Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: Lee Burbidge on April 02, 2013, 05:14:20 pm
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I am seriously interested in you guys opinions on this subject. As you will know, VAT becomes compulsory if your earnings far exceed 77k per annum.
This can create an unfair advantage in the market place as as soon as this threshold is achieved by a window cleaning business as a business cost would then increase by 20%. Would have to absorb the cost and be happy at that because your earning enough or ask your customers to pay 20% more overnight?
What would a customer think if you increased the window cleaning cost by 20% because of VAT? Do you tell them?
Is it an unfair advantage compared to those happy to earn less than 77k IUO ?
This topic is probably more geared to the window cleaner who wants to build a business in window cleaning but super interested in the opinions of window cleaners happy at where they are making a living or running a maller venture.
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Lee its based on £77,000 Turnover not earnings, but I am sure you knew that !
Its not worth the hassle of registering if you are only just going to go over the threshold you really need to jump from the £77,000 to at least £100,000+ mark to really make it worth while, (eg taking on another company)
20% increase is a big hit for a customer , I think a lot would not be very happy in the present economic times
Also trying the De-register for VAT ( if your turnover drops back below the threshold ) and HMRC are ALL OVER YOU really not worth the hassle for a one man operation
I personally think George missed a trick at the last budget he should have raised the threshold by £10 / £15 thousand to help small business who want to grow.
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As Paul has said, good luck in the 20% rise with the customers, or alternatively you absorb the hit.
I personally would cull or sell some of the lesser priority work off and stay just below.
That's just my take, you may have a masterplan that your keeping quiet about there... 8) ;) :)
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Lee
I have just gone vat registered (8/3/13) and so far it's been ok for me what I have done is put all commercial up by 20% and then gauged my domestics some have gone up 20% and some 10% but because I can claim vat back I don't mind loosing out on the odd domestic
Another plus is you can claim vat back on all equipment and vehicals spent over the last 4 years
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Lee
I have just gone vat registered (8/3/13) and so far it's been ok for me what I have done is put all commercial up by 20% and then gauged my domestics some have gone up 20% and some 10% but because I can claim vat back I don't mind loosing out on the odd domestic
Another plus is you can claim vat back on all equipment and vehicals spent over the last 4 years
Even prior to registration??? Sounds too good t0o be true this...
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Yes if you brought a new van 3.5 years ago and still have it with a recite showing any vat paid then you can claim the vat back and the same goes for all equipment, also vat on any servicing in the last 6 months and all vat paid in the last 3 months prior to registration
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been discussing this with my accountant and by the time you claim back what you can claim and offset it to what you pay you're about 12-13% out of pocket, we're gonna phase in a 10% rise prior to this, our main reason for going is to grow as big as we can, like others said if we were only gonna stick to one extra van we would keep below the limit but we want to grow and this unfortunately is one of the hurdles.
Graham
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Graham in theory your turnover should go up by 20% and your profit should increase by approx 8% this is because your customers should pay 20% more thus increasing turnover you then claim back vat paid out fuel, equipment ect thus leaving approx 8% difference eg profit
This is how it should work in theory but in practice will proberbley be different hope it works out ok for you as I said before so far so good for me
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I love topic's like this all the self proclaimed big multivan operations on here yet only a few are vat registered :D :D
Paul
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I love topic's like this all the self proclaimed big multivan operations on here yet only a few are vat registered :D :D
Paul
they are Paul - they just know how to hide their monies better than you nd I !! ;D
Darran
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Lee its based on £77,000 Turnover not earnings, but I am sure you knew that !
Its not worth the hassle of registering if you are only just going to go over the threshold you really need to jump from the £77,000 to at least £100,000+ mark to really make it worth while, (eg taking on another company)
20% increase is a big hit for a customer , I think a lot would not be very happy in the present economic times
Also trying the De-register for VAT ( if your turnover drops back below the threshold ) and HMRC are ALL OVER YOU really not worth the hassle for a one man operation
I personally think George missed a trick at the last budget he should have raised the threshold by £10 / £15 thousand to help small business who want to grow.
Good points.... t/O is correct lol
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Lee
I have just gone vat registered (8/3/13) and so far it's been ok for me what I have done is put all commercial up by 20% and then gauged my domestics some have gone up 20% and some 10% but because I can claim vat back I don't mind loosing out on the odd domestic
Another plus is you can claim vat back on all equipment and vehicals spent over the last 4 years
Awesome Dave!
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Yes if you brought a new van 3.5 years ago and still have it with a recite showing any vat paid then you can claim the vat back and the same goes for all equipment, also vat on any servicing in the last 6 months and all vat paid in the last 3 months prior to registration
So thats good if you can make your plans work that way ;)
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been discussing this with my accountant and by the time you claim back what you can claim and offset it to what you pay you're about 12-13% out of pocket, we're gonna phase in a 10% rise prior to this, our main reason for going is to grow as big as we can, like others said if we were only gonna stick to one extra van we would keep below the limit but we want to grow and this unfortunately is one of the hurdles.
Graham
Graham the difficult thing is that window cleaning requires very little out put. There is your fuel of course you can off set VAT on but once your cloths and wfp equipment has been purchased the back you claim back serves only to reduce the VAT bill you have to pay each period. Personally I like how Dave tackled it. But the real question is do you think that VAT provides an unfair advantage to your business? Should it be exempt on residential work? What do you think bud?
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VAT is a pita but its a necessary evil if you wish to grow.
