Should I register for vat?

[billb]

advantages / disadvantages for registering for vat for a one man limited company?

[Eric Mc]

Has the company reached the compulsory turnover threshold (£64,000 per annum at the moment)?

Are your customers VAT registered?

Do you have any Zero Rated sales?

Do you have any Exempt sales (not the same as Zero Rated)?

Would you be eligible for the VAT Flat Rate Scheme or Cash Accounting scheme?

Do you plan to have any major capital costs in the near future?

[billb]

Eric Mc said:

Has the company reached the compulsory turnover threshold (£64,000 per annum at the moment)?

Are your customers VAT registered?

Do you have any Zero Rated sales?

Do you have any Exempt sales (not the same as Zero Rated)?

Would you be eligible for the VAT Flat Rate Scheme or Cash Accounting scheme?

Do you plan to have any major capital costs in the near future?

nope
yes
no
no
not sure what this is
no
!

[Eric Mc]

One final question - does your company have much in the way of day to day costs which contain VAT?

[billb]

Eric Mc said:

One final question - does your company have much in the way of day to day costs which contain VAT?

not really - first thing i'm doing is organising a conference where suppliers and customers both pay to turn up - only costs are food and some stationery. after that it would be consulting type work and recruitment type work.

yes i know i need to see an accountant!

[Simpo Two]

It will mean you can reclaim VAT on any purchases for the business, which can make a big difference to margin. Your customers are already VAT registered so they won't pay any extra, so I'd say do it.

[ukvoyager.info]

Simpo Two said:

It will mean you can reclaim VAT on any purchases for the business, which can make a big difference to margin. Your customers are already VAT registered so they won't pay any extra, so I'd say do it.

Yes but if their cost of sale is f.all then they don't charge VAT and comfortably undercut everyone by up to 17.5%. It all depends on their cost of sale & other VAT chargeable items IMHO.

[Simpo Two]

ukvoyager.info said:

Simpo Two said:

It will mean you can reclaim VAT on any purchases for the business, which can make a big difference to margin. Your customers are already VAT registered so they won't pay any extra, so I'd say do it.

Yes but if their cost of sale is f.all then they don't charge VAT and comfortably undercut everyone by up to 17.5%. It all depends on their cost of sale & other VAT chargeable items IMHO.

If his suppliers are VAT registered then he can reclaim the VAT - win.

If they are not, then he doesn't pay it.

As his customers are VAT registered I don't see how he can lose, because *his prices will not go up* to them - he adds it on, they claim it back.

[Eric Mc]

OK

Your company sounds like it is almost too small to be a company (I am assuming it is a limited company and not a sole-tradership).

Leaving that aside, as your customers are VAT registered, they will be able to reclaim any VAT you charge them. This means that being VAT registered does not put you at a competitive disadvantage compared to your non-VAT registered competitors.

If you are VAT registered, this allows you to reclaim any VAT charged on your business costs, including expenditure on Fixed Assets.
However, you say that you don't have much in the way of costs on which VAT may be reclaimed anyway. If that is the case, the Flat Rate option might be worthwhile considering.
In normal VAT, you declare VAT on your sales but reclaim VAT on your costs and pay over the difference - usually every three months. The VAT you charge your customers is normally at 17.5%.
Under Flat Rate Scheme you charge your customer the normal 17.5%. However, you DECLARE and pay over to the VAT man a reduced amount of VAT based on a special Flat Rate % which is specific to the type of business activity you carry on.
These flat rates can vary from 5% to 13%.
The downside is that you cannot reclaim VAT on your costs.

Do a Google under "VAT Flat Rate Scheme" and find out the VAT Flat Rate % that applies to your line of business.

[The Londoner]

One other thing you might like to think about which is a matter of perception more than anything else is how your buisness is perceived by customers and suppliers. If you are not VAT registered it somehow implies you are very small time, even if that is far from the case.

[Simpo Two]

The Londoner said:

One other thing you might like to think about which is a matter of perception more than anything else is how your buisness is perceived by customers and suppliers. If you are not VAT registered it somehow implies you are very small time, even if that is far from the case.

Agreed.

I'd also suggest you choose the 'cash accounting' option. Normally, if you raise a invoice with VAT in it, you are liable to pay that VAT to HMRC on time, *whether or not* you actually get paid by your customer. As you can imagine that can harm your cash flow. With cash accounting you only have to pay the VAT once you have received the money.

