Vat - Here we go again....

[DNgroundworks]

Im currently not VAT registered, and i am finding it a struggle to stay under the threshold of 74k - as you can imagine. So my question is who has gone VAT registered and how has it affected your work, do you find that you win less work from private customers? Id say that 60% of my clients are private.

Do you drop your day rate as you can claim back VAT on expenses and therefore pass the saving on so you aren't that much more expensive to your average Joe?

Ive always thought that i am going to struggle to operate when inevitably i have to register due to private clients not wanting to pay VAT!

Im confused and i need help lol

[Pablo]

The benifits of being registered outweigh the negatives IMO. Firstly the business running costs become 20% cheaper but the main thing is that on a normal supply and install job it normally only adds 10% onto it because you have to pass the materials vat onto the client regardless. Don't drop your day rate that's the money you need to keep going the vat you get back is so you don't pay it twice. Because you pay 20% of your gross income to HMRC quarterly you need to claim back vat that you've already paid in materials and expenses don't offer a discount as a result of this or you'll be worse off.

[msh paving]

I'm VAT reg.,yes you always get people who don't wanna pay VAT but at the end off the day customers are paying the vat you pay,when i fill discovery or lorry up there is £25 vat on each tank full which comes back,any vat you pay you can reclaim,
yes domestic people dont wanna pay it but there is nothing much you can do about that unless its cash all the way......
MSH

[DNgroundworks]

Do you think that customers see VAT Registered businesses as more reputable/worthy etc as they are turning over more money and therefore doing more work?

My line of thought was as the running costs are less when vat'd you could counteract the impact to the customer by reducing the margin on your labour?

[DNgroundworks]

Yes but surely you dont want to be in a position where you have no work because the next contractor in the next village isnt vat registered and as a result is cheaper?

[Pablo]

Yes but surely you dont want to be in a position where you have no work because the next contractor in the next village isnt vat registered and as a result is cheaper?

Yes possibly but you'll also be able to tender for bigger works. I registered about 7 years ago and I found it cut out all the sh#tty wee jobs that you enivitably got because you were the cheapest but always ended up make nothing on. It definately gives peace of mind to clients on larger jobs. How come you're a marshalls contractor I thought all these lists required you to be registered by the way. If you find it doesn't work out for you then de-register and you'll be back where you are. Nothing ventured nothing gained.

[DNgroundworks]

Nope its not a requirement, i reckon the Bradstone one is pretty good, I have a dodgy feeling about the marshalls list and like you say i may not be on it for much longer..... well see. How do you end up tendering for bigger works though? The people offering the work dont keep tabs on whos registering for vat? And unless your getting turned down for the bigger works due to not being registered, how do you get your foot in the door? Nearly all my work is for your average Joe.

[London Stone Paving]

Nobody is going to tell you not to go VAT registered. If anyone does give then give them a wide berth because they aint got a clue what they are talking about.

There is only one small disadvantage of going VAT registered and that is that you will lose a few little jobs in the short term. the advantages are numerous:

Claim VAT back on materials

Take on commercial works

Better clientele

Convey more professional image to your customers

Just bite the bullet and get it done. After a few months you'll never look back

[DNgroundworks]

ok well it going to happen wether i like it or not anyway, im at the accounts first thing next wed so ill let you know, ive just worked out how much VAT costs me a month, talking thousands!!!

[dig dug dan]

dan, i agonised over the same thing myself, for the same reasons.
In the end it was the best thing i ever did. Whilst i did lose the odd small piddly job, i gained some big contracts, as most builders, schools etc claim back the vat, so it actually makes you cheaper.Someone who isnt vat registered wuoting for the same job has to include vat on materials which the end user cannot then claim back.
The other great thing is that you can go back 3 years on all tools and machinery purchased for the business, and get the vat back on them. i ended up with them paying me 4k when i registered!
as MSH says, vat saved in fuel is great too. Oh and if you lease your vehicle, each payment is vat recoverable.
its win win dan, and for the extra bit of paperwork, its worth it.
the thing is to be fastidious with your claiming and form filling, and don't put silly things through (like rabbit food like someone i knew did)
the other thing is to make sure keep track of the ongoing amount you owe in vat, so when it comes to the quarterly pay, you have enough in your account to pay them. I know some people who get a bit excited thinking they have more in their account than they should have, forgetting they owe it to customs!

[DNgroundworks]

How and why do the bigger contracts suddenly role in when you become vat registered if they werent there before?

[dig dug dan]

they don't, you have to put feelers out, write to councils, builders etc. Once they know you are a proper vat registered company, you will get a look in.
I was quoting for various builders and not getting the work. once i became registered, i won contracts. i got in woth some schools, who passed my details on to other schools
I have now worked at my primary school, and my senior school (under my old year head!). small world

[rab1]

Dan, only white van man is not registered.