Affiliate Marketing VAT Rules

[splishsplash]

Please share and discuss with a professional. Hope you will get the proper advice from them.

There's nothing to discuss with a professional.

He just needs to tell the affiliate network that he needs to charge them VAT, and that they can reclaim that. They're talking nonsense. You CANNOT make a VAT inclusive payment to a non-VAT registered sole trader.

 

[walletboost]

That doesn't really make sense what they're saying.

You cannot charge VAT because you are not registered for VAT. So your payment is not inclusive of VAT. It has no VAT on it. You are not charging them VAT.

What they're doing sounds borderline illegal.

They are paying a rate now, say £100, which to a non-VAT registered business is a payment of £100, and there's no VAT added because that business isn't VAT registered.

If you become VAT registered, then you have to charge them 20% VAT on the £100 payment. Then you pay £20 to the HMRC and they reclaim £20, thus paying you £80.

That makes NO sense.

You should charge them £120, £100 + £20 VAT after you are VAT registered. You send them a VAT invoice, and they reclaim that £20. They would not be out of pocket in any way. VAT is reclaimed each quarter.

That's like me hiring you as a web designer, and you say to me the job will be £1000 + VAT, and I say, no sorry, you need to pay the VAT out your £1000. How? That would make your job actually £833.33 and not £1000.

The problem is theirs. When you become VAT registered you have to charge VAT on your payment, and they can reclaim that VAT as a VAT registered company. They can't just reduce your payment AND claim back VAT!

Thanks for your reply.

Yes, it's a highly frustrating situation.

It is exactly as you describe - if I have to register for VAT, on the current terms, I'd have to start paying the VAT entirely out of my own pocket which would put me out of business.

I have spoken to my accountant about it at length and he is seeking further advice. I think for some accountants not used to dealing with digital services it can be a bit of minefield too but I do need the proper guidance on it.

Cheers though!

 

[walletboost]

There's nothing to discuss with a professional.

He just needs to tell the affiliate network that he needs to charge them VAT, and that they can reclaim that. They're talking nonsense. You CANNOT make a VAT inclusive payment to a non-VAT registered sole trader.

I've got no idea how they are currently accounting for my supply of business in their accounts. As you say they cannot make a VAT inclusive payment to a non-VAT registered sole trader.

 

[splishsplash]

I've got no idea how they are currently accounting for my supply of business in their accounts. As you say they cannot make a VAT inclusive payment to a non-VAT registered sole trader.

There's nothing stopping you from creating an LLC or c-corp. The c-corp is a bit expensive though.

I'd just create an LLC and pay your taxes as normal here. It's just a pass through entity. You don't even have to complicate matters by specifically disclosing it. Just take your payments from it and pay tax.

The hmrc aren't really bothered about small fish. Especially if you are paying tax. They're not going to try to claim you're doing this to avoid vat when you're an affiliate. Just keep it simple. Don't give up your business because of vat, that's for sure.

 

[Deleted member 657006]

There's nothing stopping you from creating an LLC or c-corp. The c-corp is a bit expensive though.

I'd just create an LLC and pay your taxes as normal here. It's just a pass through entity. You don't even have to complicate matters by specifically disclosing it. Just take your payments from it and pay tax.

The hmrc aren't really bothered about small fish. Especially if you are paying tax. They're not going to try to claim you're doing this to avoid vat when you're an affiliate. Just keep it simple. Don't give up your business because of vat, that's for sure.

Like to ask a question please.

If I pay for vat from using a service and get the receipt but not vat registered, does that vat come of my tax bill.

Or is it just ignored as a none vat registered person .

 

[splishsplash]

Like to ask a question please.

If I pay for vat from using a service and get the receipt but not vat registered, does that vat come of my tax bill.

Or is it just ignored as a none vat registered person .

