VAT question...one for Eric?

[MrsZ4]

Hi Eric, hope you don't mind me asking, but is it generally advantageous to a tiny business to voluntarily register for VAT? My business involves buying clothing and selling it on, but i'm finding by the time I've paid the VAT on top and then added my mark-up, my prices aren't as competitive as I would like them to be. What are the downsides of being VAT registered whilst at the same time being nowhere near the threshold of compulsory registration? Thanks.

[Eric Mc]

If you mainly sell to other VAT registered entities, then being VAT registered yourself is worthwhile. They will claim back the VAT you charge them and you will be able to reclaim VAT on all your business purchases, including the purchase of equipment and other capital items.

If you mainly sell to non-VAT registered individuals, then having to add VAT on to your sale prices can put you at a competitive disadvantage with your non-VAT registered competitors.

[MrsZ4]

Many thanks Eric. Mine is still only a young business selling mainly to non-VAT registered individuals, but having said that, I've had a couple of VAT-registered businesses ask me for quotes recently so I guess only time will tell as to which way things move in the future...