tips from business owners!

[muldonach]

golly, i never really thought of it like that but your right, a Vat reg company should be able to run cheaper then non reg so the added vat may not deter customers, I always plodded along thinking Il aways outprice a vat reg company, i may be rather wrong.

 

Take two companies same kit etc etc. for simplicity assume costs are same at £200/day (net of VAT), both also charge £200/day over costs.

 

Company A is no VAT registered Company B is

 

Company A has a dayrate of £(200 * 1.2)+ 200 = £440/day

 

Company B has a dayrate of £(200 + 200) * 1.2 = £480/day

 

Ok figures are plucked out of the air but show me a case where (1.2x+y) is less than 1.2(x+y)

 

The effect of recovering VAT on inputs and charging it on output is to pass the VAT on inputs on to the end user as far as I can see

 

Cheers

mac

Edited January 26, 2012 by muldonach

[WorcsWuss]

Correct.

If your saw costs you £800 + VAT & you're VAT reg'd and you capitalise it over say 1 year, that's 245 working days for sake of argument, that's £3.27 per day. If you can't claim the VAT back that's 3.92 per day. If you have done your sums and are running your business on equal footing, by rights you need to pass that on. So instead of paying 'their' VAT on work done, they just end up paying 'your' VAT on your purchases.

 

I appreciate that the idea is that you earn more than you spend so chargeable VAT should be more than reclaimable VAT, however, I don't think that customers are actually going to be that concerned by another 30 quid on fell & clear up in a morning, so why not have it both ways? You can still let them 'pay cash' too, and then put it through your books properly...

 

I'm strongly considering going VAT registered, even though I'm nowhere near the threshold. Reclaiming VAT would be a useful thing to be able to do for me...

[Hodge]

Correct.

If your saw costs you £800 + VAT & you're VAT reg'd and you capitalise it over say 1 year, that's 245 working days for sake of argument, that's £3.27 per day. If you can't claim the VAT back that's 3.92 per day. If you have done your sums and are running your business on equal footing, by rights you need to pass that on. So instead of paying 'their' VAT on work done, they just end up paying 'your' VAT on your purchases.

 

I appreciate that the idea is that you earn more than you spend so chargeable VAT should be more than reclaimable VAT, however, I don't think that customers are actually going to be that concerned by another 30 quid on fell & clear up in a morning, so why not have it both ways? You can still let them 'pay cash' too, and then put it through your books properly...

 

I'm strongly considering going VAT registered, even though I'm nowhere near the threshold. Reclaiming VAT would be a useful thing to be able to do for me...

 

You should try asking your customers if they would still use you if you charged vat, I did and found many would find a non vat reg company to do the work just to save that 20%. If I go and price a job at £500 + vat and the next guy comes and quotes £500 no Vat then most customers will use the non vat reg guy. If they pay cash and you put it through the books then you will pay vat on it, then you have lost out.

[WorcsWuss]

You don't have to tell them you're charging them VAT.... I'd wager most people probably couldn't tell which was more... £415 + VAT or £500 cash, no VAT... As it is there's a tenner in it but as soon as they hear VAT it almost doesn't matter how much it is.... This bafflement can work to your advantage though on occasion....!

 

Of course it does depend who you're working for, I accept that VAT registration doesn't work for everyone, hence the optional status below the threshold.

If you work for private individuals and have no plans to change that, then sticking 20% on your prices across the board is bound to do you damage.

For those businesses who want to work for more commercial clients, an invoice without VAT looks a bit hick to the accounts department and they probably won't even know what to do with it!

[Hodge]

You don't have to tell them you're charging them VAT.... I'd wager most people probably couldn't tell which was more... £415 + VAT or £500 cash, no VAT... As it is there's a tenner in it but as soon as they hear VAT it almost doesn't matter how much it is.... This bafflement can work to your advantage though on occasion....!

 

Of course it does depend who you're working for, I accept that VAT registration doesn't work for everyone, hence the optional status below the threshold.