Nope, you can't claim back VAT as a non-VAT registered entity. Keep them though, because you can backdate it when you do register. You can backdate everything within the past 4 years if you still have the receipt. You don't show the receipt when you do your VAT return of course, but if they audited you then you'd need receipts. They may audit you if you register and then suddenly claim back a shit ton of VAT from the past 4 years.

 

[Deleted member 657006]

Nope, you can't claim back VAT as a non-VAT registered entity. Keep them though, because you can backdate it when you do register. You can backdate everything within the past 4 years if you still have the receipt. You don't show the receipt when you do your VAT return of course, but if they audited you then you'd need receipts. They may audit you if you register and then suddenly claim back a shit ton of VAT from the past 4 years.

1 last question and thank you, if I have to replace carpet for the space I work within, is that none taxable .

 

[693840]

@splishsplash for mod

 

[splishsplash]

1 last question and thank you, if I have to replace carpet for the space I work within, is that none taxable .

It's generally going to be a capital purchase in most instances. You have £1mil per year AIA anyway for capital expenditure, so I wouldn't worry either way.

Unless your capital expenditure is in the millions then it's not going to be an issue.

 

[jimbodmit]

I have some questions about UK VAT and place of supply for services, and decided the best place to ask them was in @splishsplash 's unofficial ask-me-anything-about-UK-VAT thread!

First, to keep us all on the same page, and to help future readers: since the Brexit transition period ended, the EU is now treated the same as the rest of the world when it comes to the place of supply of services. So when I sell my services to an overseas business, the place of supply is in the country that business is based in, and it is outside of the scope of UK VAT regardless of whether it's in the EU or elsewhere. Section 2.1 from VAT Notice 741A states: "If the supply is in the UK it is subject to UK VAT. If the supply is in an EU member state or another country it is said to be ‘outside the scope’ of UK VAT."

My situation:

I run a UK company which is not VAT registered. I only work with overseas CPA networks (some in Germany, the rest in the US) and I have their offer walls embedded on my website. According to the general place of supply rules, the value of the services I sell the does not count towards my vatable turnover and I stay below the VAT threshold.

All fairly straightforward so far! I hope you can give me your opinions on the following @splishsplash :

Am I selling B2B Intermediary Services as described in Section 11 of Notice 741A?
Or am I selling B2B website advertising?

If it's the former, then the general place of supply rules apply, which is great.

However, if it's the latter, the "Use and Enjoyment" rules would come into place, as outlined in Section 13 of Notice 741A, because selling advertising space on a website counts as an "electronically supplied service".
And if that is case, I think it would mean that the earnings I make from UK conversions would be subject to UK VAT, since the service would effectively be used and enjoyed in the UK. I found some related discussion about this in this accounting thread.

I have a meeting with my accountant next week, but I'd really like to hear your thoughts on this since you seem to have some good experience with UK VAT and affiliate marketing.

 

[nitpicker]

For their part, they actually need nothing from you in this case.

An affiliate payment is by very definition ONLY b2b. It is NOT a consumer purchase, because you have done business to get paid.

They don't even need your VAT number. Everything is on you.

The revere charge mechanism applies. This means 1 of 2 things. (You said you're VAT registered, so 1 applies to you)

1) You are VAT registered, so you charge yourself VAT and claim it back at the same time. You're charging output VAT to yourself, and claiming back input VAT. It's zero-rated. Nothing to pay. You're only recording on your VAT return, which is going to be adding to the box for vat-able sales and adding to the box for vat-able purchases at your country's main rate.

I thought that the reverse charge applied to the affiliate network: they pay you so as an affiliate you invoice them with a mention "reverse charge", and they self account as you described (zero rated). Am I wrong?

I found your posts very interesting. I was also wondering about payment processors: lots of affiliate networks charge for payouts but don't include that in the invoices they generate on your behalf. How do you account for this as an affiliate?

ex: $1000 earnings showing on the invoice but in reality you receive $999. The $1 fee doesn't show up anywhere.
Do you have to write your own invoice with:
- payment for service: 1000
- subtotal: 1000
- processor fee: -1
- total: 999

Another related matter is the fee that Payment processors (non-EU) take from you. These show up on your statements but how do you account for these?
ex: $0.25 per transaction.
Is this in scope and if so is it zero rated?

