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VAT?

 
 
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saff
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PostPosted: Wed Nov 24, 2010 7:33 pm    Post subject: VAT? Reply with quote

Hi guys, still on my quest to get setup as a sole trader Very Happy sitting down with an accountant on friday to gain a bit of clarity but was wondering if anyone could help with the basics.. I'm trying to get a hold of the pros and cons of being vat registered really; do many companies under the threshold do it? So far in my mind: 1)looks professional 2)benefits of not paying vat/claiming back vat from supplies. Cons 1) end of quarter reporting 2)charging tax on top of invoices could deter potential clients by upping end prices (not as much a concern for companies, will effect public greatly) I'm sure there are many more, any suggestions? Many thanks. Hoping that when I finally get to where I want to be, ill summarie the process in a blog style website to hopefully help others who are put off perhaps by all the red tape and jargon!
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Kay
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PostPosted: Thu Nov 25, 2010 7:01 am    Post subject: Reply with quote

My UK company isn't registered for VAT. Our turnover is below the threshold and I couldn't be bothered with the additional paperwork.

I'm in two minds about your suggestion to do a blog-style 'recipe' for getting through the process. Normally I'd think it was a good idea as people often seem to need so much hand holding. However, I think that the HMRC site is pretty good so I don't know if it's a good idea to 'compete' with them.

http://www.hmrc.gov.uk/vat/index.htm
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paul
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PostPosted: Thu Nov 25, 2010 11:14 am    Post subject: Reply with quote

Quote:
1)looks professional


Personally, I would disregard this point. I don't believe that being VAT registered or not, or being a Ltd. company or not, or whatever, makes you any more or less professional. I don't doubt that some might have a different perception but personally I wouldn't let this be a deciding factor.

Quote:
2) benefits of not paying vat/claiming back vat from supplies.


Yes, this can be a bonus. Everything you buy that has VAT in it, you'll be able to claim back the VAT element. This can be useful when you are setting up if you have significant expenditure. For example, when I set up in business I was going to be under the turnover threshold but still opted to be VAT registered partly because I was going to be paying 12K for a commercial vehicle. It was nice to be able to claw back the VAT on that one.

Quote:
1) end of quarter reporting


Yes, it's a bind... but it keeps you on top of your accounts at fairly regular intervals.

Quote:
2)charging tax on top of invoices could deter potential clients by upping end prices (not as much a concern for companies, will effect public greatly)


Yes, this will depend on who your 'customers' are going to be. If they are going to be VAT registered themselves, then it shouldn't have any bearing as they'll just be able to claim the VAT back. If not, it'll make your product that bit more expensive (and bear in mind that VAT is going up to 20% in the New Year).

I think you've covered the key issues. It's now really a case of deciding what's right for you. If you think you might reach the turnover threshold that requires VAT registration in the not too distant future, then I'd be inclined to start out as you mean to go on and just do it now, particularly if you're going to be spending a little to get started.

Good luck and keep us posted with how you get on.
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awebsolution
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PostPosted: Mon Jan 03, 2011 10:28 pm    Post subject: Reply with quote

To me, it mainly helps to reduce the cost of purchasing equipment by 17.5%, which will increase to 20% tommorrow.
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saff
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PostPosted: Tue Jan 04, 2011 7:50 pm    Post subject: Reply with quote

been a while since I posted this, I hope everyone had a good New Years.

awebsolution wrote:
To me, it mainly helps to reduce the cost of purchasing equipment by 17.5%, which will increase to 20% tommorrow.


That was a good point of thinking, which I'm still unsure about. My accountant wants a good deal more for dealing with it for one.

Secondly, my equipment levels aren't massive. We're talking initial outlay of perhaps up to 1000 for a laptop, and another 1000 tops for printers, business cards, printer ink and measuring. Everything else going forward will extend to: ink, fuel which is dealt with separately, business cards etc, telephone lines.. I can't think of much else that will be a regular buy.

Kay wrote:
My UK company isn't registered for VAT. Our turnover is below the threshold and I couldn't be bothered with the additional paperwork.

