Quick VAT question and I'm sure many of you will be able to give me a steer on this.
I'm about to retrain as a sparks and go self employed, can anyone give a me a simple viewpoint on why I should or should not be VAT registered.
What things should I worry about and what are the upsides?
Vat advice
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henpecked
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London Stone Paving
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If your business reaches a turnover of £70,000 or is expected to do so in the next 30 days you legally have to become VAT registered. So if your business is reasonably succesful the decision will be taken out of your hands. Or you can register for VAT voluntarily if you so wish.
By registering for VAT you are in effect becoming a mini tax collecter for the government because for every job you invoice you have to add 20% VAT to the total. As a reward for being this mini tax collecter the government will refund the VAT that you have paid on any of your business costs.
You will then have to pay the VAT you collect, to the government on a quarterly basis minus the amount of VAT you have spent on your business costs.
Are your customers going to be commercial or domestic?
If your customers are going to be domestic then it might be an idea not to register for VAT initially as it will help you to keep your prices lower while you build your business. The downside to this is you will not be able to claim back the VAT you will be paying on your business expenses.
On the other hand if your clients are commercial then they will be registered for VAT themselves and you being VAT registered will not effect how competitive you are on price.
If you are VAT registered then you MUST pay the VAT bill on time, or they will come down on you like a ton of bricks. As far as the VAT man is concerned you are simply storing that money for him, they will except no excuses for late payment.
If your business is more domestic my advice would be not to register until you have to. But if you are business to business you should register straight away
By registering for VAT you are in effect becoming a mini tax collecter for the government because for every job you invoice you have to add 20% VAT to the total. As a reward for being this mini tax collecter the government will refund the VAT that you have paid on any of your business costs.
You will then have to pay the VAT you collect, to the government on a quarterly basis minus the amount of VAT you have spent on your business costs.
Are your customers going to be commercial or domestic?
If your customers are going to be domestic then it might be an idea not to register for VAT initially as it will help you to keep your prices lower while you build your business. The downside to this is you will not be able to claim back the VAT you will be paying on your business expenses.
On the other hand if your clients are commercial then they will be registered for VAT themselves and you being VAT registered will not effect how competitive you are on price.
If you are VAT registered then you MUST pay the VAT bill on time, or they will come down on you like a ton of bricks. As far as the VAT man is concerned you are simply storing that money for him, they will except no excuses for late payment.
If your business is more domestic my advice would be not to register until you have to. But if you are business to business you should register straight away
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GB_Groundworks
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its £68k this year i think, depends how you work our sparks are but they are paid through the cis scheme where we deduct their tax anyway and we buy all the wholesail goods but if you are going to be buying wholesale electrics and supplying them to domestic customers be a good idea to be vat reqistered but means more paper work and 20% more expensive on jobs
Giles
Groundworks and Equestrian specialists, prestige new builds and sports pitches. High Peak, Cheshire, South Yorkshire area.
http://www.gbgroundworks.com
Groundworks and Equestrian specialists, prestige new builds and sports pitches. High Peak, Cheshire, South Yorkshire area.
http://www.gbgroundworks.com
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Trevski
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Now the VAT bit starts to make some sense to me, the CIS bit and the personal taxation when self employed is a whole other area of confusion.
Sooo in theory....I could set up Company A which is registered and Company B not registered. Buy my start up stuff, tools and the like through A and claim the VAT back.
Do domestic work through B and bigger commercial jobs through A so long as B does not go over the threshold. I would also have to pass on the VAT to the customer when buying bits for a job that has VAT on them but can't claim back. I also assume a big no no is buying all bits through A to use for B.
Currently I'm PAYE so NI and tax is deducted at source and I understand that bit. What I don't get my head around is how much tax and NI I have to pay when self employed on earnings (is that on nett profit per month?) (do I have to set myself a wage and get taxed on that instead?) let alone sole trader versus Ltd.
The Revenue website just confuses the hell out of me and I need to understand it all before I make the leap.
Sooo in theory....I could set up Company A which is registered and Company B not registered. Buy my start up stuff, tools and the like through A and claim the VAT back.
Do domestic work through B and bigger commercial jobs through A so long as B does not go over the threshold. I would also have to pass on the VAT to the customer when buying bits for a job that has VAT on them but can't claim back. I also assume a big no no is buying all bits through A to use for B.
Currently I'm PAYE so NI and tax is deducted at source and I understand that bit. What I don't get my head around is how much tax and NI I have to pay when self employed on earnings (is that on nett profit per month?) (do I have to set myself a wage and get taxed on that instead?) let alone sole trader versus Ltd.
The Revenue website just confuses the hell out of me and I need to understand it all before I make the leap.
I'm a pessimist, by that I mean an optimist with experience.
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lutonlagerlout
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Ted
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I am exporting stuff and trying to claim my VAT back and I have to say I have found HMRC thoroughly unhelpful and their helpline attendants misleading.
The advice I now need (re exports) is perhaps a little more out of the ordinary than that which you need, but I know that when I worked in the UK previously if I had been more savvy I would have paid them less.
I have just forked out for some fancy accountants and within five minutes they had spotted GBP5Ks worth of expenditure where I thought I was unable to reclaim the VAT but according to them, apparently I am able to.
It seems they are going to more than pay for themselves... I would advise getting some professional advice as soon as you can afford to as they should save you money and free up your time...
I wish I had employed an accountant years ago. Your accountant is on your side... HMRC's helpline is on the other!
The advice I now need (re exports) is perhaps a little more out of the ordinary than that which you need, but I know that when I worked in the UK previously if I had been more savvy I would have paid them less.
I have just forked out for some fancy accountants and within five minutes they had spotted GBP5Ks worth of expenditure where I thought I was unable to reclaim the VAT but according to them, apparently I am able to.
It seems they are going to more than pay for themselves... I would advise getting some professional advice as soon as you can afford to as they should save you money and free up your time...
I wish I had employed an accountant years ago. Your accountant is on your side... HMRC's helpline is on the other!