Clean It Up
UK General Cleaning Forum => General Cleaning Forum => Topic started by: angela stone on September 22, 2012, 01:42:54 pm
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Hi,
Is there anyone who does predominently domestic cleaning and vat registered?
thanks
Ange
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Is it only me then? lol
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Hi :) Been a couple of years since I posted on here but your query caught my eye.
I'm about to go back into the domestic market to complement my commercial business and I'm setting up a separate company specifically to avoid having to pay VAT, my reasoning being that the bulk of my costs are in labour and that in the unlikely event of my going over the threshold in year one, I'll sub-divide the company again to ensure that I'm not needlessly charging an additional 20% and pricing myself out of the market.
I should add that I've taken advice from my accountant who advised that HMRC would look for a clear and obvious distinction between the trading styles and that domestic and commercial split are generally acceptable. Whether I'll get away with that when it comes to splitting cleaning and professional services to domestic households remains to be seen..
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I'm really at a cross roads. My accountant told me that I can't split domestic and commercial. I've been vat registered for a year and have essentially paid the vat for my domestic customers for the last year. It really is killing my business and I just take a wage leaving no profit in the business because of it.
If I were to add vat to our hourly rate I wouldn't get any domestic customers. I'm totally priced out of the market now.
I think that they shouldn't have a threshold personally, and if they do it shouldn't be on turnover.
I think I'm going to have to stop doing domestics now and concentrate on commercials.
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Angela, could you look at franchising out the domestic side? Take the fees in the form of a consultancy for a new small separate business.
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You surprise me - my accountant is squeaky clean, annoyingly so, but his instruction to me was that if I set up a subsidiary company that the distinction would be no problem at all. I was going to set it up as a 'trading as' but on his advice have created a limited company for domestic works only.
Different opinions, seemingly..
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Tom thanks for your reply, could you explain in a bit more detail what you mean? thanks
Pristine clean...I believe it can be done but you have to make sure that you have a different name, different owners, different tel no., different staff, different insurance, different everything!
It's just naff!
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Well good luck in any event - suffering from an excess in business isn't the worst problem to have. You're quite right about the insurance, company name and telephone numbers having to be different with clear splits between company costs and so on.
I hated domestic work when I did it in 2003 and I'm not really sure that it's going to work for me again but my new premises are located on the commuter 'rat run' of a fairly affluent area so it's worth the punt.
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What I mean by the franchise route is:-
Do your commercial stuff under whatever your company is now called.
Domestic stuff, "sell" your customers to someone else and take an ongoing percentage. Set up another company and take the income as a fee of some sort. Check with your accountant..
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You can't pick and choose what aspects you apply VAT to and if all under the same type of work (cleaning) by the same company then VAT is across the board.
Are you passed the VAT threshold or are you there voluntarily? If the latter then the answer is a simple one, if not then it's time to talk to your clients.
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We've been doing domestic for 12 yrs mom and pop stlye initially and not vat registered however after moving into commercial about two years ago we split the company, a non vat sole trader for domestic and a vat registered limited company for commercial.
Our accountant recommended it and its worked well for us.
All our staff were moved to the vat co and the domestic co is charged for their labour.
As long as there is a clear distinction ie diff names diff RA's and MS's diff clients and types of work and insurance the HMRC is fine with it. It's only when you split a business in two that's basically doing the same thing to avoid hitting the vat threshold that they perk up and take notice.
Deb
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You are allowed to do this by having one, say the commercial cleaning set up as a limited company. A limited company is a standalone entity and even though you may be the main shareholder you are only classed as an employee.
You can then operate the domestic side as a seperate business as a sole trader.
The VAT threshold does not equate to the two turnovers. They are completely seperate business's.
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John, is this still the case if you are using the same vans/equipment to carry out the business? My understanding is it has to be completely separate, even down to the printer/pc level.