Should I voluntarily register with the VAT man? Should I voluntarily register with the VAT man?
Page 1 of 2 12 LastLast
Posts 1 to 10 of 16
  1. #1

    TommyFlockton

    Guest

    Default Should I voluntarily register with the VAT man?

    I've recently formed a ltd as I've got an IR35 friendly deal to supply deliverables to a software co. I'm not currently registered with the vatman as the co will have a turnover of only 20-30k in its 1st year or two.

    I need to shell out maybe £1500 on hardware and software licences - is it worth the hastle of voluntarily registering with the vatman so that I can claim back a few hundred of vat?

    And also if I do register will that mean that I'll have to charge the client 17.5% extra that they'll not be able to reclaim?

  2. #2

    rebeccaloos

    Guest

    Default

    it is always worth registering - you can't lose money by registering, only gain (from your licences etc.)

    Your clients will be able to reclaim VAT (as long as they're companies, and themselves VAT-registered), so it's not an issue for them.

    VAT is just paperwork really

  3. #3

    planetit

    Guest

    Default

    There’s not a lot of hassle involved in being VAT registered. It’s pretty simple by comparison to everything else involved in running a Ltd company. Money for nothing if you ask me. Take a look at the flat rate VAT scheme which makes things even more simple.

    If you are supplying to a software company, the chances are they will be registered. If they are not registered they will not be able to reclaim the VAT, and this could be a disincentive for them to use your company.

  4. #4

    thunderlizard

    Guest

    Default

    Yes, the flat rate scheme is fairly painless, and once you've bitten the bullet and done your first VAT return it's nice to be saving a few quid. Do do the sums beforehand to make sure you won't be out of pocket.

  5. #5

    Vetran

    Guest

    Default

    ask for cash accounting option, that way when the customer pays vat, you pay vat otherwise you may end up shelling out VAT for bad debts.

    Talk to the VAT man they are helpful.

  6. #6

    TommyFlockton

    Guest

    Default

    Yes, the customer is VAT registered so they will I guess be able to claim back the vat and me being registered isn't a disincentive for them to use me. And I'll ask for the cash accounting option so I avoid VAT on bad debts.

    I've had a look at the customs & excise site re the flat rate VAT - looks interesting.
    If I've understood it correctly, I have to levy VAT at 17.5% on the (say for example) £25k of services I supply, which is £4375. But only have to hand over 13% of 25k to the C&E, which is £3250 - that can't be right can it, as I'll be making over £1k on my VAT!?

  7. #7

    Mindomoo

    Guest

    Default

    i made the same mistake.

    See a post on the general board - the 13% is on your gross not you net

  8. #8

    rebeccaloos

    Guest

    Default

    VAT is quite simple really:

    1) you pay it on goods/services you pay for, and claim it back

    2) you charge it on goods/services you provide, and pay it back

    compared to tax, it's a doodle.

    you cannot make money nor lose money with VAT. the only thing is that now you can buy stuff VAT-free, unlike the non-incorporated general public. That's all.

  9. #9

    TommyFlockton

    Guest

    Default

    I must admit to being a tad confused here.
    The VAT model I have in my head suggests that if I charge the customer, say 10k, then I add £1750 to the bill in VAT. The customer gives me £11750 and I give the £1750 VAT component to the C&E. The customer reclaims the £1750 from them and money goes in a nice neat circle.
    Do I have an additional VAT liability to pay on the gross (£11750 x 13% = £1527) to the C&E or something?

    Sorry if I've completely misunderstood the situation!

    Reclaiming the VAT on business purchases seems pretty straightforward though, and will probably save me a few hundred quid a year.

  10. #10

    rebeccaloos

    Guest

    Default

    Tommy,

    You don't have any VAT liability of the gross - otherwise you'd lose money every time you charge VAT to someone!

    Your understanding was correct up to (and including) the point where said "money goes in a nice neat circle".

    That's exactly right - money goes into a circle when transactions are between VAT-registered companies. When it's the private, general public, then VAT goes to the VATman.

    For example, if you buy a CD, the store charges you 17.5% VAT, which it then repays to the VATman. You can't claim it back. The VATman wins.

    But when your VAT-registered company has to pay VAT for goods/services, you claim back exactly the VAT you have paid.
    And when you charge VAT to a client, you have to pay it back to the VATman. Nothing more, nothing less.

    So, in other words, the VATman does not make any money from transactions that are between VAT-registered companies. They only make money out of stuff being sold to individuals (and imports in the UK too but that's another story..)

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •