Full time and self employed in UK/EU? What do I do with VAT?

For quite some time I have managed to hold a well paid full time job and in the extra time do allot of other work. These are clients that are happy to pay me cash and take the VAT hit on their expense because they are happy with my prices and the quality of my work.

It has come to a point where more and more people are coming to me willing to pay more but want a VAT Invoice. I have gone through the gov.uk site and tried to make sense of how I should deduct VAT.

Fair enough- They say I should not register for VAT if I earn less than 75k a year but I can if I want to self assess my self if I earn less than that. On a side note a friend of mine wants to partner up with me. He travels around Lithuania, Sweden and Poland and wants to also issue VAT Invoices and help fund a company.

On a note of finances I understand that who ever registrs for VAT is responsible to keep the books up to date and is fully liable for any penalties- I am just trying to find out how to do this properly but not full blown company.

1. If i register for VAT does that mean I have to assess absolutely everything my self, my full time job and all my freelance work?
2. Is it possible to run some sort of micro business in EU/UK and only record transactions for the "business" Should i/we register somewhere.
3. Can I issue VAT invoices for my friend so that a comapny in the EU Zone can get VAT refunds (I also read on gov.uk that a partnership can be simply formed by verbal agreement- any thing larger needs to be contractaully agreed)

If you're billing companies in other countries, you do not charge VAT at all, even if VAT registered. However, you do have to fill in a EU Sales form with the taxman every 3 months.

You do not have to add VAT onto the invoices, if you're not VAT registered you do not charge VAT and they cannot reclaim it - typically your customers do business with VAT-registered businesses who add the VAT on, so they can then claim that back against the VAT they've added to their invoices. If you didn't add the VAT on in the first place, there's no problem.

You can register for the limited VAT schemes, there's one where you pay a flat rate, as IT consultant, you'd pay 14.5% of your UK sales but.. you can add VAT onto all sales invoices (yay!). Of course, if all your sales are in the EU, you'll be paying 14.5% but adding 0% so it's not the best for that circumstance.

I think your best bet is to get an accountant to advise you, if you're turning over more than hobby money, it makes sense especially if you're getting into complicated stuff like EU sales.

BTW - IANAA, so get proper advice.

Your salary from your main job is taxed as personal income and therefore outside of the scope of VAT as long as you remain a PAYE employee.

You can set up a business (Ltd recommended) to run your other side projects through. You may elect to voluntarily register for VAT, although of course, once you do you'll have to complete quarterly returns (there are discount schemes available too, which may be advantageous, depending on your circumstances.)

Your clients probably want VAT invoices as that is what they are used to dealing with. You can issue them with non-VAT invoices (as long as you follow the EU invoicing directives) and assure them that you don't need to be VAT registered.

If your friend is partner and/or employee of your business, it is fine for them to issue invoices.