Discuss Mainly domestic; are you VAT registered? in the Business Related area at ElectriciansForums.net

Welcome to ElectriciansForums.net - The American Electrical Advice Forum
Head straight to the main forums to chat by click here:   American Electrical Advice Forum

W

Welchyboy

hey

Im at the point where im struggling to stay under the VAT limit and im thinking of buying a new van in the next few months so i will need to shortly register for VAT, has any of you lads who do a fair bit of domestic work had problems with the extra hassle or cost to the customer? or has it worked out better for you!
I have tried to avoid it up to now cause all i get on nearly every job is the old 'can you do it cheaper for cash mate'
Although I would think commercial customers would be no problem

Anyone?
 
Last edited by a moderator:
We work for a local taxi / mini bus company that has "multiple" companies, and each one manages to stay under the VAT threshold.

ABC Mini Buses Ltd
ABC Taxies Ltd
ABC Mini Cabs Ltd
BC Taxies Ltd
etc
(ABC is JUST an example, I HAVE changed the name.)
I think they up to about 5 or 6 companies... You never know which on to charge the job to!

I'm not suggesting they do this to avoid VAT ;-) or that you should as I'm not sure of the legality.
 
We work for a local taxi / mini bus company that has "multiple" companies, and each one manages to stay under the VAT threshold.

ABC Mini Buses Ltd
ABC Taxies Ltd
ABC Mini Cabs Ltd
BC Taxies Ltd
etc
(ABC is JUST an example, I HAVE changed the name.)
I think they up to about 5 or 6 companies... You never know which on to charge the job to!

I'm not suggesting they do this to avoid VAT ;-) or that you should as I'm not sure of the legality.

The legality is you can't do that as a sole trader as it's YOU that's registered rather than a company.

VAT ruins our domestic pricing but that's not always a bad thing, it seems to leave us with a better class of customer (I know that sounds awful).
 
im doing my best not to register, to the customer your just that bit more expensive than the other guy.
 
how easy is it to un-register? say if you register and realise its costing you work

I was speaking to a builder the other week about this, and he was saying that if you were to be VAT registered, then decide not to. HMRC or whoever it is can reclaim the VAT that hasn't been paid to them etc.

Not sure if this is entirely right, but I'm sure someone on here will put me straight.
 
It's not such a bad thing. If your not VAT registered, then you still have to pay for your materials gross and pass that cost onto your customer. When your VAT registered, your price increase will only be 20% extra on your labour rate but you get the advantage of claiming back the VAT on materials, fuel, van etc.

e.g if your not VAT registered:

Materials £100 + VAT = £120 (what you pay at the wholesalers)
Labour £100 = £100

Total for job = £220



VAT registered

Materials = £100
Labour = £100
(VAT) = £40
Total for job = £240

Also claim back 20% on all your fuel, vehicles, tools, clothes, anything to do with the business. You may loose the odd job, but you may end up with more money in your pocket? Best thing is to work out your outgoings and incomings and see what's best for your situation.
 
To be honest ponty the more i think about it the more i think i will get registered, its not as bad when you think of the benefits as well and as was mentioned here before it will maybe get rid of some of the customers that you can maybe do without, also when i do them little odd jobs on the way home for £30 hopefully they wont be so quick to go for the chequebook when i tell them it will then be + vat
the builders i work for are vat any way, does that mean they wont have to stop my CIS tax then cause that it a pain in the --- too
 
To be honest ponty the more i think about it the more i think i will get registered, its not as bad when you think of the benefits as well and as was mentioned here before it will maybe get rid of some of the customers that you can maybe do without, also when i do them little odd jobs on the way home for £30 hopefully they wont be so quick to go for the chequebook when i tell them it will then be + vat
the builders i work for are vat any way, does that mean they wont have to stop my CIS tax then cause that it a pain in the --- too

No, your CIS will not change.
 
It's not such a bad thing. If your not VAT registered, then you still have to pay for your materials gross and pass that cost onto your customer. When your VAT registered, your price increase will only be 20% extra on your labour rate but you get the advantage of claiming back the VAT on materials, fuel, van etc.

e.g if your not VAT registered:

Materials £100 + VAT = £120 (what you pay at the wholesalers)
Labour £100 = £100

Total for job = £220



VAT registered

Materials = £100
Labour = £100
(VAT) = £40
Total for job = £240

Also claim back 20% on all your fuel, vehicles, tools, clothes, anything to do with the business. You may loose the odd job, but you may end up with more money in your pocket? Best thing is to work out your outgoings and incomings and see what's best for your situation.


Am I right in thinking when you do your VAT return, this then offsets against your Tax return?
e.g. simplified if you owe £3000 tax and your claiming £1000 back VAT then you really owe £2000???
 
No, same authority, entirely different taxes.

The VAT that you've charged customers is paid to R&C minus the VAT that you've paid on business purchases.

You're an unpaid tax collector.
 
