Getting VAT registered

Getting VAT registered

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A993LAD

Original Poster:

1,652 posts

223 months

Tuesday 14th November 2023
quotequote all
Just wondering whether it is worth getting vat registration for a very small business in order to save VAT costs on equipment and supplies ETC

My wife runs a flock of sheep on our 30 acres of land and sells the lambs for meat as well as some of the wool. As you can imagine the turnover is pitiful but the costs can be quite high especially when we're buying equipment which always has VAT added on top.

We are currently looking to buy a new sheep trailer and possibly another second hand tractor. Both have vat added to the price

Is it worth being vat registered to claim the vat back or is it a massive hassle for such a small business?

Also if we are vat registered to claim the VAT back on incoming purchases do we then have to charge VAT on the meat we sell?


Eric Mc

122,236 posts

267 months

Tuesday 14th November 2023
quotequote all
What is her annual turnover (sales)?

Many agricultural products (such as certain basic foodstuffs) are Zero Rated for VAT purposes.

A993LAD

Original Poster:

1,652 posts

223 months

Tuesday 14th November 2023
quotequote all
Sales are only about 5k

But when we buy trailer, tractor, sheep hurdles, fencing etc they all have 20% vat added so wondered whether it was worth getting it back.


Edited by A993LAD on Tuesday 14th November 18:19

Eric Mc

122,236 posts

267 months

Tuesday 14th November 2023
quotequote all
In my opinion, it's not worth it.

Don't forget, if you are planning on buying some equipment and wish to reclaim the VAT on the cost of that equipment, when you eventually sell that equipment - or even just transfer it out of the business, you will have to account for the VAT on the sale price/trade-in or market value at disposal.

Mr Pointy

11,354 posts

161 months

Tuesday 14th November 2023
quotequote all
Eric Mc said:
In my opinion, it's not worth it.

Don't forget, if you are planning on buying some equipment and wish to reclaim the VAT on the cost of that equipment, when you eventually sell that equipment - or even just transfer it out of the business, you will have to account for the VAT on the sale price/trade-in or market value at disposal.
But by then the value will be greatly reduced so the VAT repayable could be minimal. I'd say do it, given the amount of VAT you can reclaim could be a useful boost to your profits - you might want to work out how much VAT you might recover in a year. You'll need to keep good records of course.

A993LAD

Original Poster:

1,652 posts

223 months

Tuesday 14th November 2023
quotequote all
Ok thanks

Does it cost much to become vat registered?

Can I claim it back retrospectively? We had a big fencing bill last year.

StevieBee

12,993 posts

257 months

Tuesday 14th November 2023
quotequote all
First off - and completely unrelated to your question, it's lovely to hear of a business that doesn't include 'IT' or 'Property' or 'Consultancy'. May only be £5k a year but what a great way to earn it!

A993LAD said:
Does it cost much to become vat registered?
Costs nothing - unless you are ask your accountant to register for you.

A993LAD said:
Can I claim it back retrospectively? We had a big fencing bill last year.
Yes, providing the invoice was within 6 months of registration.

Don't forget that VAT is a two way thing and you may be required to charge it as well as reclaim it. If your customers are VAT registered then no issue but if they're not, you're suddenly going to be 20% more expensive to them.







Simpo Two

85,833 posts

267 months

Tuesday 14th November 2023
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A993LAD said:
Is it worth being vat registered to claim the vat back or is it a massive hassle for such a small business?

Also if we are vat registered to claim the VAT back on incoming purchases do we then have to charge VAT on the meat we sell?
Yes, but if your customers are also registered they claim it back so it's irrelevant.

I was voluntarily registered for about 20 years and it saved me a fortune.

megaphone

10,801 posts

253 months

Wednesday 15th November 2023
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Don't forget you will need to use proper accounting software, or use MTD software for your VAT returns, it's a pain if you do your accounts manually, or by excel etc.


james6546

1,022 posts

53 months

Wednesday 15th November 2023
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We are vat registered for our alpaca business.

So far with building sheds, buying alpacas, hurdles, quad, trailer, L200 etc. it has been worth it, but it is a faff.

It’s a lot easier if you have accounting software that calculates it like xero.

