VAT - **** 'em
Discussion
Mr Pointy said:
Mobile Chicane said:
A clothes alteration place turns over in excess of £85k a year. Really?
Sounds like money-laundering to me, moreover the perfect front for it. Not as though they have to buy much in the way of stock.
I had a zip replaced in a jacket which cost £30. £85000/30/365 is 7.8 garments a day over a year & plenty of those will cost more than £30. I can see it being legit.Sounds like money-laundering to me, moreover the perfect front for it. Not as though they have to buy much in the way of stock.
Mobile Chicane said:
A clothes alteration place turns over in excess of £85k a year. Really?
Sounds like money-laundering to me, moreover the perfect front for it. Not as though they have to buy much in the way of stock.
I’m no money laundering expert, but surely money laundering 101 is don’t put a sign up in the shop saying ‘cash only’ and don’t tell everyone you’re doing your best to avoid paying VAT? Sounds like money-laundering to me, moreover the perfect front for it. Not as though they have to buy much in the way of stock.
dxg said:
Jordie Barretts sock said:
robinh73 said:
I run a tree surgery business and have this year just gone over the VAT threshold. I have a mix of personal and business customers and while the business ones can claim the vat back, the personal ones cannot do so. This is going to cause issues as I will be 20% more expensive in an already very competitive sector. I am just hoping that it won't be as much of an issue as I fear it may be.
It will be.If I were you (and I'm waaaay over the VAT threshold) I'd be doing all I could to get back under it. You say business can claim it back, yes they can, but they still have to pay it out in the first place. There really isn't an upside to being an unpaid tax collector.
He cleaved his business into two distinct entities and "gave" one to his son.
I used to be flat-rate but the IR tosspots basically torpedoed it with reverse vat charging; TBH in reality vat reg makes you "only" about 10% or so dearer and most clients either value a decent tame tradie more than that or know what to do.
MattsCar said:
jonathan_roberts said:
The idea of business is to make money. Deliberately keeping your business small to stay under the vat threshold is a ridiculous race to the bottom strategy. If you don’t grow you will die.
Just as people who fear earning more because they’ll be a top rate taxpayer, if you fear grow that comes with extra complication like a VAT registration, you’ll end up being lost in the doldrums anyway.
Not necessarily, take the electrician who is self employed and happily works on his own. He works 30 hours a week and manages to have enough time with his family. He has noticed that he is about to go over the VAT threshold. Just as people who fear earning more because they’ll be a top rate taxpayer, if you fear grow that comes with extra complication like a VAT registration, you’ll end up being lost in the doldrums anyway.
Does he
A) take a couple of less jobs during the year
Or
B) go full on and work 40-45 hours a week to make being VAT registered worthwhile in terms of overall profit, at the expense of family life.
A lot of people run businesses that don't want to grow or deal with the headaches that growing a business comes with.
You are absolutely right though in terms of certain businesses being about growth, mainly sales businesses.
To my mind I run my own business so that I make exceptional amounts of money that I can’t earn working for someone else. If I thought I had to worry about vat, I’d just work for someone else and not bother with the stress that comes with self employment or business ownership.
ETA the VAT threshold hasn’t changed since 2017!
Edited by jonathan_roberts on Saturday 3rd February 02:06
jonathan_roberts said:
The problem is that long term, by thinking like this you always limit your income to the vat threshold and therefore you’re worse of anyway even with normal levels of inflation. Unless the vat threshold goes up you can’t earn more. It’s not a long term strategy for running any business if it’s what you live from.
It may not be a long term strategy to run a business but it's very much a long term strategy for a happy life. Edited by jonathan_roberts on Saturday 3rd February 02:06
Businesses exist mainly to create profit, an individual doesn't necessarily work for themselves with profit as the primary goal.
As an example, my neighbour ran a successful B2B business then at 50 decided he'd had enough of the long hours and chasing the next sale to do driving instructing instead.
If he was forced to charge VAT for the lessons, he'd be giving away a proportion of his income with negligible benefit.
The thing is the VAT threshold is the same whether you work for yourself for a better life or chasing your tail for more money.
OldGermanHeaps said:
Its a bit of an inaccuracy to say your price to non vat customers needs to go up 20 percent to make the same profit. The other side of the coin is you instantly get a 20 percent discount on everything you buy for the business, diesel , leccy, tools materials, entertaining potential customers, food while traveling, uniform by the time you are done you can keep the same profit but only put your prices up by 20 of your overall profit, minus the one or 2 things you cant claim vat back on. The quarterly paperwork is a f
king headache but iy makes your end of year a piece of piss to generate.
Fair would be vat for everyone .
All the far eastern sellers on amazon that supply a vat invoice must be up to something i reckon.