Threshold was 68,500 and I think it went up........If you become VAT Registered IE your turnover (including parts and materials- not your profits) goes over the threshold then you become Liable for VAT at the rate of 20% on all your turnover for the past 12 months, so if you make for your business (put into your business account, not all going on wages to you but even just into your business account) say maybe £ 40, 000 over 11 months, and then somebody says "fit me this marble kitchen, you order it and I will pay you back" and the marble kitchen for example, or office furniture, or building materials etc etc costs £40,000 to buy, you end up having to VAT register and pay full VAT on the lot, which means VAT on the £40,000 materials for that one job, which you pass on to the rather un-amused customer....and the £40,000 turnover that you brought into your little business account in the last 11 months(and mostly went out on bills and expenses/small wages to you) becomes VAT Liable at 20% as well, so thats a bill for £8, 000 for that as well and you better pay up right now thanks very much....
This is because as far as the TAX man is concerned your turnover has just hit £80,000 and he is not interested in your hardship or the fact that you never saw very much of this, he just wants to grab the money because he can do anything he wants to you and you have less than no rights, even if it is his/her mistake/error....
You cant go back to customers and ask for back dated VAT as they have every right to say no, and believe me they will say no and laugh at you, it falls onto you, and the tax man can take your house, car, savings and even your tools and you will be court order bankrupted, I have even heard of cases where they have pursued for TAX owed and managed to close child trust funds and empty them of funds to cover the mother / Fathers Tax...they can crush any one of us like a fly.

I knew an electrician a few years ago who got into trouble with this, he was doing OK running a small business doing emergency light installation and maintenance, and took on a lad to work with him, he paid the lad cash and just billed it onto his customers almost like the lad was a sub contractor and he was dealing with all the finances for him.....he was not VAT registered and just put through his side of the wages and the materials thinking he was in the clear as the other lad was self employed.....well he did a job for a Farmer for about £6,000 for 4 weeks work for him and the other person(including materials) and the farmer asked for a receipt "for his records to remind him what he spent where and when" he hastily scribbled out a carbon paper docket and gave it to him....and the farmer put it in to his accountant who then attempted to write it off against capital allowances....as 50% of the money was not notified on his own tax self assessment and he was paying the other man 50% of everything in cash (other man self employed and supposed to do own tax, so he thought that this was ok and didnt fully understand VAT rules) the TAX man did an ivestigation into his business takings , turned round and said "I think that YOU owe ME £71,000 in backdated VAT".......he managed to beg the taxman not to flatten him and was allowed to pay all that he could afford and keep his house, which was about £22,000 of it, with the provision that he would wind up his business and not start another one for a few years as part of the agreement, as this allowed the tax man to close the case against his business...
He went books in with a company and never started up on his own again, this all happened because he thought he was doing the lad a favour by collecting his wages/payment for him at the same time as his own on one invoice and passing it on to him, basically he was putting through 2 peoples wages through one small business along with the materials and parts used and this pushed it over the VAT threshold, when the TAX man couldnt figure out what was where he just went for the throat and made up a figure that he felt was suitable...


If you are going to end up VAT registering, you will owe 20% on everything earned since the start for the Tax year, I have had quite a few arguments with different people who got really really angry as they were convinced that you only needed to pay VAT on any amount over the threshold, this is wrong, you have to pay VAT on ALL turnover for the year leading up to registering as well, take a look on HMRC website and you will see this...
 
What rubbish!
So you register for VAT and immediately become liable for VAT before you hit the threshold?

I wonder why I bother posting links!
 
In terms of taking money that you have put into savings/a trust fund for your childerns future, they will seize this money if you owe tax as even though it is in the childs name, it is not legally classed as theirs until they reach their 18th birthday, and it is classed as YOUR money sitting with a custodian (Trustee/Lawyer/Bank/Building Society) for a future legally processed gift/endowment to a child/young adult, in which case they assume that you are trying to hide your cash by putting it into the childrens account/Bonds....they see this as trying to avoid paying debts to them (or assumed debts to them) by moving money around and consider the possibility that you may manage to retrieve that money in the future, which with many of these trusts can be done, I know this because when I was a Student, a friend of mine was presented with the documents for a trust fund that he never knew he had, and upon sending them into the bank got a letter back stating that the trust fund had been closed out in 1993 and all monies withdrawn.....bummer as he thought he was due a few thousand..
Apparently his old granddad had started the fund and was putting in money for years, he had named one of the fellows Aunts as an additional signatory (to take over running the trust fund until the boy reached age 18 if anything happened to him) and she had went in, closed it, drew out all the money and went on an allmighty pss up and Holiday bender while the boy was still in his early years at high school...he never found out until 2000 a whole seven years after it was arsed...and he was a skint student..
 

Reply to Mainly domestic; are you VAT registered? in the Business Related area at ElectriciansForums.net

OFFICIAL SPONSORS

Electrical Goods - Electrical Tools - Brand Names Electrician Courses Green Electrical Goods PCB Way Electrical Goods - Electrical Tools - Brand Names Pushfit Wire Connectors Electric Underfloor Heating Electrician Courses
These Official Forum Sponsors May Provide Discounts to Regular Forum Members - If you would like to sponsor us then CLICK HERE and post a thread with who you are, and we'll send you some stats etc
This website was designed, optimised and is hosted by Untold Media. Operating under the name Untold Media since 2001.
Back
Top
AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock