Sole trader to Ltd

[Highland Forestry]

That's a very good point dillsue.... the VAT flat rate scheme is something I am considering looking into also...I have a sneaky feeling that we wouldnt be much better off unfortunatley.

 

That prompts a phone call to my accountant in the morning me thinks!

[Stephen Blair]

put aside the finer details for a second, if you are always skint, in overdraft and spend money before you get it, DONT go ltd, if you are good at saving, can afford to keep a good bank balance while taking a small wage then ltd is going to suit you. if your profit is over 25k then there is a little loop hole that can make it worth while, BUT dont think an accountant is trying to make life easier for you, not saying he is a rogue, but he will certainly charge more for the service. As far as claiming stuff back, you can claim 100% of everything its not until you have to prove WHY that the problems begin, And going back to vat, if you go vat registered you can claim back 3 years of vat on assets.

[Doug Blease]

Hi SWB,

 

Never in an overdraft. Making a profit but not 25K, but have only been on a three day week since 2007. I guessed the accountant would give me a bigger bill for kmore work, but thats fair enough.

 

Are you still LTD?

[skyhuck]

If the majority of your customers are VAT registered (ie not domestic) then register for VAT voluntarily. You should be able to get on what is called the Flat Rate Scheme where you charge VAT at the normal rate (17.5%) but pay the VAT man and agreed percentage that encompasses any VAT that you would have claimed back if you operated VAT "normally". I charge 17.5% and pay 10%!!!!!!!! Nice little earner and simple, as I dont have to keep any records or receipts for VAT being claimed back. Check out the flat rate scheme on the HMRC web site and you can self assess the rate you pay the VAT man:biggrin:

 

You pay 10% of turnover not the VAT you have collected, BIG difference, if you sell lots of firewood at 5%, and you can only claim back VAT on capital purchases over £2K

 

I'm on the flat rate scheme and save around £800 a year and as you say its easer.

Edited January 7, 2010 by skyhuck

[Highland Forestry]

Taken from the HMRC website:

 

''You can generally reclaim VAT on goods you bought up to three years before you registered for VAT, and services you bought up to six months before you registered. Remember too that you may be able to backdate your VAT registration by up to three years.''

 

Could be handy for someone about to register for getting VAT back on saws, vehicles etc.

[Tom D]

I went LTD last year, still not reached end of first years trading. I think you can end up paying MORE tax as a LTD Co if you dont make enough profit as you can only take dividends out of a real profit, if you only make 10K profit the max dividend you can take is 10k less corporation tax...I think. Ask your accountant to explain this to you.

 

I went limited partly for tax reasons but also for the respectability it gives when going for bigger contracts. I will probably pay a similar amount of tax as before. Of course as the business grows It will pay off more and more.

[Steve Bullman]

You cant claim back VAT for 5 years by going Ltd.

 

When your turnover reaches the VAT threshold, your accountant should flag you up for VAT registration. After registration you can claim back VAT on all purchases for up to 6 months before the date of registration.

 

thats not entirely accurate. its 6 months for services...but for capital purchases you can claim back 2 years...maybe 3, but im pretty sure its 2

[Doug Blease]

Do you then pay VAT on the sales for those 2/3 years?

[Highland Forestry]

thats not entirely accurate. its 6 months for services...but for capital purchases you can claim back 2 years...maybe 3, but im pretty sure its 2

 

Yep, we're both right (kindof)

 

You can generally reclaim VAT on goods you bought up to three years before you registered for VAT, and services you bought up to six months before you registered. Remember too that you may be able to backdate your VAT registration by up to three years.

 

That's what it says on the HMRC site.

[Highland Forestry]

Do you then pay VAT on the sales for those 2/3 years?

 

You'll only pay VAT from the date of registration I believe Doug.