This set of questions is for a business based in the EU.

 

[splishsplash]

I thought that the reverse charge applied to the affiliate network: they pay you so as an affiliate you invoice them with a mention "reverse charge", and they self account as you described (zero rated). Am I wrong?

I found your posts very interesting. I was also wondering about payment processors: lots of affiliate networks charge for payouts but don't include that in the invoices they generate on your behalf. How do you account for this as an affiliate?

ex: $1000 earnings showing on the invoice but in reality you receive $999. The $1 fee doesn't show up anywhere.
Do you have to write your own invoice with:
- payment for service: 1000
- subtotal: 1000
- processor fee: -1
- total: 999

Another related matter is the fee that Payment processors (non-EU) take from you. These show up on your statements but how do you account for these?
ex: $0.25 per transaction.
Is this in scope and if so is it zero rated?

This set of questions is for a business based in the EU.

Bank fees are not vatable.
You account for a 1000 income and 1 expenses(bank charges). This works out to a net 999

as for the main question.

affiliate network is like the client. They are the buyer.

They do not pay any vat. What they do depends on the circumstances.

Web design example again..

i hire you to do a web site for 1k.

i am the affiliate network.

you dont pay me.
If you are vat registered you invoice me for 1k + vat. Lets say its 20%.

I pay you 1200. You then pay 200 vat to the gov.

if we are both eu vat registered companies you send me a 1k reverse charge vat invoice. On my tax return i am now responsible for reporting the vat to my gov but theres nothing to pay since its reverse charge.

if i am outside the eu and you are vat registered in the eu then you dont charge me vat. But you need to charge yourself vat and claim it back at the same time. This is just a zeroing out on paper. No monies are exchanged with the gov.

if i am outside the eu and you are non vat registered inside then you dont charge me or yourself but the value of the “sale” is added to your total vatable sales which goes towards your threshold for vat registration.

if we are both outside the eu then we high fucking five, do a dance, make money and laugh at the poor fuckers inside the eu who are held to a stupidly complex anti-business system that favors big business, big law and big accounting but makes it incredibly complex for the small business owner to survive. Long live the USA Without it we would never have our amazing digital economy

 

[nitpicker]

Bank fees are not vatable.
You account for a 1000 income and 1 expenses(bank charges). This works out to a net 999

as for the main question.

affiliate network is like the client. They are the buyer.

They do not pay any vat. What they do depends on the circumstances.

Web design example again..

i hire you to do a web site for 1k.

i am the affiliate network.

you dont pay me.
If you are vat registered you invoice me for 1k + vat. Lets say its 20%.

I pay you 1200. You then pay 200 vat to the gov.

if we are both eu vat registered companies you send me a 1k reverse charge vat invoice. On my tax return i am now responsible for reporting the vat to my gov but theres nothing to pay since its reverse charge.

if i am outside the eu and you are vat registered in the eu then you dont charge me vat. But you need to charge yourself vat and claim it back at the same time. This is just a zeroing out on paper. No monies are exchanged with the gov.

if i am outside the eu and you are non vat registered inside then you dont charge me or yourself but the value of the “sale” is added to your total vatable sales which goes towards your threshold for vat registration.

if we are both outside the eu then we high fucking five, do a dance, make money and laugh at the poor fuckers inside the eu who are held to a stupidly complex anti-business system that favors big business, big law and big accounting but makes it incredibly complex for the small business owner to survive. Long live the USA Without it we would never have our amazing digital economy

Thanks for your reply. It's the most interesting thread on the topic!


On the bank fees point:

The processing fees charged by my processor for receiving money should be straight forward: like you said, not vatable. And I have a statement from them.

