VAT Registered

[Conorjm10]

Thanks for the replies! Some useful advice.

[Mr. Squirrel]

On 18/06/2020 at 14:41, maybelateron said:

I had to register for VAT 7 years ago due to increased turnover. My turnover is now beneath the threshold consistently, but I would not consider de registering - I agree with everything said so far in this thread. I was able to reclaim VAT on previous investments (but not day to day costs eg fuel/repairs), I think going back three years. Like the OP I am mainly domestic work biased. Customers who we have worked for before accept they have to pay VAT on my work, and I don't want customers who insist on avoiding VAT by "paying cash". If I sense a potential new customer may be this way inclined I quote them the total cost, inclusive of VAT, without pointing out my VAT status. If they look closely at my quote/letterhead they will see the VAT reg number at the bottom in small print, as this is a legal requirement to show it. If the potential new customer indicates that they know I am VAT registered and pushes for losing the VAT for cash, I play along with them, but quote the full amount including VAT then put it through the books. Try telling the cashier at B and Q you want a discount for cash?. If you are reliable, do quality work at a fair price to yourself and the customer you should be fine. Regarding submitting the quarterly VAT return this literally takes me no more than five minutes, as I run a simple to use accounting programme (Moneydance). Investing in better newer kit is also so much less painful when VAT registered!

Dragging this post up and hijacking it as I'm considering going VAT registered electively. 

 

I'm a fair way beneath the threshold, but my outgoings are fairly low. Most of my turnover therefore is profit, and I'm doing pretty ok for myself. I bought my van 3 years ago and forked out the VAT on that as I thought a couple of grand was better than being more expensive for domestics. I'm going to be replacing it in the next few weeks though, and am looking at paying a fair whack more in VAT this time round. Obviously once you take the VAT off the total cost vehicles get a whole lot more affordable... 

Maybelatron, I'm interested in your post as not many seem to be below the threshold but still VAT registered. All good for you though?

And any others who've found themselves in similar situations... I've got a good accountant and use, though don't fully understand, Sage, so I imagine with a little discipline the transition wouldn't be too painful? 

[maybelateron]

3 minutes ago, Mr. Squirrel said:

Maybelatron, I'm interested in your post as not many seem to be below the threshold but still VAT registered. All good for you though?

And any others who've found themselves in similar situations... I've got a good accountant and use, though don't fully understand, Sage, so I imagine with a little discipline the transition wouldn't be too painful? 

I use Moneydance for my accounting (as well as an accountant). It really is very simple indeed to do my VAT returns. 

[treevolution]

I'm on sage and found it very easy to use. 

 

I would not go VAT registered if you don't have to even if you could save the VAT on the new van. 

 

It always worth doing the maths if you don't claim the VAT it goes against your tax where as if you claim it back you then have to pay tax on it. 

 

You might find out the difference is not that great. 

 

You can also claim the VAT back on the van within 4 years if you do have to go VAT registered. 

[dig-dug-dan]

56 minutes ago, treevolution said:

I'm on sage and found it very easy to use. 

 

I would not go VAT registered if you don't have to even if you could save the VAT on the new van. 

 

It always worth doing the maths if you don't claim the VAT it goes against your tax where as if you claim it back you then have to pay tax on it. 

 

You might find out the difference is not that great. 

 

You can also claim the VAT back on the van within 4 years if you do have to go VAT registered. 

Eh? Pay tax on the vat you claim back??? It doesn't work like that!

[treevolution]

26 minutes ago, dig-dug-dan said:

Eh? Pay tax on the vat you claim back??? It doesn't work like that!

How does it work? 

 

From my understanding if you claim back say £2000 in VAT from buying a van then that amount would then show in your accounts as profit for which you would need to pay tax on. 

 

I could be mistaken but I'm sure VAT that you reclaim over the tax year is not tax free. 

[dig-dug-dan]

You are basically a tax collector when vat registered, and paying that tax to the government. Every invoice you send out, you record the  at you are charging. That's got to be paid to HMRC, but you then add up all the vat from stuff you can put against the business, and deduct that from the amount. Unless you have had a big purchase, you always owe them.

Let's say for example, you buy a pallet of bricks, and they cost 500 plus vat. You sell them to the customer, for let's say 1000 plus vat. You choose to make 500 on them. That's the only thing you have done all month, and it's time to send in the vat return. You have an invoice for 1200 all in,  but against that, 600 all in. 200 vat on the invoice, 100 on the receipt of bricks. You owe them 100. You are taxed on the profit you have just made on the bricks. £500.

If you were not vat registered, you buy the bricks for 600 Inc vat, but cannot claim this back. You sell them for 1200, again, Inc vat which you dont owe them. You are taxed on £600 profit.

Being vat registered really makes you dearer by 20% on your labour only

 

[Stephen Blair]

37 minutes ago, treevolution said:

How does it work? 

 

From my understanding if you claim back say £2000 in VAT from buying a van then that amount would then show in your accounts as profit for which you would need to pay tax on. 

 

I could be mistaken but I'm sure VAT that you reclaim over the tax year is not tax free. 

Get an accountant!

[dig-dug-dan]

34 minutes ago, Stephen Blair said:

Get an accountant!

What he said!

And to answer the van question, if the van is 20,000 plus vat. You have to pay the dealer 24,000, then claim 4000 back from hmrc. Its not income so its not taxed

[Mr. Squirrel]

6 hours ago, treevolution said:

I'm on sage and found it very easy to use. 

 

I would not go VAT registered if you don't have to even if you could save the VAT on the new van. 

 

It always worth doing the maths if you don't claim the VAT it goes against your tax where as if you claim it back you then have to pay tax on it. 

 

You might find out the difference is not that great. 

 

You can also claim the VAT back on the van within 4 years if you do have to go VAT registered. 

Why wait until then though? If I went vat registered now, claimed back what I could, plus the vat on a new vehicle, that could go straight back into the business so I wasn’t needing to hire in machinery as often, meaning more efficient and more cost effective. Winner, no? 
I gave a good number of long term clients who though largely domestic, I don’t think would have any issue. 
To me it seems a no brainier. I’d just be interested to hear any solid reasons not to. 

Edited August 30, 2020 by Mr. Squirrel