VAT can be incredibly complex but then again if your business is simple then so can the VAT be. One extra column on each side of your accounts book, add them up each quarter, pay the difference. Remember, the money you pay to HMRC is not your money, it is extra money you've raised for them and have merely kept for them for a bit. And if you're smart, you'll get some interest on it in the meantime.

The only complication you're likely to run in to is the fuel scale charge, but I'll let Eric deal with that

[ukvoyager.info]

Simpo Two said:

As his customers are VAT registered I don't see how he can lose, because *his prices will not go up* to them - he adds it on, they claim it back.

You assume he is doing B2B. If its B2C then they get the same service for less as they cant claim it back.

[billb]

Eric Mc said:

OK

Your company sounds like it is almost too small to be a company (I am assuming it is a limited company and not a sole-tradership).

Leaving that aside, as your customers are VAT registered, they will be able to reclaim any VAT you charge them. This means that being VAT registered does not put you at a competitive disadvantage compared to your non-VAT registered competitors.

If you are VAT registered, this allows you to reclaim any VAT charged on your business costs, including expenditure on Fixed Assets.
However, you say that you don't have much in the way of costs on which VAT may be reclaimed anyway. If that is the case, the Flat Rate option might be worthwhile considering.
In normal VAT, you declare VAT on your sales but reclaim VAT on your costs and pay over the difference - usually every three months. The VAT you charge your customers is normally at 17.5%.
Under Flat Rate Scheme you charge your customer the normal 17.5%. However, you DECLARE and pay over to the VAT man a reduced amount of VAT based on a special Flat Rate % which is specific to the type of business activity you carry on.
These flat rates can vary from 5% to 13%.
The downside is that you cannot reclaim VAT on your costs.

Do a Google under "VAT Flat Rate Scheme" and find out the VAT Flat Rate % that applies to your line of business.

yes it is small as its just a side project to my normal job at the mo but who knows am concerned about not looking like a "proper" compnay if not vat registered will check out flat rate thanks for the advice chaps

[singlecoil]

billb said:

yes it is small as its just a side project to my normal job at the mo but who knows am concerned about not looking like a "proper" compnay if not vat registered will check out flat rate thanks for the advice chaps

If you register for VAT you will then, of course, have to charge your employers VAT on what they pay you. Will that be OK?

[smartie]

singlecoil said:

billb said:

yes it is small as its just a side project to my normal job at the mo but who knows am concerned about not looking like a "proper" compnay if not vat registered will check out flat rate thanks for the advice chaps

If you register for VAT you will then, of course, have to charge your employers VAT on what they pay you. Will that be OK?

not if employed under PAYE.

[Eric Mc]

singlecoil said:

billb said:

yes it is small as its just a side project to my normal job at the mo but who knows am concerned about not looking like a "proper" compnay if not vat registered will check out flat rate thanks for the advice chaps

If you register for VAT you will then, of course, have to charge your employers VAT on what they pay you. Will that be OK?

His business is operating through a limited company. Therefore it is the company that will register for VAT, not him personally. The company is a separate legal entity to the individual so the fact that the company is VAT registered will not mean that that other trading income billed separtely by the individuals involved in the limited company will need to have VAT added to it.

However, as has already been said, the income he receives from his employment is not "trading" income and therefore would never be considered for VAT. It is "Employed Income" - which is always "outside the scope" of VAT.

[singlecoil]

Eric Mc said:

singlecoil said:

billb said:

yes it is small as its just a side project to my normal job at the mo but who knows am concerned about not looking like a "proper" compnay if not vat registered will check out flat rate thanks for the advice chaps

If you register for VAT you will then, of course, have to charge your employers VAT on what they pay you. Will that be OK?

His business is operating through a limited company. Therefore it is the company that will register for VAT, not him personally. The company is a separate legal entity to the individual so the fact that the company is VAT registered will not mean that that other trading income billed separtely by the individuals involved in the limited company will need to have VAT added to it.

However, as has already been said, the income he receives from his employment is not "trading" income and therefore would never be considered for VAT. It is "Employed Income" - which is always "outside the scope" of VAT.

Learn something new every day, thanks Eric

Edited by singlecoil on Monday 17th March 20:07

[Simpo Two]

ukvoyager.info said:

You assume he is doing B2B. If its B2C then they get the same service for less as they cant claim it back.

I have the advantage of reading the brief. Witness:

billb said:

Eric Mc said:

Are your customers VAT registered?

yes

Edited by Simpo Two on Monday 17th March 21:22

[Eric Mc]

Easy to miss, being such a short answer