That’s not the whole story though: affiliate networks produce self-generated invoices (so you don’t have to send one to them). These invoices include “reverse charge” mention and show the amount due for services.

Nowhere do the processing fees on their end (for sending money to the affiliate) show up. Should it be another invoice where the biller is them?

I understand that bank fees are not vatable, in this case I think the affiliate network pays the fee to their processor and offset this amount (or part of it) by deducting it from the earnings.

In my example, the affiliate has an invoice for 1000 where he is the biller but he receives 999. No document shows -1.



On the main question:

I am not an expert but I think we might need clarification on the assertion that “if you are outside the eu and I am vat registered then I need to charge myself vat and claim it back”. I think this is the case when I purchase a service from you but in our scenario I am the affiliate selling you a service. What do you think?


As an example, considering a B2B operation located in Ireland (EU) and selling online services, I see 6 use cases and 2 considerations for each (amount on the invoice and what to enter in the VAT3 return) I’d love your opinion on the following use cases :


T1 is VAT on Sales
T2 is VAT on Purchases
ES1 is intra-eu supply of services
ES2 is intra-eu acquisition of services


#1 SALES to EU companies (ex:1000 euros of service)

on invoice: 1000EUR (no VAT;reverse charge apply)

on VAT3 return: T1: 0; T2: 0; ES1: 1000; ES2: 0

Supporting documentation:https://www.revenue.ie/en/vat/vat-on-services/when-is-vat-charged-on-services/vat-obligations-of-Irish-traders-supplying-services-to-business-customers-abroad.aspxhttps://www.revenue.ie/en/vat/vat-on-services/when-is-vat-charged-on-services/vat-obligations-of-Irish-traders-supplying-services-to-business-customers-abroad.aspx


#2 SALES to NON-EU companies (ex:1000 dollars of service)

on invoice: 1000$ (converted to EUR)

on VAT3 return: T1:0; T2:0; ES1:0;ES2:0

Supporting documentation:https://www.revenue.ie/en/vat/vat-on-services/when-is-vat-charged-on-services/vat-obligations-of-Irish-traders-supplying-services-to-business-customers-abroad.aspx

“In general, supplies of services to business customers outside the EU are not subject to VAT.”


#3 PURCHASE from EU companies (ex:100EUR)

on invoice: 100EUR

on VAT3 return: T1:23; T2:23; ES1:0; ES2:100

Supporting documentation:https://www.revenue.ie/en/vat/vat-on-services/exceptions-general-place-supply-rules-services/received-services/index.aspx

“Services received from abroad can be from the European Union (EU) and outside the EU. In these circumstances, you are regarded as the supplier of the services for VAT purposes.”


#4 PURCHASE from NON-EU companies (ex:100eur after conversion from USD)

on invoice: 100EUR

on VAT3 return: T1:23;T2:23;ES1:0;ES2:0

Supporting documentation:https://www.revenue.ie/en/vat/vat-on-services/exceptions-general-place-supply-rules-services/received-services/index.aspx

“Services received from abroad can be from the European Union (EU) and outside the EU. In these circumstances, you are regarded as the supplier of the services for VAT purposes.”


#5 SALES to Irish company (ex:1000EUR)

on invoice: 1230 EUR incl VAT

on VAT3 return: T1:230;T2:0;ES1:0;ES2:0


#6 PURCHASE from Irish company (ex:100EUR)

on invoice: 123 EUR incl VAT

on VAT3 return: T1:0;T2:23;ES1:0;ES2:0


Are these correct?

 

[splishsplash]

Thanks for your reply. It's the most interesting thread on the topic!


On the bank fees point:

The processing fees charged by my processor for receiving money should be straight forward: like you said, not vatable. And I have a statement from them.

That’s not the whole story though: affiliate networks produce self-generated invoices (so you don’t have to send one to them). These invoices include “reverse charge” mention and show the amount due for services.