If you work for private individuals and have no plans to change that, then sticking 20% on your prices across the board is bound to do you damage.

For those businesses who want to work for more commercial clients, an invoice without VAT looks a bit hick to the accounts department and they probably won't even know what to do with it!

 

You have to tell the customer you are charging vat, it's illegal if you dont

[muldonach]

You don't have to tell them you're charging them VAT.... I'd wager most people probably couldn't tell which was more... £415 + VAT or £500 cash, no VAT... As it is there's a tenner in it but as soon as they hear VAT it almost doesn't matter how much it is.... This bafflement can work to your advantage though on occasion....!

 

 

I rather think you do actually have to tell them you are charging VAT and you are obliged to provide an invoice with your VAT Reg no.

 

I am not sure that the majority of people are as niaive as you seem to think on the subject of VAT or at least not the one's I deal with!

 

 

Cheers

mac

[WorcsWuss]

Sorry, I don't mean hiding the fact you're charging VAT, ie 'that'll be 450 quid' and sticking VAT on top of it at the end. I mean just quote a price including VAT, just the same as everything else consumers buy. Washing up liquid isn't 79p + VAT is it...?

And no, I don't mean customers are niaive with regards VAT, I mean most consumers only think about VAT when we bring it up as a separate thing. If their first thought about VAT was after a job when they study the invoice and see part of what they paid you was VAT, that's no different to looking at the receipt for your weekly shop at Sainsbury's...

It's US who make VAT a big deal, not the consumer.

Edited January 26, 2012 by WorcsWuss

[Big Mark]

Here are my thoughts for what it is worth as regards equipment.

 

When we moved to france 10 years ago I came with a tipper van, chainsaws, climbing gear and thats it. I had to hire chippers at €230 per day and use a local guy to grind the stumps for me at €350 per stump (far too expencive)

 

I charge €550 per day for two man team and then €230 for the chipper totaling €780 a day. We got work but not loads. now I own my own chipper (bank loan for €300 a month) and charge €550/€590 a day including the use of the chipper and we are booked up till end of Feb now. We are getting a new stump grinder next month and we have €1500 woth of work ready for this to do.

 

My point behind all that dribble is never be afrade to invest, my moto is the more equipment I own the more I can do in house and the better I look. Also have good business cards and a good web-site these you can do yourself and not a lot of money.

[Le Sanglier]

Here are my thoughts for what it is worth as regards equipment.

 

When we moved to france 10 years ago I came with a tipper van, chainsaws, climbing gear and thats it. I had to hire chippers at €230 per day and use a local guy to grind the stumps for me at €350 per stump (far too expencive)

 

I charge €550 per day for two man team and then €230 for the chipper totaling €780 a day. We got work but not loads. now I own my own chipper (bank loan for €300 a month) and charge €550/€590 a day including the use of the chipper and we are booked up till end of Feb now. We are getting a new stump grinder next month and we have €1500 woth of work ready for this to do.

 

My point behind all that dribble is never be afrade to invest, my moto is the more equipment I own the more I can do in house and the better I look. Also have good business cards and a good web-site these you can do yourself and not a lot of money.

 

what are you getting?

[scotspine1]

A two man team should turnover 80k minimum

 

The most prosperous area in the UK is the South East, I bet you'd be hard pushed to find the majority of 2 men arb teams that operate in that area are turning over 80K per year.

 

Not because the money isn't there but simply because there are so many arb companies fighting for the same work it pushes the average price of treework down. Maybe they all aim for 80K but rarely achieve it.

 

Your in the fortunate position of working in an area with a relatively low number of arb companies (compared with the South East), added to this a relatively wealthy client base, so for you 80K seems realistic, for many others it will seem out of touch with their own particular situation.

 

I do agree in general that we should all charge more - but we're all to a greater or lesser degree controlled by the economic situation of the area in which we operate.

 

For many people this will probably mean going in relatively low to guarantee the work and keep the company ticking over.