[eddie d]

mmmm
so you opt for the 10% vat option .
so £100 + 10% = 110 10 to the vat man ??
but you are now turning over 110  - 10% = 99 so its 11 to the vat man .??
whats the correct way to work it out .i think its the second option which is a bit of a ......

[Moderator David@stives]

you charge vat out at say 17.5% on £60'000 so that equals about £70'500 turnover , then you simply hand the taxman 10 % of £70'500

so you hand him a big fat £7050

[Clive McDonald]

Correct Dave but simplistic. He would probably argue that he doesn't actually charge VAT, only pays it.
(I assume he is talking about the flat rate option).

If we really could charge it at 17.5% and pay it at 10% that would be the theory. The reality is often that we have to swallow it in our costs.

I believe that turnover is after the deduction. So if what you paid would have been profit, at least you know you would have paid 20% of it in income tax anyway.

[Moderator David@stives]

Curious

I always thought Turnover is including vat .

[Trevor Knight]

There seems to be some confusion here, let me clear it up for you.

You send an invoice for £100 + VAT @ 17.5% Total invoice due £117.50.

Now you do this on every invoice irrespective of the amount, i.e £5 + VAT, £50 + VAT etc....

Now you keep your records EXACT with details exactly how much VAT you have collected from your invoice.

So using these figures as follows:

Jan invoiced £10,000 + VAT = £11,750 (£1,750 = VAT proportion)
Feb invoiced £9000 + VAT = £10,575 ( £1,575 = VAT proportion)
March invoiced £14,000 + VAT = £16,450 ( £2,450 VAT proportion)

So total amount of VAT collected in this quarter is £5,775. This is the amount you HAVE to send to the VAT office less any VAT you have paid yourself on any purchases.

You claim back ALL VAT on purchases from suppliers, rent, petrol, stationery, anything that you have paid VAT on.

So lets say over the same 3 month quarter you have paid out £2000 VAT on your own purchases you then only send the VAT man the balance:

VAT Invoiced          £5,775
VAT spent              £2000
Total Due to VAT    £3,775

Hope this clears it up for you?

[Moderator David@stives]

Trevor

Have you heard of the flat rate scheme ?

You can opt to pay 10% of your turnover for your vat liability

Dave

[Moderator David@stives]

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_InfoGuides&propertyType=document&id=HMCE_CL_001208#P34_3592

[Clive McDonald]

as usual you are right Dave. The website is the best place for info. They have a calulator that tells you which system would be better for you. I was trying to say earlier that IR accept the figure with it taken off. But take no notice of me website is the place.

[Trevor Knight]

Trevor

Have you heard of the flat rate scheme ?

You can opt to pay 10% of your turnover for your vat liability

Dave

Hi Dave,

No I hadn't heard of that scheme but my turnover exceeds the limit they set for that anyway, so couldn't use it.

Trev

[choice.clean]

here is a good tip form a limited company cost me about £300 its a seperate entity so it too can earn up to the vat threshold so if you run a sole trader too you have doubled your earnings and the vat man gets nowt.

[JM123]

yes its known as fraud - the vat man will be on to you in no time.

[Paul Coleman]

yes its known as fraud - the vat man will be on to you in no time.

I'm not sure if I am referring to the same thing but I think it is possible to do it if you have no visible interest in running the ltd company.  For instance, if the (male) window cleaner worked as a sole trader up to the VAT threshold and his wife and daughter (for instance) were directors of the ltd company and he cleaned windows for them - but only as an employee on the PAYE.
I'm sure there must be some rule against it and even if there wasn't, it would attract so much attention that they could make things hard for you.
Mind you, you would really have to go some to take one business up to the VAT limit never mind two.  You would probably be dead through being knackered before they got around to investigating.
I suppose it could be possible for a very hard working two person partnership to hit VAT levels but I couldn't see a sole trader doing it - even a highly accomplished one.

[choice.clean]

no quite legitimate get yourself a good accountant and employ some people to do the work i work one day aweek now vat people said they know it goes on but nowt they can do about it. as i was told years ago you can tell people but most people don't listen over and out. i'm going fishing now

[Trevor Knight]

here is a good tip form a limited company cost me about £300 its a seperate entity so it too can earn up to the vat threshold so if you run a sole trader too you have doubled your earnings and the vat man gets nowt.

A BIG NO NO!! you will be fried with the fish you just been out to catch.

1)  The VAT man is fully aware of this and will quiet legally audit your accounts and go through both business with a fine tooth comb. The second there is any possible conflict he will freeze your accounts, instruct the banks to withold your assets and then the TAX man will visit and also audit you. When he has finished if there is any way they can prove you have helped in any minute detail you will be fined and also an application to strike you off Companies Houses will be registered.

2) Set up your Ltd Company, this means you have to have AUDITED accounts as well as memorandems and you are liable for Corporation Tax, You HAVE to have Public and Employers Liability Insurance. the list goes on? A big cost to you for what savings?

All this is for what? If you work commercial clients they pay VAT on top of your invoice, if you work domestic include 17.5% into the price, keep yourself legal?

My advice, if your at the financial threshold then register for VAT or stick to where you are.

[choice.clean]

tut tut tut
so much negativity a ltd company is aseperate personality so let me illustrate it to you can the inland revenue come to you to pay your next door neighbours tax bill answer no.

[choice.clean]

is trevor knight a qualified accountant i doubt it typical window cleaning forum comment thats why i don't look in too often because any genuine help is replied with masses of negative comments. i have got liability for employer and i do all the legitimate stuff. advantage customers don't give 17.5% to tax man they give it to me how do i mean before someone thinks i charge em vat the answer is there is a limit to what you can charge think about it if i put them all up 17.5% i would in affect give myself a financial handicap on pricing. i'm sure this will get you all going but i aint even going to look at the replies but leave you all to do it the old fashioned way. just don't take awindow cleaners answer as fact if you want to follow my advice ask an expert an accountant or phone the vat man and ask him straight up he'll give you the professional answer.

[Moderator David@stives]

I agree with Trev , to split the round up you have to make sure both rounds have bsolutely nothing to do with each other , ie seperate vehicles seperate phone, different company names.

And what do you do when you answer the phone to a potential customer "hello this Jeckell window cleaners or is it hyde"

It is a dangerous game to play , I would just phone the vat man and ask him about what you are going to do.

Dont be suprised by the answer

Dave

[Moderator David@stives]

Have a read on here

http://www.ukbusinessforums.co.uk/forums/archive/index.php/t-13344.html

[DaveWilkinson]

Limited companies offer limited liability to debts etc, as a director you are held accountable to the
vat and revenue for the dealings of the company, If an employee is injured or worse still killed you
can be sent to prision for proffesional manslaughter if the company is held at fault.....oh yes and limited liabilty
only holds true if you can prove you run your company responsibly.

DAve

[choice.clean]

 i do have seperate vans and seperate business's one based at my home address and one at our business premises

[Clive McDonald]

Choice clean I know/we know you are right, but keep quiet. Its called- well I forget what it's called but it's called something- and you can't do it.(similar to putting 60k business in wifes name).

[Sunshine Cleaning]

Choice clean I know/we know you are right, but keep quiet. Its called- well I forget what it's called but it's called something- and you can't do it.(similar to putting 60k business in wifes name).

Dishonest?

[eddie d]

my accountant tells me it is legitamate for my wife to run a wc buisness also if she wishes to .

[Clive McDonald]

If they can find enought similarties, like same address, same business sector etc they class it as one business.There were words i couldn't remember one is what you are talking about - artificial seperation- (yes that was two words on it's own), and suppresion.

Please look on government website for correct info, I will advise you all wrong.

[Trevor Knight]

is trevor knight a qualified accountant i doubt it typical window cleaning forum comment thats why i don't look in too often because any genuine help is replied with masses of negative comments. i have got liability for employer and i do all the legitimate stuff. advantage customers don't give 17.5% to tax man they give it to me how do i mean before someone thinks i charge em vat the answer is there is a limit to what you can charge think about it if i put them all up 17.5% i would in affect give myself a financial handicap on pricing. i'm sure this will get you all going but i aint even going to look at the replies but leave you all to do it the old fashioned way. just don't take awindow cleaners answer as fact if you want to follow my advice ask an expert an accountant or phone the vat man and ask him straight up he'll give you the professional answer.

Thank you for your words of wisdom!

No I am not a qualified accountant, I had no idea you were either!! however, before I write any help or advice I get it checked out first by my accountant. Especially when what you write can put people in potentially very difficult circumstances.

I have run a limited company for many,many years as have I been VAT registered. Let me tell you for a FACT! Anyone who tries to be clever and dodge VAT, for why I just don't understand as it costs you nothing?? then be warned, the VAT man will hammer you and you will be on the regular inspection list. So your saving of x will cost you 3 times as much later on down the road.

Whilst you sit there at home pondering ways to get around the VAT man there are also teams of VAT inspectors equally sat in their office discussing the last little scam someone tried on them.

Oh, and while your there thinking up these schemes, remember, if you are caught, its not like the Tax man where you can plead poverty and agree installments, they are quite strict. Pay up or we will shut you down!

Whatever advice you take on this forum, and remember its your choice who or what you want to believe. One thing is for certain, there are certain people who you just don't want to upset. VAT and TAX man

GOOD LUCK!

[eddie d]

very wise words trevor .im with you on this .

[choice.clean]

lets all be negative together dib dib dib

[choice.clean]

you have still failed to ask my basic question
can the tax man knock on your door for you to pay your neighbours tax bill?
a limited company is a seperate individual that is why it as limited liability
examples what if a son and father are both living at the same address can the tax man regard it as the same business?
a limited company means that if you run into a financial problem that the directors have protected their own personal property a limited company is liable to corporation tax why because it is regarded as a seperate individual.
come on boys some proper reasoning not your own ideas.
oh ad if anyone has had next doors tax bill let me know did you pay it?

[Trevor Knight]

you have still failed to ask my basic question
can the tax man knock on your door for you to pay your neighbours tax bill?
a limited company is a seperate individual that is why it as limited liability
examples what if a son and father are both living at the same address can the tax man regard it as the same business?
a limited company means that if you run into a financial problem that the directors have protected their own personal property a limited company is liable to corporation tax why because it is regarded as a seperate individual.
come on boys some proper reasoning not your own ideas.
oh ad if anyone has had next doors tax bill let me know did you pay it?

You really need to seek legal advice as your not believing what we are writing on here and your sarcastic comments are quite honestly BORING!

Gone are the days when a Ltd Company accrues lots of debts and then the directors walk away scott free. Like I have said, the VAT & TAX offices are not stupid and will look to offset the liability against the directors. Look at Companies house it is all in black and white. You have to understand, too many high profile people have done this to the Tax man, Richard Branson, Peter Stringfellow, Victor Kiam, Lord Archer to name a few, because of the millions they walked away with the Tax man has tightend up this flaw in the legal system and now as a Director you are also personally liable for any dodgy dealings under a Ltd status, how do I know, because I have been a Director for many, many years and when in my earlier years things were very touch and go, it was pointed out to me VERY CLEARLY by the Tax Man and the VAT dept that I would be pursued for any debts that were not legitimate. i.e. deliberatley spending money with the knowledge I couldn't repay it. So I couldn't go out and buy a brand new BMW on lease knowing my comany was financially unable to pay for it - getting the picture now?

Regarding your neighbours bill, well look at it this way if this helps you understand. You own a house and then buy another one to rent out, you can tell me if you still pay tax on both and if your second house is classed as taxable due to the income you receive. Or maybe if you own a house and then go into partnership with a mate and buy another property, you are still liable for the taxes and on your own personal tax both properties are treated as yours. Again, how do I know this, lets just say i own more than one property.