Nowhere do the processing fees on their end (for sending money to the affiliate) show up. Should it be another invoice where the biller is them?

I understand that bank fees are not vatable, in this case I think the affiliate network pays the fee to their processor and offset this amount (or part of it) by deducting it from the earnings.

In my example, the affiliate has an invoice for 1000 where he is the biller but he receives 999. No document shows -1.

You're hugely overcomplicating this.

Invoicing for 1k, then receiving 999 has nothing to do with vat.

Even IF you had to charge, say 20% vat and pay that $200 vat, the bank fees wouldn't make ANY difference. They area totally separate cost of doing business.

But they are expensed against tax. If you pay a total of $5k in bank fees at the end of the year, and you make $500k profit, then you only pay tax on $495k.

The affiliate network isn't paying fees to the processor by deducting from your earnings. They are just paying you, and the bank takes their fee. The affiliate network has no control over this. All money transfer services take a fee. It's a cost of doing business.

Why would an affiliate network self invoice for bank processing fees?

If you do work for me, and I pay you money via paypal, it's not me deducting from your fee. It's paypal taking their cut. I don't get an invoice for paypal fees. That wouldn't make any sense.

There's no invoices for bank fees.

I don't know why you're making this so complicated though.

What's the problem you're trying to solve?

On the main question:

I am not an expert but I think we might need clarification on the assertion that “if you are outside the eu and I am vat registered then I need to charge myself vat and claim it back”. I think this is the case when I purchase a service from you but in our scenario I am the affiliate selling you a service. What do you think?

In your example 4.

“Services received from abroad can be from the European Union (EU) and outside the EU. In these circumstances, you are regarded as the supplier of the services for VAT purposes.”

Ie, when you buy from a non-EU company, YOU are the supplier for VAT, which means you charge yourself VAT, and claim it back at the same time. If you aren't VAT registered, then this just increases your "VAT-able sales" box which pushes you closer to the threshold.


I think at this stage you need an accountant. I don't mind giving some help, but I can't go over every possible scenario, and especially not for accounting in Ireland, which I know nothing about other than the general EU stuff.

I don't even see the point in going over every scenario here.

What *specific* problem do you have? You're asking every question and scenario variation under the sun ;-)

 

[nitpicker]

What's the problem you're trying to solve?

The problem is there is no financial document showing evidence of the outgoing processing fee.

To be clear: I am not talking about the fee that my bank charges me ($Y in the example below)) I am talking about the fee that their bank charges them ($X) :


affiliate network -> bank A -> bank B - $X is charged (statement presumable available to the affiliate network)

bank B -> affiliate -$Y for incoming payment shows on affiliate statement from bank B


Since the charge is paid by the affiliate network and offset by deducting the amount on my earnings (otherwise the amount received would match the invoice) it is not trivial to use in accounting and reconcile. Talking to an accountant as suggested, wouldn''t he ask for all records? there is no record for the payout fee. Without document, how do we know tax treatment?

In your example 4.

“Services received from abroad can be from the European Union (EU) and outside the EU. In these circumstances, you are regarded as the supplier of the services for VAT purposes.”

Ie, when you buy from a non-EU company, YOU are the supplier for VAT, which means you charge yourself VAT, and claim it back at the same time. If you aren't VAT registered, then this just increases your "VAT-able sales" box which pushes you closer to the threshold.

When you took an example of me (a web designer) selling services to you (affiliate network), you stated "if i am outside the eu and you are vat registered in the eu then you dont charge me vat. But you need to charge yourself vat and claim it back at the same time."

I think this is use case #2 (not #4) : selling to a non-eu companies. It looks like there is nothing to add in the vat return. It is out of scope. I could be wrong, that's what I wanted to know.

What *specific* problem do you have? You're asking every question and scenario variation under the sun ;-)

6 use cases is not that many and cover everything. In fact #5 and #6 are trivial and could have been omitted to make it concise, I just put them there so the list is complete.

