to recalim the VAT that doesnt exist. Unless your turnover meets the VAT threshold I would advise against registering for VAT as it will be a headache that will be difficult to get rid of.

As for earnings that are not part of a PAYE scheme you should declare them by asking the tax office for the self employment registration forms. they will send you a bundle of stuff, most of which is not applicable but you will be givenn a reference number and receive a tax return formsome point in May/jun for the 2014-5 tax year. Fill out the short form version and dont forget to includer the info from your P60 when you get it. This wil occur later on so make sure you can pay any tax due. Dont opt in to class 4 NI contributions either, no point if employed.