soon i will need to be vat registered but i,m confused
Discussion
as of april i,m going to go vat registered.i want to expand and turn my small paving company into a proper company,supplying and fitting the materials and not just supplying the labour.
so basically i,m worried that with 17.5% vat on top i,ll be too dear and will have mountains of paperwork,big accountant bills and generally a lot more to worry about.
so i see this flat rate scheme which as far as i can see will be 8.5% flat which seems much better.although i dont claim back for materials and costs i dont seem to have to charge loads more.
i thought it sounded simple unitl i read a post by ericmc stating
vat is worked out at £100+ vat =£117.5 then its 8.5% of that
so basically i dont understand how i,ll charge people?
will i (for example) say
driveway £1000 + vat of 8.5% = total cost £1085 and then £85 goes into the vat pot
or do i have to charge 17.5% and make some bizaree calculation to get my total?
if i did have to charge 17.5% then surely i,d have to (for example to stay competetive)...
work out job total in this case £1000 then take off 8.5% then add 17.5% vat to get to my original total of £1085
god i,m confused and really just would like to go to work,earn a living and not have all this immesnse confusion and potentialy large fines/prison if it all goes pear shaped
so basically i,m worried that with 17.5% vat on top i,ll be too dear and will have mountains of paperwork,big accountant bills and generally a lot more to worry about.
so i see this flat rate scheme which as far as i can see will be 8.5% flat which seems much better.although i dont claim back for materials and costs i dont seem to have to charge loads more.
i thought it sounded simple unitl i read a post by ericmc stating
vat is worked out at £100+ vat =£117.5 then its 8.5% of that
so basically i dont understand how i,ll charge people?
will i (for example) say
driveway £1000 + vat of 8.5% = total cost £1085 and then £85 goes into the vat pot
or do i have to charge 17.5% and make some bizaree calculation to get my total?
if i did have to charge 17.5% then surely i,d have to (for example to stay competetive)...
work out job total in this case £1000 then take off 8.5% then add 17.5% vat to get to my original total of £1085
god i,m confused and really just would like to go to work,earn a living and not have all this immesnse confusion and potentialy large fines/prison if it all goes pear shaped
after a quick work out i have a feeling i may be better off going the standard vat route.
lets say i want to charge £55 per sq meter now with no vat then i could drop my price to £52 then plus 17.5% to get £61 per meter sq which imo is feasible.
that way i would still earn about the same,but be able to claim back all expenses(obviously adds up,fuel,tools etc)
it seems i,d actually lose out if i was on the flat rate scheme.
i could lower the price to £50 per sq meter but then i,m not claiming back any expense.
infact god knows really,all i know is it isnt easy.if it was i wouldnt be getting y hands dirty and i,d be the accountant.
i do have a very good accountant and i,m awaiting his call on an explanation.however its nice to hear others views and actually read them and be able to think about it rather than have to try and take it all in within a minute or so
lets say i want to charge £55 per sq meter now with no vat then i could drop my price to £52 then plus 17.5% to get £61 per meter sq which imo is feasible.
that way i would still earn about the same,but be able to claim back all expenses(obviously adds up,fuel,tools etc)
it seems i,d actually lose out if i was on the flat rate scheme.
i could lower the price to £50 per sq meter but then i,m not claiming back any expense.
infact god knows really,all i know is it isnt easy.if it was i wouldnt be getting y hands dirty and i,d be the accountant.
i do have a very good accountant and i,m awaiting his call on an explanation.however its nice to hear others views and actually read them and be able to think about it rather than have to try and take it all in within a minute or so
It depends whether you are going to charge people as prices + VAT or including VAT
If you charge a job at £1000 + Vat it's £1175.00. Business customers would prefer the VAT to be shown as a sepeate amount because they are going to claim it back
If you charge an inclusive amount to a private customer at £1175.00, 85.106% of it is the nett amount at £1000 and the balance is VAT, £175
If you only do VAT inclusive work, at the end of the VAT quarter 85.106% of the turnover is yours and the balance is VAT
You then claim back all the VAT you have been charged for supplies and services in the quarter and pay the difference
If you made a large purchase like a new van you'd lose out on the other scheme because you'd pay about £2k VAT and not be able to claim it back
If you charge a job at £1000 + Vat it's £1175.00. Business customers would prefer the VAT to be shown as a sepeate amount because they are going to claim it back
If you charge an inclusive amount to a private customer at £1175.00, 85.106% of it is the nett amount at £1000 and the balance is VAT, £175
If you only do VAT inclusive work, at the end of the VAT quarter 85.106% of the turnover is yours and the balance is VAT
You then claim back all the VAT you have been charged for supplies and services in the quarter and pay the difference
If you made a large purchase like a new van you'd lose out on the other scheme because you'd pay about £2k VAT and not be able to claim it back
Edited by Robin Hood on Monday 10th December 23:48
Edited by Robin Hood on Monday 10th December 23:54
@robin hood i,m not sure what the 85.01 means in your post
basically i,ve got the 8.5% vat because theres a flat rate scheme.my trade means i,d be in the 8.5% bracket-it basically means you cant claim back anything afaik.