So, you run a sole trader business and have an interest, i.e. you are a named director on a Ltd Company, then yes, your tax is viewed in a diffent light. They will look at what is involved and what similarities there are between the two business. If they feel this is to similar they will tax you based on both of your businesses. So, an example. You trade a Ltd Company for Commercial contracts which you do, and also operate as a sole trader cleaning only domestic - Tax man's view - Too similar, viable interest in both, adds up turnover, submits details is above to VAT man if over the threshold and also adjusts your taxable income accordingly.

So, whatever you believe or choose to do, please don't post questions asking for advice only to rebuff them with sarcasm and wit, I and other members on here look to help other members and not waste our time.

Best of luck!

[Trevor Knight]

Choice clean I know/we know you are right, but keep quiet. Its called- well I forget what it's called but it's called something- and you can't do it.(similar to putting 60k business in wifes name).

Its called - only a matter of time before your get - Knock Knock, guess whos here!! Oh and don't forget, the VAT  and Tax Inspection team work out of hours, so don't be surprised if your watching Eastenders and you get interuppted!

[Ian Rochester]

My only advice to anyone who is getting near the VAT threshold is:

Seek professional advice from a QUALIFIED ACCOUNTANT, they understand the tax and VAT regulations much better than any layman.

[simbo]

i should know this but will ask anyway, at what point should you register for vat as have just took on some very well paid contract work. how do you deal with the vat on domestic customers, do you add or absorb, what actualy concerns me more at mo is wll need to employ someone soon as growing too fast for me.
simbo

[Trevor Knight]

The current threshold for VAT is £61,000 Once you rerach this level it is compulsory for you to register.

All your questions are answered on this link

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_FAQs&propertyType=document&columns=1&id=HMCE_PROD_008650

How you apply this increase can be done a couple of ways.

Commercial - write to them explaining thats as from (date) you will be VAT registered and that all future invoices will be + VAT - they willl be fine with this as it is the norm in Commercial work.

Your Domestic customers, well for the under charged accounts add it on and for your good accounts you may wish to talk with them, explain your a victim of your own success and maybe pay half each, you absorb half and they pay half, maybe agree no price incease for a set period to help with the increase.

try to add on as much as you can as absorbing 17.5% on your turnover eats a lot of your profit.

Regards,

Trev

[simbo]

thanks trevor,
 seems to me could be a real pain on the domestic acounts, but have no intention of quiting my domestics in favour of comercial however well paid, another 12 months of current growth though may not have a choice but will tackle that then hte snowball keeps growing as i am sure you know
cheers simbo

[mick hay]

Out of interest, are there any one man bands here that are VAT registered?

[Moderator David@stives]

Trevor

Good sound advice there.

Dave

[Paul Coleman]

you have still failed to ask my basic question
can the tax man knock on your door for you to pay your neighbours tax bill?
a limited company is a seperate individual that is why it as limited liability
examples what if a son and father are both living at the same address can the tax man regard it as the same business?
a limited company means that if you run into a financial problem that the directors have protected their own personal property a limited company is liable to corporation tax why because it is regarded as a seperate individual.
come on boys some proper reasoning not your own ideas.
oh ad if anyone has had next doors tax bill let me know did you pay it?

Well it's not the same thing but I did get my neighbour's gas bill a while back   

[kiral1404]

Hmm, I thought i had an idea about vat.

Your turnover is 100k for example

so you pay 17.5k vat

Does that mean you only pay tax on the difference 82.5k

[Moderator David@stives]

Kiral

Correct

[Trevor Knight]

Hmm, I thought i had an idea about vat.

Your turnover is 100k for example

so you pay 17.5k vat

Does that mean you only pay tax on the difference 82.5k

Correct apart from £100,000 less VAT = £85,000

To find out a net VAT figure divide by 1.175

eg. 100 divided by 1.175 = £85 (this is the net VAT figure)

regards,
Trev

[kiral1404]

Thats what i thought

So if you vat reg then you are effectively saving  about 5% ish on inc tax then but have the headache of 3 monthly vat payments etc