Small Business - VAT And Going Digital - Software
Small Business - VAT And Going Digital - Software
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Discussion

Jap90s

Original Poster:

1,771 posts

137 months

Monday 17th January 2022
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My hobby has grown - selling motorbikes - it looks like I'll have to VAT register next year which it seems will be on the Margin Scheme

Currently I submit an online self assessment but everything is on bits of paper - it seems I'll have to upgrade

Can anyone tell me what software would be most suitable - ie easy to use and preferably cheap

I'm selling motorbikes from home - so not many transactions at all, probably 40 sales a year

I've googled but it all seems far more complicated than I need

Eric Mc

124,046 posts

281 months

Monday 17th January 2022
quotequote all
Sadly, it is complicated.

The favourite software for digital filing amounts to a choice between Quickbooks, Xero or Free Agent.

Excel can be used as the basic recording software but to transmit the figures to HMRC you have to use a "bridging solution".

What does your accountant say?

Jap90s

Original Poster:

1,771 posts

137 months

Monday 17th January 2022
quotequote all
Eric Mc said:
What does your accountant say?
Nothing - I'm earning circa £20k so I can't afford an accountant - slightly miffed I'm now having to pay an extra 16% in tax when I'm not even earning an average wage yet

But I've bought stock over winter so I know I'll be above the VAT threshold next year


Eric Mc

124,046 posts

281 months

Monday 17th January 2022
quotequote all
I would suggest that, if your sales are going to take you over the VAT threshold soon, you should be talking to an accountant sooner than later.

Not making use of an accountant is a false economy.

MattsCar

1,807 posts

121 months

Tuesday 18th January 2022
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Before committing to VAT, work out what you'd have to turnover to earn the same amount of profit in comparison to not being VAT registered and keeping under the £85,000 threshold.

I was previously on the Flat Rate Scheme and my break even figure was about £110,000, anything below that and I would have essentially been worse off financially and for a period of time, I was, until I deregistered and waved goodbye.

This MTD thing is an utter shambles. Buy software, then buy bridging software, or multiples of, in order to integrate various sales channels....bleugh.


MustangGT

13,438 posts

296 months

Wednesday 19th January 2022
quotequote all
Jap90s said:
Nothing - I'm earning circa £20k so I can't afford an accountant - slightly miffed I'm now having to pay an extra 16% in tax when I'm not even earning an average wage yet

But I've bought stock over winter so I know I'll be above the VAT threshold next year
VAT has nothing to do with income tax at all. If you are VAT registered as you suggest, then you pay VAT on your margin, if you had a £500 margin you should increase your sales price by £100 making a margin of £600 of which £100 is VAT (£500 + 20%). The threshold is £85,000 turnover.

As far as personal tax goes you say it is a hobby. My assumption is that you have a 'proper' job and are assessed for tax on that, either by SA or PAYE. If so, you should be paying income tax, at your marginal rate, on your £20k income from the bike sales. If not, then your personal allowance is around £12.5k and you should be paying income tax on around £7.5k at the basic rate. This is another reason why you should have an accountant.

MattsCar

1,807 posts

121 months

Wednesday 19th January 2022
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Op can you clarify what your turnover is...

Jap90s

Original Poster:

1,771 posts

137 months

Thursday 20th January 2022
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MattsCar said:
Op can you clarify what your turnover is...
This year I hit the the £85k limit in December so I either stop selling for 3 months or I pay 16% VAT on everything thus far.

As Jan and Feb are very quiet and I think I can get most of March's sales in April I've decided to cease selling until April 6th

But then next year I should sell well over £100k as I already have £100k of bikes - the problem is sourcing them cheap enough - I can sell all that I can buy - my turnover entirely depends on availability.

To those who say to just add the VAT to the bikes - if only life worked that way, I charge the maximum I can charge, to still get a reasonable sales rate

I have no other income I'm effectively semi retired

Edited by Jap90s on Thursday 20th January 12:48

Eric Mc

124,046 posts

281 months

Thursday 20th January 2022
quotequote all
Jap90s said:
This year I hit the the £85k limit in December so I either stop selling for 3 months or I pay 16% VAT on everything thus far.

As Jan and Feb are very quiet and I think I can get most of March's sales in April I've decided to cease selling until April 6th

But then next year I should sell well over £100k as I already have £100k of bikes - the problem is sourcing them cheap enough - I can sell all that I can buy - my turnover entirely depends on availability.

To those who say to just add the VAT to the bikes - if only life worked that way, I charge the maximum I can charge, to still get a reasonable sales rate

I have no other income I'm effectively semi retired

Edited by Jap90s on Thursday 20th January 12:48
When you say "this year" are you referring to 2021 or 2022? Have you already hit the £85,000 in December 2021 or is it something that you predict will happen in December 2022?