i would mainly be doing work privately.giving a quote with before and after vat figures to show the totals.
upon working it out if i dropped from my £55 per sq meter down to £52+vat i would only be £300odd dearer on a 3k something job(just a quick example with figues guessed)
slightly o/t but....
lets say your a customer of mine
i quote your drive .i,ve pulled up in a smart signwritten van,i,m of a tidy apperance,got a good portfolio,got a good website,am the only local guy on a manufacturers approved installers scheme which i,ve been vetted to go on,ive got 2 million liability,give a 5 yr guarantee which is backed by the manafacturer,they give a 10 yr product guarantee,i give you a list of jobs to look at and then give you a price of
£3700
which is 1k dearer than 1 guy and £500 cheaper than another and i,m 300 dearer than without vat.
if you understand my late night drivel here do i still stand a chance of getting your job over the other guys? for the sake of this conversation came across ok to you but didnt have as many credentials as me particually the approved installer part
basically i,m scared of it all.its competitive enough as it is but if (after all the great advice i received in my pie and piston thread recently) i have a very professional aura to me then i think i,m right in thinking the masses will go with me as opposed to what i used to be if you get what i,m saying
(sorry its getting late,my heads at 1000 mph as i,m exicited because things are looking good and have so many plans now that i,m literally buzzing with excitement)
basically i,ve got the 8.5% vat because theres a flat rate scheme.my trade means i,d be in the 8.5% bracket-it basically means you cant claim back anything afaik.
i would mainly be doing work privately.giving a quote with before and after vat figures to show the totals.
upon working it out if i dropped from my £55 per sq meter down to £52+vat i would only be £300odd dearer on a 3k something job(just a quick example with figues guessed)
slightly o/t but....
lets say your a customer of mine
i quote your drive .i,ve pulled up in a smart signwritten van,i,m of a tidy apperance,got a good portfolio,got a good website,am the only local guy on a manufacturers approved installers scheme which i,ve been vetted to go on,ive got 2 million liability,give a 5 yr guarantee which is backed by the manafacturer,they give a 10 yr product guarantee,i give you a list of jobs to look at and then give you a price of
£3700
which is 1k dearer than 1 guy and £500 cheaper than another and i,m 300 dearer than without vat.
if you understand my late night drivel here do i still stand a chance of getting your job over the other guys? for the sake of this conversation came across ok to you but didnt have as many credentials as me particually the approved installer part
basically i,m scared of it all.its competitive enough as it is but if (after all the great advice i received in my pie and piston thread recently) i have a very professional aura to me then i think i,m right in thinking the masses will go with me as opposed to what i used to be if you get what i,m saying
(sorry its getting late,my heads at 1000 mph as i,m exicited because things are looking good and have so many plans now that i,m literally buzzing with excitement)
Edited by m3jappa on Tuesday 11th December 00:05
m3jappa said:
basically i,m scared of it all.its competitive enough as it is but if (after all the great advice i received in my pie and piston thread recently) i have a very professional aura to me then i think i,m right in thinking the masses will go with me as opposed to what i used to be if you get what i,m saying
(sorry its getting late,my heads at 1000 mph as i,m exicited because things are looking good and have so many plans now that i,m literally buzzing with excitement)
Let the baker bake your bread.(sorry its getting late,my heads at 1000 mph as i,m exicited because things are looking good and have so many plans now that i,m literally buzzing with excitement)
Concentrate on what you're good at and employ a recommended accountant who will help you operate more tax-efficiently. Are you registering for VAT voluntarily, or does your t/o require it?