Eric Mc

122,236 posts

267 months

Wednesday 15th November 2023
quotequote all
The turnover is only £5,000.

I would strongly recommend NOT to VAT register at those turnover levels.

The admin hassle will be excessive. If the business expands, of course, that will be a different story.

Simpo Two

85,833 posts

267 months

Wednesday 15th November 2023
quotequote all
Eric Mc said:
The turnover is only £5,000.

I would strongly recommend NOT to VAT register at those turnover levels.

The admin hassle will be excessive. If the business expands, of course, that will be a different story.
I guess the OP needs to add up what the value of a reclaim would be and make a judgement.

VAT was easy when I did it - two extra columns in the cashbook, and a return once a quarter. I'm sure technology has conspired to make it vastly more complex and expensive now, but that's progress eh.

VeeReihenmotor6

2,203 posts

177 months

Wednesday 15th November 2023
quotequote all
Surely you'd need to charge VAT on the sales, retrospectively, to be able to offset the VAT paid on past expenses? Unless you plan to wait for more sales, which will have VAT on top, but at £5k/annum surely that will take a while before meaningful offset and you'll be past the 6mth rule on the fence?

I don't think the hassle is worth it for a £5k turnover. If your expenses are way past the income raised it sounds like a hobby rather than a business - why add pain to the mix.

Eric Mc

122,236 posts

267 months

Wednesday 15th November 2023
quotequote all
Simpo Two said:
Eric Mc said:
The turnover is only £5,000.

I would strongly recommend NOT to VAT register at those turnover levels.

The admin hassle will be excessive. If the business expands, of course, that will be a different story.
I guess the OP needs to add up what the value of a reclaim would be and make a judgement.

VAT was easy when I did it - two extra columns in the cashbook, and a return once a quarter. I'm sure technology has conspired to make it vastly more complex and expensive now, but that's progress eh.
You need to submit VAT returns using commercial software these days - and you must keep your records in electronic form - although there are "cheats" about that make this rule a bit of a nonsense.

If and whenever MTD for Income Tax comes in, then electronic records will need to be maintained by ALL sole trader businesses so that will apply whether VAT registered or not, although I'm waiting for that plan to be scrapped as it has been deferred 4 times already and will be 8 years late if implemented in April 2026 as is currently planned.

Eric Mc

122,236 posts

267 months

Wednesday 15th November 2023
quotequote all
VeeReihenmotor6 said:
Surely you'd need to charge VAT on the sales, retrospectively, to be able to offset the VAT paid on past expenses? Unless you plan to wait for more sales, which will have VAT on top, but at £5k/annum surely that will take a while before meaningful offset and you'll be past the 6mth rule on the fence?

I don't think the hassle is worth it for a £5k turnover. If your expenses are way past the income raised it sounds like a hobby rather than a business - why add pain to the mix.
You can reclaim Input VAT on some items of expenditure that were incurred BEFORE the business became VAT registered.

The normal items on which you can reclaim Input VAT incurred pre-registration are -

unsold stock on hand at the date of VAT registration

fixed assets purchased before the VAT registration date which were still in use at the date of VAT registration

Simpo Two

85,833 posts

267 months

Wednesday 15th November 2023
quotequote all
VeeReihenmotor6 said:
Surely you'd need to charge VAT on the sales, retrospectively, to be able to offset the VAT paid on past expenses? Unless you plan to wait for more sales, which will have VAT on top, but at £5k/annum surely that will take a while before meaningful offset and you'll be past the 6mth rule on the fence?
'Offset' the VAT?

We don't know if the OP's customers are VAT-registered (ie businesses) or Joe Public. That's a key factor.

Eric Mc

122,236 posts

267 months

Wednesday 15th November 2023
quotequote all
He also seems to be selling a mix of Standard Rated and Zero Rated items - which can make life a bit more complicated.

There might even be special agricultural VAT rates in the mix as well.

AndyC_123

1,121 posts

156 months

Thursday 16th November 2023
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Simpo Two said:
'Offset' the VAT?

We don't know if the OP's customers are VAT-registered (ie businesses) or Joe Public. That's a key factor.
Irrelevant if they're selling zero rated food.

All "professional" farms are VAT registered, and pretty much all will get a VAT refund.