Vat registration question.
Discussion
I run an Mot station as a sole trader and have a question regarding Vat registration. Now I already know that Mot tests are outside the scope of vat so any turnover generated from mot tests alone is not counted with regards to vat etc which is why in the past I haven’t bothered to register for vat as vat able turnover has always been well under the threshold. I am predominantly mot only but do the odd repair and service (which would be vat chargeable if registered) when workload allows (probably only accounts for a few thousand of my yearly turnover )
Now my question is would hmrc have a catastrophic sulk on if I voluntarily registered for vat and claimed back any vat paid as it would pretty much constantly be in my favour and not hmrcs?
Am I better off not poking the sleeping bear or can it be done as I pay a fair amount of vat per month on numerous business expenses and in the present climate any lowering of overheads would be more than welcome.
Thank you in advance for any advice.
Now my question is would hmrc have a catastrophic sulk on if I voluntarily registered for vat and claimed back any vat paid as it would pretty much constantly be in my favour and not hmrcs?
Am I better off not poking the sleeping bear or can it be done as I pay a fair amount of vat per month on numerous business expenses and in the present climate any lowering of overheads would be more than welcome.
Thank you in advance for any advice.
Yes, if you have substantial VAT Exempt supplies (sales), then you have to restrict the amount of Input VAT that you reclaim on your costs.
Simply put, if 50% of your supplies are VATable (i.e. VAT is charged at standard rate or other rates, which includes Zero Rate) and 50% of your sales are exempt, then, you are only allowed reclaim 50% of the Input VAT on your costs.
There are some complications (such as "de minimis levels") to consider but by and large that is the basic principle.
Simply put, if 50% of your supplies are VATable (i.e. VAT is charged at standard rate or other rates, which includes Zero Rate) and 50% of your sales are exempt, then, you are only allowed reclaim 50% of the Input VAT on your costs.
There are some complications (such as "de minimis levels") to consider but by and large that is the basic principle.
wolf1 said:
I run an Mot station as a sole trader and have a question regarding Vat registration. Now I already know that Mot tests are outside the scope of vat so any turnover generated from mot tests alone is not counted with regards to vat etc which is why in the past I haven’t bothered to register for vat as vat able turnover has always been well under the threshold. I am predominantly mot only but do the odd repair and service (which would be vat chargeable if registered) when workload allows (probably only accounts for a few thousand of my yearly turnover )
Now my question is would hmrc have a catastrophic sulk on if I voluntarily registered for vat and claimed back any vat paid as it would pretty much constantly be in my favour and not hmrcs?
Am I better off not poking the sleeping bear or can it be done as I pay a fair amount of vat per month on numerous business expenses and in the present climate any lowering of overheads would be more than welcome.
I registered for VAT voluntarily as all my customers were also registered (so they weren't bothered by the 20% extra), and it allowed me to reclaim VAT on stuff I bought in. So in my instance it was the obvious thing to do. When my business changed to fee-based and the customers were general public, I de-registered to stay competitive.Now my question is would hmrc have a catastrophic sulk on if I voluntarily registered for vat and claimed back any vat paid as it would pretty much constantly be in my favour and not hmrcs?
Am I better off not poking the sleeping bear or can it be done as I pay a fair amount of vat per month on numerous business expenses and in the present climate any lowering of overheads would be more than welcome.
The slight issue for you is that your non-MOT work will get 20% more expensive for individual customers, so consider if that will have an effect. I suspect not as most people expect to pay VAT.
HMRC have no issue with sending VAT refunds, but obviously any claim must be backed up by correct paperwork as they can call in and check.
Simpo Two said:
The slight issue for you is that your non-MOT work will get 20% more expensive for individual customers, so consider if that will have an effect. I suspect not as most people expect to pay VAT.
But Joe Public would rather not pay VAT if he can avoid itI'm assuming when a guy's car fails an MOT he'd offer to do the work to get it through which would be VATable, this work is likely more profitable for the OP than the MOT test.
You'd have to assume people driving cars that fail the MOT are on tight budgets anyway so the extra 20% VAT may cause the guy to go to another garage down the road that doesn't charge VAT and just come back for the retest?
Edited by jonsp on Wednesday 8th June 10:42
Fair points. My post was based on the idea that 'no VAT' is usually more expected from a 'man and van' operation, rather than a garage with lifts and loads of equipment. But I agree 'No VAT' is a very good sales point. The OP will of course then have to pay VAT on all the parts he buys in. He'll just have to run the numbers and decide what's best.
You don't have to be fearful of HMRC as long as you play by the rules and keep records.
You don't have to be fearful of HMRC as long as you play by the rules and keep records.
Gassing Station | Business | Top of Page | What's New | My Stuff