i,ll be registering volentarilly(sp) as of april 08.i have in the past supplied labour only.now i want to look more professional by supplying the whole package and not having mr and mrs jones driving about choosing their bits,i want to sell it to them.
i could carry on doing labour only and do the odd supply and fit but if i want to expand which i do and i think wont be overly tough then i have no choice.obviously now i,m limited to only having one person do any work for me which isnt good.
being vat registered also gives me an image which shows i,m a legitimate company and not just some bloke doing the odd drive
i could carry on doing labour only and do the odd supply and fit but if i want to expand which i do and i think wont be overly tough then i have no choice.obviously now i,m limited to only having one person do any work for me which isnt good.
being vat registered also gives me an image which shows i,m a legitimate company and not just some bloke doing the odd drive
Don't forget that the 8.5% VAT rate is applied to the VAT INCLUSIVE value of the sale.
For axample:
Raise a bill for £1,000.00 for a job. Add on the normal VAT at 17.5% bringing the total VAT Inclusive value of the invoice up to £1,175.00.
You then apply the Flat Rate VAT of 8.5% to the £1,175.00 amount which results in a VAT payable amount of £99.88.
This actually equates to a true VAT rate on the Vat Exclusive invoice of 9.99% - noy 8.5%
There are a number of points you need to be aware of.
In the first year of Flat Rate VAT, you can apply a reduced Flat Rate amount. If 8.5% is the normal rate for what you do, then for the first 12 months of operating the scheme you can apply a special lower rate of 7.5%.
Using the Flat Rate Scvheme does not completely block the ability to reclaim VAT. On Capital Expenditure over £2,000, you can still reclaim the VAT on those costs.
If you do reclaim VAT on an item, if and when you eventually sell that item, you must charge Normal 17.5% VAT on its sale value.
Finally, businesses using the the Flat Rate Scheme complete the normal VAT Return. Unfortunately, HMRC have not amended the VAT Return for those using the Flat Rate Scheme. As a result, the instructions shown on the Return are completely wrong and should NOT be followed. Make sure you make use of your accountant when completing your first Flat Rate return to ensure the form is completed correctly.
For axample:
Raise a bill for £1,000.00 for a job. Add on the normal VAT at 17.5% bringing the total VAT Inclusive value of the invoice up to £1,175.00.
You then apply the Flat Rate VAT of 8.5% to the £1,175.00 amount which results in a VAT payable amount of £99.88.
This actually equates to a true VAT rate on the Vat Exclusive invoice of 9.99% - noy 8.5%
There are a number of points you need to be aware of.
In the first year of Flat Rate VAT, you can apply a reduced Flat Rate amount. If 8.5% is the normal rate for what you do, then for the first 12 months of operating the scheme you can apply a special lower rate of 7.5%.
Using the Flat Rate Scvheme does not completely block the ability to reclaim VAT. On Capital Expenditure over £2,000, you can still reclaim the VAT on those costs.
If you do reclaim VAT on an item, if and when you eventually sell that item, you must charge Normal 17.5% VAT on its sale value.
Finally, businesses using the the Flat Rate Scheme complete the normal VAT Return. Unfortunately, HMRC have not amended the VAT Return for those using the Flat Rate Scheme. As a result, the instructions shown on the Return are completely wrong and should NOT be followed. Make sure you make use of your accountant when completing your first Flat Rate return to ensure the form is completed correctly.
Three years - if the item is still being used in the business or is still in stock.
Make sure you are fully aware of the legal nature of the agreement under whichj you have acquired this item of equipment. If owned outright, bought using a bank loan or on HP, you should have no problem reclaiming the VAT. If being acquired under a Lease Agreement of some sort, you need to look carefully at the paperwork to ensure you reclaim the VAT in the correct way.
Make sure you are fully aware of the legal nature of the agreement under whichj you have acquired this item of equipment. If owned outright, bought using a bank loan or on HP, you should have no problem reclaiming the VAT. If being acquired under a Lease Agreement of some sort, you need to look carefully at the paperwork to ensure you reclaim the VAT in the correct way.
m3jappa
I think you may be getting a little confused over pricing as well.