The specific problem I am trying to solve is: making sure the logic is correct for those use cases.


Apologies if that was overwhelming or confusing. Thank you for reading me, you're probably the only one who did

 

[Deleted member 657006]

The problem is there is no financial document showing evidence of the outgoing processing fee.

To be clear: I am not talking about the fee that my bank charges me ($Y in the example below)) I am talking about the fee that their bank charges them ($X) :


affiliate network -> bank A -> bank B - $X is charged (statement presumable available to the affiliate network)

bank B -> affiliate -$Y for incoming payment shows on affiliate statement from bank B


Since the charge is paid by the affiliate network and offset by deducting the amount on my earnings (otherwise the amount received would match the invoice) it is not trivial to use in accounting and reconcile. Talking to an accountant as suggested, wouldn''t he ask for all records? there is no record for the payout fee. Without document, how do we know tax treatment?



When you took an example of me (a web designer) selling services to you (affiliate network), you stated "if i am outside the eu and you are vat registered in the eu then you dont charge me vat. But you need to charge yourself vat and claim it back at the same time."

I think this is use case #2 (not #4) : selling to a non-eu companies. It looks like there is nothing to add in the vat return. It is out of scope. I could be wrong, that's what I wanted to know.



6 use cases is not that many and cover everything. In fact #5 and #6 are trivial and could have been omitted to make it concise, I just put them there so the list is complete.

The specific problem I am trying to solve is: making sure the logic is correct for those use cases.


Apologies if that was overwhelming or confusing. Thank you for reading me, you're probably the only one who did

As what i understand and already stated, the total fee you collect from a afflicate after there banking fees or conversion fees you dont pay tax on.

The money that was used from bank charges or conversion are not refundable.

So if your owed £100 and it cost £5 to get the fees, you only pay tax on the £95.

If there from usa and your UK you don't pay vat, if your vat registered you pay your vat to your self if it a abroad vat transaction ) ( I think that correct)) what I getting to understand.

If your doing business with UK to UK then your invoice with the added vat% and you claim it back every taxing year.(( think it right)) both vat registered.

Thank you @splishsplash kind of you educating us all was very Intresting....

 

[Deleted member 657006]

There's nothing stopping you from creating an LLC or c-corp. The c-corp is a bit expensive though.

I'd just create an LLC and pay your taxes as normal here. It's just a pass through entity. You don't even have to complicate matters by specifically disclosing it. Just take your payments from it and pay tax.

The hmrc aren't really bothered about small fish. Especially if you are paying tax. They're not going to try to claim you're doing this to avoid vat when you're an affiliate. Just keep it simple. Don't give up your business because of vat, that's for sure.

Best advise ever loved it.
Stright to the point.

 

[splishsplash]

The problem is there is no financial document showing evidence of the outgoing processing fee.

This is just not a big deal.

Don't stress over financial evidence

Keep evidence of big purchases. The rest can easily be put together in the rare case of an audit. You only have to be stringent over financial evidence when you are a cash business, because really you're fucked if you're audited and don't have records. For digital.. Everything is digital. Everything is trackable. If you pay $5k for some service, and you don't have an invoice for it you aren't going to get in trouble. You can request the invoice at a later date, or you can show the payment to their bank. It's not like a $5k cash payment without an invoice.

And you're talking about a TINY fee!

so, to sum up, this becomes an issue if you are audited, and you are worried about a $10-$20 bank fee discrepancy where you don't have documentation, BUT, you DO have documentation. You just show ok, $1k invoice, received $990.

 

[nitpicker]

This is just not a big deal.

Don't stress over financial evidence

Keep evidence of big purchases. The rest can easily be put together in the rare case of an audit. You only have to be stringent over financial evidence when you are a cash business, because really you're fucked if you're audited and don't have records. For digital.. Everything is digital. Everything is trackable. If you pay $5k for some service, and you don't have an invoice for it you aren't going to get in trouble. You can request the invoice at a later date, or you can show the payment to their bank. It's not like a $5k cash payment without an invoice.