I'm in two minds about your suggestion to do a blog-style 'recipe' for getting through the process. Normally I'd think it was a good idea as people often seem to need so much hand holding. However, I think that the HMRC site is pretty good so I don't know if it's a good idea to 'compete' with them.



I've done notes of what I've found out and decided, so I think I'll post them up on a page somewhere.. Rather than 'compete' with the HMRC, I'm more thinking it may help others to think of things that aren't so obvious about the process, and where issues I found were resolved by the HMRC and other websites. The HMRC has a habit of being very prescriptional and doesn't give scope for lateral thinking, if's and buts.. Just figured that a sort of mini blog might help confirm things I weren't too sure about and confirmed via my accountant, the web, and of course helpful people like your fine selves Smile

paul wrote:
Quote:
1)looks professional


Personally, I would disregard this point. I don't believe that being VAT registered or not, or being a Ltd. company or not, or whatever, makes you any more or less professional. I don't doubt that some might have a different perception but personally I wouldn't let this be a deciding factor.

Quote:
2) benefits of not paying vat/claiming back vat from supplies.


Yes, this can be a bonus. Everything you buy that has VAT in it, you'll be able to claim back the VAT element. This can be useful when you are setting up if you have significant expenditure. For example, when I set up in business I was going to be under the turnover threshold but still opted to be VAT registered partly because I was going to be paying 12K for a commercial vehicle. It was nice to be able to claw back the VAT on that one.

Quote:
1) end of quarter reporting


Yes, it's a bind... but it keeps you on top of your accounts at fairly regular intervals.

Quote:
2)charging tax on top of invoices could deter potential clients by upping end prices (not as much a concern for companies, will effect public greatly)


Yes, this will depend on who your 'customers' are going to be. If they are going to be VAT registered themselves, then it shouldn't have any bearing as they'll just be able to claim the VAT back. If not, it'll make your product that bit more expensive (and bear in mind that VAT is going up to 20% in the New Year).

I think you've covered the key issues. It's now really a case of deciding what's right for you. If you think you might reach the turnover threshold that requires VAT registration in the not too distant future, then I'd be inclined to start out as you mean to go on and just do it now, particularly if you're going to be spending a little to get started.

Good luck and keep us posted with how you get on.


you're right it's a very secondary factor to be honest, I think it helps going into a consultant position slightly in that no one can tell what my turnover is, perhaps giving an impression of being bigger/more established than I actually am?

I have decided to not go VAT registered for now, as I won't exceed the turnover limit just yet, next year - hopefully come closer! My outlay of equipment, say, 2k, will save me potentially a few hundred on VAT, but for now I'll swallow the hit as the offset against the higher accountant costs mean a marginal saving and more hassle.

In other news however, I am getting closer to the day where I go fully SE. I have now set up my Ltd Company (limited liability was attractive, as was being a separate entity), registered with companies house. I have got an accountant in place, with an understanding that he's not going to charge and undertake work till may/june at earliest, in the interim he is happy to help with the odd questions that are cropping up and he seems a genuine guy.

I've sorted things like a website etc, I'm now waiting for my business bank account to fall into place, as well as my company mobile contract (dependant on the bank account) which for the time being will be paid by means of a Director's Loan.

Then, when I finish the course that I'm on currently, I plan to make the transition, so fingers are crossed I should be able to hit the ground running. I hope to open discussions with my current employer to talk about hiring me in a similar role on the current project on a 3 or 4 day week, leaving 1 or 2 days to pursue other business. Bit daunting and I keep having the thoughts of 'what if I can't get work' but I'm just going to roll with it. thanks again for all the pointers so far.
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Gaddon
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PostPosted: Wed Mar 23, 2011 11:59 am    Post subject: Reply with quote

I found my local tax office was very helpful when I registered for VAT, one of their staff came to my office and we went through the accounts so they could suggest if being fully VAT or the percentage (for consultants). They also showed me sample excel spreadsheets that made my life a lot easier. I foiund out that as I do a lot of work overseas it was worthwhile being registered as I couldn't charge my customers but was paying VAT for all office running, travel and consumables.
Still it does depend on what you need.
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