That depends on what the business is, doesn't it?king headache but iy makes your end of year a piece of piss to generate.Fair would be vat for everyone .
All the far eastern sellers on amazon that supply a vat invoice must be up to something i reckon.
Friends of mine who run a small café have just gone from opening 6 days a week to 5 to avoid breaching a VAT threshold - although in their case I believe it's the £150k ceiling for flat rate - and one of the main difficulties they faced from VAT was the fact that practically all their purchases are zero rated food ingredients, yet they have to charge VAT on almost everything they sell.
jonathan_roberts said:
The problem is that long term, by thinking like this you always limit your income to the vat threshold and therefore you’re worse of anyway even with normal levels of inflation. Unless the vat threshold goes up you can’t earn more. It’s not a long term strategy for running any business if it’s what you live from.
To my mind I run my own business so that I make exceptional amounts of money that I can’t earn working for someone else. If I thought I had to worry about vat, I’d just work for someone else and not bother with the stress that comes with self employment or business ownership.
ETA the VAT threshold hasn’t changed since 2017!
Why would you want to keep on working the same hours as you get older towards retirement, with the inevitable aches and pains that come as part of getting old? I know a few one-man band tradies in car repairs and all of them are happily winding down how much work they do as they head towards retirement which nicely keeps them under VAT as a bonus. You work your socks off in your younger years when you have the energy and health to easily do the long hours to grow your business, then by your later years you typically have most of your sTo my mind I run my own business so that I make exceptional amounts of money that I can’t earn working for someone else. If I thought I had to worry about vat, I’d just work for someone else and not bother with the stress that comes with self employment or business ownership.
ETA the VAT threshold hasn’t changed since 2017!
Edited by jonathan_roberts on Saturday 3rd February 02:06
t owned outright with a comfortable buffer in the bank for frequent holidays and so no need to be flogging your knackers off anymore.You work to live, not the other way round. A lot of people don't seem to have figured this out yet and are simply wasting their short time on this planet.
jonathan_roberts said:
To my mind I run my own business so that I make exceptional amounts of money that I can’t earn working for someone else.
I guess it depends on what you consider exceptional. The median salary in the highest age range is around £40k, overall it’s about £35k. That’s for a full time job with all the commitment, stress and bulls
t that comes with working for someone else. https://www.forbes.com/uk/advisor/business/average...Say you can turn over £80k on a flexible three day week doing something for yourself. Obviously your business has costs but in a trade to stay under the threshold that probably just means running a van, phone, tools etc, lets say £20k for that.
So suddenly you are earning 50% over the average doing short hours and with no boss.
It may not be exceptional but it doesn’t sound so bad or stressful (spoiler: it doesn’t have to be bad or stressful even if you are vat registered, I do it)
Is it only me in this conversation that realises that £85k turnover isn’t £85k profit - so you might put half of that through buying product or parts to do the work, renting a unit, or fuelling your van, whatever.
Also isn’t it obvious that £85k in 2017 for three days work or whatever example all of you are giving was fine, but £85k now is not the same as it was in 2017. By not VAT registering and growing, you’re leaving money on the table for someone else who will do the totally easy accounting associated with making more money. You don’t have to be a millionaire and aim for the stars, but £85k in 2017 is well over £110k in today’s money.
To the poster who said you shouldn’t live to work, you’re only prolonging the inevitable by staying under the VAT threshold and you’ll be living to work for a long time. I guess you’re also assuming that I’m overworked, overweight, and never spend any time with my family. Quite the opposite.
Also isn’t it obvious that £85k in 2017 for three days work or whatever example all of you are giving was fine, but £85k now is not the same as it was in 2017. By not VAT registering and growing, you’re leaving money on the table for someone else who will do the totally easy accounting associated with making more money. You don’t have to be a millionaire and aim for the stars, but £85k in 2017 is well over £110k in today’s money.
To the poster who said you shouldn’t live to work, you’re only prolonging the inevitable by staying under the VAT threshold and you’ll be living to work for a long time. I guess you’re also assuming that I’m overworked, overweight, and never spend any time with my family. Quite the opposite.
Did you not read my post properly?
I just gave an example of £60k PROFIT
.
The income figures I compared to were not from 2017, they are current.
The answer to the question of whether it is better to stay under the threshold will vary for each individual but there are plenty that can make it work well for what they want while earning well above the average amount.
I just gave an example of £60k PROFIT
.The income figures I compared to were not from 2017, they are current.
The answer to the question of whether it is better to stay under the threshold will vary for each individual but there are plenty that can make it work well for what they want while earning well above the average amount.
