Is it worth going VAT reg?
Discussion
Apart from the obvious:
1. Your prices will be 17.5% higher than they are now (assuming your product or service attracts the standard rate of VAT) Not so much of a problem if the bulk of your customers are also VAT registered, but might be a problem if you sell to small business or Joe Public.
2. Obviously you can reclaim the VAT on raw materials etc.
3. Completion of VAT returns.
So if your customers are VAT registered on the whole might be worth looking at, otherwise possibly not.
1. Your prices will be 17.5% higher than they are now (assuming your product or service attracts the standard rate of VAT) Not so much of a problem if the bulk of your customers are also VAT registered, but might be a problem if you sell to small business or Joe Public.
2. Obviously you can reclaim the VAT on raw materials etc.
3. Completion of VAT returns.
So if your customers are VAT registered on the whole might be worth looking at, otherwise possibly not.
You only need to register for VAT if you are above the VAT threshold... or your products are heavily VAT dependent.. If you do not need to register for VAT then I wouldn't go down that route. If you are above the threshold you need to register now! Your accountant should be able to advise of course.
The two sources of income that i have are:
From contracting - Day rate. If VAT registered my incommings will be 17.5% more than what i am getting now, this is good right?
From Private work - Most of my clients are small business most are VAT reg, some are not, but i also see Joe Blogs. So it was probably make more expensive to the average home user, maybe reducing my income here?
I don't think that i've hit the threshold on the VAT limit (is it £60K) yet and the company is just under a year old.
From contracting - Day rate. If VAT registered my incommings will be 17.5% more than what i am getting now, this is good right?
From Private work - Most of my clients are small business most are VAT reg, some are not, but i also see Joe Blogs. So it was probably make more expensive to the average home user, maybe reducing my income here?
I don't think that i've hit the threshold on the VAT limit (is it £60K) yet and the company is just under a year old.
_Deano said:
From contracting - Day rate. If VAT registered my incommings will be 17.5% more than what i am getting now, this is good right?
No, because you have to pay that 17.5% to HMCE. The only "benefit" is that you can claim back the VAT of any invoices that *you* have to pay.
Have you considered the VAT flat rate scheme? Google for more details. Not sure if you are eligible but it means you can keep a percentage of the VAT you charge to people.
john_p said:
_Deano said:
From contracting - Day rate. If VAT registered my incommings will be 17.5% more than what i am getting now, this is good right?
No, because you have to pay that 17.5% to HMCE. The only "benefit" is that you can claim back the VAT of any invoices that *you* have to pay.
Have you considered the VAT flat rate scheme? Google for more details. Not sure if you are eligible but it means you can keep a percentage of the VAT you charge to people.
Flat rate is excellent, if you are VATable..
If you aren't over the threshold I wouldn't bother registering for it.
re: other companies - if you don't charge it they don't need to recover it!!
Yes - Joe Bloggs would be the one missing out.
Flat rate scheme makes it easier to calculate VAT return. I.e. you don't have to collect receipts and so on.. http://www.hmrc.gov.uk/manuals/bimmanual/bim31585.... You put 17.5% on top of your amounts charged and then pay out about 14.5% (possibly with an extra 1% for the first year) on gross... So you do not "get" 3-4%, as it's on the gross not NET.. HTH
Your accountant should be advising you about this - it would probably raise the amount you pay your accountant as it would involve extra work on their part..
If you aren't over the threshold I wouldn't bother registering for it.
re: other companies - if you don't charge it they don't need to recover it!!
Yes - Joe Bloggs would be the one missing out.
Flat rate scheme makes it easier to calculate VAT return. I.e. you don't have to collect receipts and so on.. http://www.hmrc.gov.uk/manuals/bimmanual/bim31585.... You put 17.5% on top of your amounts charged and then pay out about 14.5% (possibly with an extra 1% for the first year) on gross... So you do not "get" 3-4%, as it's on the gross not NET.. HTH
Your accountant should be advising you about this - it would probably raise the amount you pay your accountant as it would involve extra work on their part..
Flat Rate is OK - but you MUST be sure you select the correct rate for you. The guide issued by HMRC is not that clear.
It may make the completion of the VAT returns simpler, but it actually makes completion of the final accounts MORE complicated.
If you have mixed supplies, the Flat Rate Scheme is even more problematic.
The information printed on the standard VAT Return (which is still used (even if you are on Flat Rate) are incorrect for those using the Flat Rate Sceme.
It may make the completion of the VAT returns simpler, but it actually makes completion of the final accounts MORE complicated.
If you have mixed supplies, the Flat Rate Scheme is even more problematic.
The information printed on the standard VAT Return (which is still used (even if you are on Flat Rate) are incorrect for those using the Flat Rate Sceme.
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