And you're talking about a TINY fee!

so, to sum up, this becomes an issue if you are audited, and you are worried about a $10-$20 bank fee discrepancy where you don't have documentation, BUT, you DO have documentation. You just show ok, $1k invoice, received $990.

Very well. Thanks for your insight.


I have another question. You might think I am over complicating things but I think it is an important point. I’d like some insight.

We took the example of a web designer selling services but affiliate networks have a few specifics:

billing date

Some aff programs generate an invoice before sending a payment (date on invoices), some will generate invoices even if there is no payment (minimum payout threshold not met), others don’t produce invoices at all (just online stats). Some networks pay almost immediately after a billing period ends other have a 3 weeks delay.


Threshold for payment

they don’t send money until you reach minimum earnings. This can have an effect on VAT because accrual accounting takes date of earnings (invoice date) rather than date of payment. What if it takes 3 years to reach the minimum, you account for vat on money you may never see? Is the solution to use cash accounting instead of accrual?



=> Problem to be solved: what date do you use for VAT accounting and what accounting method (accrual vs cash) given the above constraints?

 

[splishsplash]

I have another question. You might think I am over complicating things but I think it is an important point. I’d like some insight.

Hehe..

We took the example of a web designer selling services but affiliate networks have a few specifics:

billing date

Some aff programs generate an invoice before sending a payment (date on invoices), some will generate invoices even if there is no payment (minimum payout threshold not met), others don’t produce invoices at all (just online stats). Some networks pay almost immediately after a billing period ends other have a 3 weeks delay.


Threshold for payment

they don’t send money until you reach minimum earnings. This can have an effect on VAT because accrual accounting takes date of earnings (invoice date) rather than date of payment. What if it takes 3 years to reach the minimum, you account for vat on money you may never see? Is the solution to use cash accounting instead of accrual?

=> Problem to be solved: what date do you use for VAT accounting and what accounting method (accrual vs cash) given the above constraints?

Let me start with my mini-rant.

Again.. You are really over-worrying

You don't need invoices.

For what? Do you really think you're going to have a DEEP audit done on you where they question the legitimacy of your affiliate payments and don't accept just a wire transfer or paypal from the affiliate company as sufficient?

Do you really think you'd get an audit if one of your problems is you're not reaching the minimum? Why would any gov waste resources on this? Send a tax inspector to look through your books and question everything so they can get potentially an extra 50 euros of tax?

The solution is definitely not to use cash accounting, which makes things really annoying as you grow and just harder to deal with, plus i don't think you physically can opt for cash based accounting if you're over a certain turnover.

Ok, now that's out the way, I will answer you.

First of all, you say they're "self-generating an invoice".

Who cares. They are not the supplier, and you the customer.

You are the supplier, and THEY are the customer.

They can generate whatever they want.. They're only doing that because it doesn't matter if you send me an invoice with your name/address, or I generate one with your name/address.

You actually don't ever really need a company to generate you an invoice. You can always self-generate. The only thing you need is their billing details. I wouldn't do this with big companies though, but they'll always send invoices. But for your contractors etc, you don't need invoices from them. You can self-generate.

If you were audited and the gov sent a 10 man team to check your books... (hehe)

You would just generate the invoice for whatever date you want.

But if you're REALLY worried about the mismatch in dates on the vat, and they submit their vat return 6 months before you because you got your payment later. (This doesn't matter because there's no dates for VAT. It's only totals in boxes. It's only if they get a VAT audit lol)


Then there's nothing stopping you putting through the reverse charge totals in the same quarter as they've generated their invoice.

There's never going to be anything to pay.

The only case you'd have to pay something is if you were vat registered in the same country as them. At least in the UK, in that case you'd charge VAT, but they would need to physically PAY you VAT. If they didn't, then you could report them to the HMRC for refusing to pay VAT.