Jap90s

Original Poster:

1,771 posts

137 months

Thursday 20th January 2022
quotequote all
Eric Mc said:
When you say "this year" are you referring to 2021 or 2022? Have you already hit the £85,000 in December 2021 or is it something that you predict will happen in December 2022?
Sorry, I was meaning this tax year, I hit it Dec '21

MustangGT

13,438 posts

296 months

Thursday 20th January 2022
quotequote all
Jap90s said:
Sorry, I was meaning this tax year, I hit it Dec '21
Then you should have registered a few months ago. The rule is if you anticipate to be over 85k in the tax year.

Eric Mc

124,046 posts

281 months

Thursday 20th January 2022
quotequote all
Exactly - that's why I asked the question. He needs to register for VAT ASAP.

Jap90s

Original Poster:

1,771 posts

137 months

Thursday 20th January 2022
quotequote all
MustangGT said:
Then you should have registered a few months ago. The rule is if you anticipate to be over 85k in the tax year.
I'm unsure which part you don't understand, I'm 100% sure I won't exceed 85k as I've stopped selling !

MattsCar

1,807 posts

121 months

Friday 21st January 2022
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The threshold is not based on the year, it is based on the past 365 days on a rolling basis.

If you have not gone over 85k, you do not have to register for VAT.

If you have and do not want to go on to VAT, you can write to HMRC and explain that the year was an anomaly and you will not be going above the threshold in the future, with a valid reason, e.g you are struggling to source bikes, if this is genuinely the case.

As mentioned previously, you really need to work out how much more you would have to sell, if you were VAT registered that equals, in terms of profit, what you would get if you were to stick to £85,000 or less turnover without paying VAT.

Work out your current profit as a percentage of turnover and go from there.



Edited by MattsCar on Friday 21st January 00:09

Eric Mc

124,046 posts

281 months

Friday 21st January 2022
quotequote all
Once you bust the £85,000 threshold for ANY 12 month period, the law says you should register for VAT within 30 days. As has been said, you can plead with HMRC that it was a "one-off" and that you will never exceed the threshold again - and they MAY let you off.


Many businesses have fallen foul of this over the years, including a limited company set up by Vince Cable, when he was a Business Minister!

MattsCar

1,807 posts

121 months

Friday 21st January 2022
quotequote all
"This year I hit the the £85k limit in December so I either stop selling for 3 months or I pay 16% VAT on everything thus far."

Just to add, this is not correct. You will start paying VAT on all products sold from the day that you become VAT registered, it is not back dated.

For the sake of £100, book a 1 hour session with a good accountant who should be able to answer all your questions and offer some advice.

Jap90s

Original Poster:

1,771 posts

137 months

Friday 21st January 2022
quotequote all
MattsCar said:
"This year I hit the the £85k limit in December so I either stop selling for 3 months or I pay 16% VAT on everything thus far."

Just to add, this is not correct. You will start paying VAT on all products sold from the day that you become VAT registered, it is not back dated.

For the sake of £100, book a 1 hour session with a good accountant who should be able to answer all your questions and offer some advice.
Thanks I didn't know that.

But I can't register for VAT yet anyway as I have to get everything sorted relating to their digital requirements but that means I'll bring it forward to March at the least

I'd rather clean a bike than talk to an accountant (or do paperwork) for an hour and I wouldn't have more than 5 minutes of questions plus my paperwork isn't in a state they'd understand either laugh

I agree it's something I'll have to do sooner or later but finding a sensible accountant nearby will be another task


48k

15,358 posts

164 months

Friday 21st January 2022
quotequote all
Jap90s said:
plus my paperwork isn't in a state they'd understand either laugh
You'd better hope a VAT inspector can understand it, just in case.

Respectfully, you are sounding like the sort of person that NEEDS to be talking to an accountant. You really don't want to muck about with VAT, you can get in to a lot of trouble.

anonymous-user

70 months

Friday 21st January 2022
quotequote all
Jap90s said:
Can anyone tell me what software would be most suitable - ie easy to use and preferably cheap
I use Xero. The sub is about 130 pa plus VAT from memory.

It does the job but it’s a PITA to use and three months is about ideal for forgetting how to use it. It makes a job that I used to do on paper take twice as long.

I’d be surprised if the other options were any better TBA.

It feels like software written by accountants for accountants, sold to punters.

Ham_and_Jam

3,139 posts

113 months

Friday 21st January 2022
quotequote all
Jap90s said:
But I can't register for VAT yet anyway as I have to get everything sorted relating to their digital requirements but that means I'll bring it forward to March at the least
You don’t need any special accounting software. Providing you have a spreadsheet set up with sales and VAT breakdown, just get VAT bridging software.

Once your registered and have given permissions, it takes 10 mins to point the software to the relevant cells required for a VAT submission.