The VAT threshold now sits at a level that suits nobody. Businesses are artificially reducing the business they do to avoid hitting £85k, which has wider ramifications in terms of stagnating growth across the whole economy.
I'd support removal of the VAT threshold altogether. Solutions for VAT returns are now fast and cheap enough that it's hard to justify why a 1 man band earning £84k doesn't need to whereas a 2 person company struggling on £85k must.
Ultimately VAT should be P&L agnostic.
I'd support removal of the VAT threshold altogether. Solutions for VAT returns are now fast and cheap enough that it's hard to justify why a 1 man band earning £84k doesn't need to whereas a 2 person company struggling on £85k must.
Ultimately VAT should be P&L agnostic.
Steve H said:
Did you not read my post properly?
I just gave an example of £60k PROFIT.
The income figures I compared to were not from 2017, they are current.
The answer to the question of whether it is better to stay under the threshold will vary for each individual but there are plenty that can make it work well for what they want while earning well above the average amount.
But you have to compare today’s income with 2017 because if you have always stayed at the vat threshold that’s what your income is. I just gave an example of £60k PROFIT
.The income figures I compared to were not from 2017, they are current.
The answer to the question of whether it is better to stay under the threshold will vary for each individual but there are plenty that can make it work well for what they want while earning well above the average amount.
If you think that you can buy parts required to do £85k worth of plumbing/building/electrics, run a van, buy and replace tools, pay insurance premiums necessary to work on peoples houses, have professional looking outfit allowing you to charge market rates, and get change out of £20k I’m impressed. There’s also no space for any marketing (even a good business loses 5% of customers per year so to stay afloat you need to find 5% again which takes work), any accountancy (could easily be another £1500). Any investment or big amount you’d need to suddenly find would be like being in a low paid salaried job.
Also take into account that unless you have an apprentice/helper you’ll likely not be able to take on half the jobs. Your regular customer then finds someone who can do it because they have the manpower, and you, as a timid little VAT avoider, find yourself losing that customer because it’s less hassle for them to employ someone who’s ready to take all their money. Can you employ that person legally, and include it in the £20k?
Even if you get it to £20k then put £12500 in a pension, you’re still at £48k net income after tax. It’s simply not worth the hassle.
If you can do something higher value that genuinely means you can chill out and earn £85k for an hours work a day tinkering, I can understand why you’d want to remain unregistered. For anything else it’s pointless to avoid it.
My point of reference is my business that allows me genuine fun time and freedom. Sticking to vat limits would not be enough money, or fun, or free.
Another poster also suggested having two operations loosely connected doing £85k each as if the tax man has never seen this ever in his life
Making it work under the threshold would typically involve not supplying materials, not having staff etc. Plenty of one-man trades do zero marketing and are beating work off with a stick so can choose the jobs they want to take on.
I’m not suggesting it has to suit you, just that it’s not unreasonable that it does suit some people.
I’m not suggesting it has to suit you, just that it’s not unreasonable that it does suit some people.
recordman said:
There's a lot to be said for voluntarily registering for VAT from day 1. VAT would be reclaimable on any start up equipment bought (eg. office eqpt, vans etc and 50% of VAT on leased cars), and none of the angst breaching the threshold.
I have done that. Twice. Unless your services are entirely generated out of your brain, you will be buying things for your business which you pay VAT on. So why not claim that back?robinh73 said:
I run a tree surgery business and have this year just gone over the VAT threshold. I have a mix of personal and business customers and while the business ones can claim the vat back, the personal ones cannot do so. This is going to cause issues as I will be 20% more expensive in an already very competitive sector. I am just hoping that it won't be as much of an issue as I fear it may be.
I think you’ll be fine. A lot of tree surgeons are not trustworthy types so if you are a decent person who actually does the job and doesn’t steal/rip people off then the extra 20% is money well spent. Douglas Quaid said:
robinh73 said:
I run a tree surgery business and have this year just gone over the VAT threshold. I have a mix of personal and business customers and while the business ones can claim the vat back, the personal ones cannot do so. This is going to cause issues as I will be 20% more expensive in an already very competitive sector. I am just hoping that it won't be as much of an issue as I fear it may be.
I think you’ll be fine. A lot of tree surgeons are not trustworthy types so if you are a decent person who actually does the job and doesn’t steal/rip people off then the extra 20% is money well spent. robinh73 said:
Not blowing my own trumpet but I get a great deal of recommendations and repeat customers, so fingers crossed it goes well.
And as stated your prices dont need to go up 20% to end clients. You will be claiming vat back on nearly every outgoing if you are dilligent about documenting all your outgoings the overall price increase wont be much, and you will be more competitive when working for vat registered customers.Gassing Station | Business | Top of Page | What's New | My Stuff