Any Leeway with registering for VAT?

[Contract Killer]

Im an electrician (LTD company) of which 50% is domestic customers and 50% vat registered businesses.

Im not currently Vat registered, I knew I've been getting close to the £85K threshold. And was thinking of going registered start of next year.

I have just worked out if I invoice any more work this month, I will go over the threshold between end of Dec 2017 to end of Dec 2018.

I probably have around £4K more to invoice this month.


So do i either have to register immediately?, or stop invoicing - and invoice in Jan?

Or is there any Leeway in regards to registering?


One other issue if I have to register immediately, is I have ongoing domestic work what was quoted at nil Vat, so would end up losing out if I now have to charge Vat on this. So would be good to get these jobs completed and invoiced before registering.


Cheers

[Alpinestars]

You should be registering;

- if in the next 30 days, you’re going to exceed the limit. You need to register within that 30 days. The registration goes from when you realised you’d go over the threshold, ie, any further supplies from now should be subject to VAT
- 30 days after the end of the month in which you go over the threshold on a rolling 12 month basis. The registration is effective from the first day of the next month. Eg, if you go over on say 25 December, you’d register by 30 Jan, and you’d have to charge VAT on goods supplied from 1 Feb.

[Eric Mc]

This is the dilemma that the Office of Tax Simplification highlighted in its report last year - businesses deliberately stifling their own growth in an effort to stay under an arbitrary threshold.

[Alpinestars]

Eric Mc said:

This is the dilemma that the Office of Tax Simplification highlighted in its report last year - businesses deliberately stifling their own growth in an effort to stay under an arbitrary threshold.

Yep. It’s a cliff edge tax which is bound to drive that kind of behaviour. Makes a big difference to a small business.

[TooLateForAName]

Split the business into commercial and domestic - two companies?

[Eric Mc]

TooLateForAName said:

Split the business into commercial and domestic - two companies?

HMRC is wise to that. They call is disaggregation and it doesn't generally work - unless you can prove that the two activities are completely separate in every way.

[Contract Killer]

Thanks guys, my accountant is looking into it for me, but suggested I will most likely need to register from the new year!

He looked into having 2 companies for me a while ago, but suggested unless I have 2 vans, 2 sets of tools, 2 sets of insurance etc, then it wouldn't go well if I got an inspection... Plus he would have to charge me for 2 companies

On the plus side it looks like I can claim back the Vat on tool purchases etc for the last couple of years, plus 6 months of services. Which should add up nicely.


However, my van is on a finance lease, im guessing I can only claim the vat back for the last 6 months on this?
Even though I can own it at the end after the balloon payment?

[Eric Mc]

Contract Killer said:

Thanks guys, my accountant is looking into it for me, but suggested I will most likely need to register from the new year!

He looked into having 2 companies for me a while ago, but suggested unless I have 2 vans, 2 sets of tools, 2 sets of insurance etc, then it wouldn't go well if I got an inspection... Plus he would have to charge me for 2 companies

On the plus side it looks like I can claim back the Vat on tool purchases etc for the last couple of years, plus 6 months of services. Which should add up nicely.


However, my van is on a finance lease, im guessing I can only claim the vat back for the last 6 months on this?
Even though I can own it at the end after the balloon payment?

When did you start the van agreement?

[Teddy Lop]

Check it out but you used to be able to exceed the threshold once without punishment so long as you were registered for the following year (or don't exceed it)

I got stiffed as I had a st accountant who on telling him in good time I was exceeding the threshold told me not to worry about it.

I found the tax advice line people very helpful actually, and managed to mitigate my bill in several way inc claiming relief on "stocks and assets in hand" then going straight to paying vat on invoices raised, then flipping to paying vat on invoices banked a soon as permissible.

I use the flat rate scheme BTW, do the math but its a lot less faff. Charge 20% and pay 9.5% on gross turnover with no other accounting.

[Teddy Lop]

Eric Mc said:

This is the dilemma that the Office of Tax Simplification highlighted in its report last year - businesses deliberately stifling their own growth in an effort to stay under an arbitrary threshold.

thats a good point. Businesses like me "bob around" the vat threshold. I was kind of forced into vat through a shyster of an accountants incompetence, but for that I'd have managed my way below it.

These kind of thresholds probably drive a lot of cash business.

[Contract Killer]

Eric Mc said:

Contract Killer said:

Thanks guys, my accountant is looking into it for me, but suggested I will most likely need to register from the new year!

He looked into having 2 companies for me a while ago, but suggested unless I have 2 vans, 2 sets of tools, 2 sets of insurance etc, then it wouldn't go well if I got an inspection... Plus he would have to charge me for 2 companies

On the plus side it looks like I can claim back the Vat on tool purchases etc for the last couple of years, plus 6 months of services. Which should add up nicely.