If you currently buy a paving slab at £20 and sell it at £28, you make £8
If you are VAT registered and so is your supplier, you pay £17.02+VAT (£20) to buy and sell at £23.83+VAT (£28), since you claim back VAT on one and pay on the other your profit is £6.81, so you would only have to increases your prices by £1.19 + VAT (£25.02+VAT=£29.40) to make the original £8 profit
However if your supplier is not VAT registered then you pay £20 (no reclaimable VAT) and would need to sell at £28+VAT = £32.90 to make your £8 profit.
Therefore it pays you once you are VAT registered to buy from VAT regstered suppliers (all purchase prices being equal)
Obviously you will be charging VAT on any labour content that you are providing therefore your prices will rise in this area by 17.5%
Now that you are VAT registered you will be a lot more attractive to VAT registered customers, small businesses or as a subcontractor/supplier to a larger builder etc, so you may find new work in this area
Sorry if this was teaching you to suck eggs, but your original postings seemed a little confused.
davidy
I think you may be getting a little confused over pricing as well.
If you currently buy a paving slab at £20 and sell it at £28, you make £8
If you are VAT registered and so is your supplier, you pay £17.02+VAT (£20) to buy and sell at £23.83+VAT (£28), since you claim back VAT on one and pay on the other your profit is £6.81, so you would only have to increases your prices by £1.19 + VAT (£25.02+VAT=£29.40) to make the original £8 profit
However if your supplier is not VAT registered then you pay £20 (no reclaimable VAT) and would need to sell at £28+VAT = £32.90 to make your £8 profit.
Therefore it pays you once you are VAT registered to buy from VAT regstered suppliers (all purchase prices being equal)
Obviously you will be charging VAT on any labour content that you are providing therefore your prices will rise in this area by 17.5%
Now that you are VAT registered you will be a lot more attractive to VAT registered customers, small businesses or as a subcontractor/supplier to a larger builder etc, so you may find new work in this area
Sorry if this was teaching you to suck eggs, but your original postings seemed a little confused.
davidy
thanks very much for the input i,m very much at the beginning of learning it all and yes i am terribly confused tbh.
i,m worried that by being vat registered that i,ll be too expensive.i realise i can claim back for my materials,fuel,tools etc etc.however heres an example.
lets say that at the moment i,m charging £55 per sq meter,if i added vat then that would become £65
i feel this would make me that much too dear especially as i,m still a new company,maybe in a few years i can charge that.
so i,ll drop my first price to £51 per meter which inc vat will be £60 per sq meter which i should hopefully get away with.now i then can claim back on my materials etc and be actually back nearer to my original £55 before vat.
is that correct?
and i expect the difference i owe in vat(e.g i charge £500 vat and i actually claim back £300 will mean i have to pay tax on the £200 left as really its now my money/profeit?)
right or completly wrong?
again thanks for any help,its good to be able to read this stuff in laymans terms and not the gibberish on hmrc which you would need to be an accountant to understand
i,m worried that by being vat registered that i,ll be too expensive.i realise i can claim back for my materials,fuel,tools etc etc.however heres an example.
lets say that at the moment i,m charging £55 per sq meter,if i added vat then that would become £65
i feel this would make me that much too dear especially as i,m still a new company,maybe in a few years i can charge that.
so i,ll drop my first price to £51 per meter which inc vat will be £60 per sq meter which i should hopefully get away with.now i then can claim back on my materials etc and be actually back nearer to my original £55 before vat.
is that correct?
and i expect the difference i owe in vat(e.g i charge £500 vat and i actually claim back £300 will mean i have to pay tax on the £200 left as really its now my money/profeit?)
right or completly wrong?
again thanks for any help,its good to be able to read this stuff in laymans terms and not the gibberish on hmrc which you would need to be an accountant to understand
Edited by m3jappa on Tuesday 11th December 11:49
m3jappa
You only pay tax (corporation/income if self employed) on the net profit values, all VAT is ignored in this calculation.
VAT is entirely seperate.
If you charge £500 VAT and claim back £300 in any one VAT period you will pay £200 to the VAT man at the end of the period. The 'profit' your business made in this period is taxed in the normal way.
davidy
You only pay tax (corporation/income if self employed) on the net profit values, all VAT is ignored in this calculation.
VAT is entirely seperate.
If you charge £500 VAT and claim back £300 in any one VAT period you will pay £200 to the VAT man at the end of the period. The 'profit' your business made in this period is taxed in the normal way.
davidy
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