However, my van is on a finance lease, im guessing I can only claim the vat back for the last 6 months on this?
Even though I can own it at the end after the balloon payment?

When did you start the van agreement?

December 2016

[PugwasHDJ80]

Contract Killer said:

Thanks guys, my accountant is looking into it for me, but suggested I will most likely need to register from the new year!

He looked into having 2 companies for me a while ago, but suggested unless I have 2 vans, 2 sets of tools, 2 sets of insurance etc, then it wouldn't go well if I got an inspection... Plus he would have to charge me for 2 companies

On the plus side it looks like I can claim back the Vat on tool purchases etc for the last couple of years, plus 6 months of services. Which should add up nicely.


However, my van is on a finance lease, im guessing I can only claim the vat back for the last 6 months on this?
Even though I can own it at the end after the balloon payment?

Think very very carefully before you register

You might be much much better off by not working for 4 weeks!

Your commercial work isn't a problem as you can just charge vat on top, but on domestic work youmay price yourself out of the market (as you'll be cometing with other people who don't have to charge VAT) , or you just up the circa £8k loss by yourself.

Run the numbers first......

[227bhp]

When this happened to me I seem to remember we back claimed a lot of VAT which hadn't been put through before I was VAT reg, they ended up paying me out a substantial sum.

[Teddy Lop]

PugwasHDJ80 said:

Contract Killer said:

Thanks guys, my accountant is looking into it for me, but suggested I will most likely need to register from the new year!

He looked into having 2 companies for me a while ago, but suggested unless I have 2 vans, 2 sets of tools, 2 sets of insurance etc, then it wouldn't go well if I got an inspection... Plus he would have to charge me for 2 companies

On the plus side it looks like I can claim back the Vat on tool purchases etc for the last couple of years, plus 6 months of services. Which should add up nicely.


However, my van is on a finance lease, im guessing I can only claim the vat back for the last 6 months on this?
Even though I can own it at the end after the balloon payment?

Think very very carefully before you register

You might be much much better off by not working for 4 weeks!

Your commercial work isn't a problem as you can just charge vat on top, but on domestic work youmay price yourself out of the market (as you'll be cometing with other people who don't have to charge VAT) , or you just up the circa £8k loss by yourself.

Run the numbers first......

in reality its 10% dearer and in my experience most people wouldn't worry about that for a tradesman they trust and respect.

I've always thought having a kind of loose partnership with another sparky where you both have your own biz setup, one VAT one non VAT and "work for each other" to suit would be an idea, although the lines could be so easily blurred particularly in the blurry way most tradies work you'd want to be family or real close pals enough to not worry.

[Eric Mc]

It's madness the hoops people feel they have to jump through to keep below the VAT threshold. I often think their energies would be better served growing and developing their businesses.

[Teddy Lop]

Eric Mc said:

It's madness the hoops people feel they have to jump through to keep below the VAT threshold. I often think their energies would be better served growing and developing their businesses.

most tradies aren't exactly businessmen; they're aren't building something where growth represents success so much as trading to get by and put bread on the table, thus the vat threshold represents an impediment.

[Alpinestars]

Teddy Lop said:

most tradies aren't exactly businessmen; they're aren't building something where growth represents success so much as trading to get by and put bread on the table, thus the vat threshold represents an impediment.

This is why the threshold shouldn’t be a cliff edge. But would be difficult to administer.

[Olivera]

Eric Mc said:

This is the dilemma that the Office of Tax Simplification highlighted in its report last year - businesses deliberately stifling their own growth in an effort to stay under an arbitrary threshold.

The threshold should be reduced to 50k, or perhaps even less. Then the assumption for pretty much every trade person would be that VAT is due.

[Vincecj]

Olivera said:

The threshold should be reduced to 50k, or perhaps even less. Then the assumption for pretty much every trade person would be that VAT is due.

Better still, increase the threshold for registration to £250,000 to stimulate the economy.

[Eric Mc]

Vincecj said:

Olivera said:

The threshold should be reduced to 50k, or perhaps even less. Then the assumption for pretty much every trade person would be that VAT is due.

Better still, increase the threshold for registration to £250,000 to stimulate the economy.

It just pushes the chicanery to another higher level.

The Office of Tax Simplification recommended that the threshold be drastically reduced - to around £45,000 - £50,000 to try and generate a level playing field for any serious businesses. The Chancellor agreed with them but was reluctant to make any changes to the VAT threshold when there are too many dramatic things happening around VAT as it is.