Don't forget to ask your accountant about only paying FLAT RATE VAT. you charge at 20% but only pay at the level advised. usually around 12%
And don't forget to put the cash to one side to cover those 3 monthly's. Mr Vat man hates it when you tell him your skint :-)
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http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm
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Lee the reason I registered for vat was because I. Had 2 businesses I doing carpets and. 1 doing windows then I brought another carpet cleaning company and trying to keep them all separate was a nightmare so my accountant advised me to put them all together and register, and so far so good it's also a hell of a lot eaisier to control
I does make it harder to compete with those who arnt registered but as I said I'm gauging mine and some but not all pay the extra but also because my out goings are fairly high I'm able to claim a lot of vat back
Also as said in post above I think ALL businesses should be made to register it would also stop a lot of fiddling from those who try and avoid it and also make it a fair competition across the boadd
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back to the original question, am I right in assuming you don't always get the increase you want out of your domestics prior to going registered..? therefore it's quite a big leap if you are mainly domestic, but you limit yourself if you sit under it, I know what you're saying lee, we are quite limited to what we can claim back to what we will be giving the taxman but I personally want to grow my business into a sizeable one so havo no choice
Graham
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We are flat rate VAT.
Got to be in it to win it.
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VAT is defo what you will attract if your a growing business.....
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Graham the difficult thing is that window cleaning requires very little out put.
If you're AT registered you'll be employing, thats a large output in anyones books.
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Lee like someone half mentioned start another company. Yes I know two sets of accounts etc but could save you time and money.
"Lee B cleaning"
"Lees window cleaning"
For example ;D even when you reach the threshold on that second company start another even, then amalgamate the lot and then by then you should have a sizeable enough company to be able to absorb the VAT. Or have a "group".
Just a thought
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Sure that would work. Vat man wouldnt have seen such shrewdness before. :)
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Sure that would work. Vat man wouldnt have seen such shrewdness before. :)
;D ;D
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Lee like someone half mentioned start another company. Yes I know two sets of accounts etc but could save you time and money.
"Lee B cleaning"
"Lees window cleaning"
For example ;D even when you reach the threshold on that second company start another even, then amalgamate the lot and then by then you should have a sizeable enough company to be able to absorb the VAT. Or have a "group".
Just a thought
Now there is an idea :)
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Lee like someone half mentioned start another company. Yes I know two sets of accounts etc but could save you time and money.
"Lee B cleaning"
"Lees window cleaning"
For example ;D even when you reach the threshold on that second company start another even, then amalgamate the lot and then by then you should have a sizeable enough company to be able to absorb the VAT. Or have a "group".
Just a thought
Now there is an idea :)
Yes, there is an idea. A very bad one.
Do not avoid registering for VAT by artificially separating business activities
If you run more than one business, the sales in all those businesses must normally be added together to determine whether or not you must register for VAT.
However, if you are involved in the running of several separate legal entities, you may not need to combine the sales of those businesses to find whether you need to be VAT-registered.
If HMRC decides that you have artificially separated one business into smaller parts to avoid registering for VAT, it can decide that the entire business is a single taxable person and therefore must be registered for VAT. See the description of 'taxable person' in the section in this guide on who can and can't register for VAT.
Situations that HMRC may consider a single taxable person for VAT purposes include:
- Separate entities selling to registered and unregistered customers. The VAT-registered entity sells only to VAT-registered customers, and the entity not registered for VAT sells to customers who are not registered for VAT.
- The same equipment or premises being used by different entities on a regular basis. The premises and/or equipment are owned by one of the parties, who charges rent to the others. This situation may occur in businesses such as launderettes and takeaway food operations.
- Splitting up what is usually a single sale. This is common in industries such as the bed and breakfast trade, where one business supplies the bed and another the breakfast.
If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, the matter will be investigated and you may be prosecuted.
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Lee like someone half mentioned start another company. Yes I know two sets of accounts etc but could save you time and money.
"Lee B cleaning"
"Lees window cleaning"
For example ;D even when you reach the threshold on that second company start another even, then amalgamate the lot and then by then you should have a sizeable enough company to be able to absorb the VAT. Or have a "group".
Just a thought
Now there is an idea :)
Yes, there is an idea. A very bad one.
Do not avoid registering for VAT by artificially separating business activities
If you run more than one business, the sales in all those businesses must normally be added together to determine whether or not you must register for VAT.
However, if you are involved in the running of several separate legal entities, you may not need to combine the sales of those businesses to find whether you need to be VAT-registered.
If HMRC decides that you have artificially separated one business into smaller parts to avoid registering for VAT, it can decide that the entire business is a single taxable person and therefore must be registered for VAT. See the description of 'taxable person' in the section in this guide on who can and can't register for VAT.
Situations that HMRC may consider a single taxable person for VAT purposes include:
- Separate entities selling to registered and unregistered customers. The VAT-registered entity sells only to VAT-registered customers, and the entity not registered for VAT sells to customers who are not registered for VAT.
- The same equipment or premises being used by different entities on a regular basis. The premises and/or equipment are owned by one of the parties, who charges rent to the others. This situation may occur in businesses such as launderettes and takeaway food operations.
- Splitting up what is usually a single sale. This is common in industries such as the bed and breakfast trade, where one business supplies the bed and another the breakfast.
If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, the matter will be investigated and you may be prosecuted.
Not if you have a franchisee ;)
Ask Ian Lancaster :)
He has around 9 or 10 franchisee and still don't pay V.A.T. :)
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Franchises are something altogether different.
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Rather than telling the residential customer you are charging 20% extra for vat ,could you not charge them maybe 10% more( if they haven't already been hiked up in the past few years )as just a price rise ? Your lose 10% but saves losing customers,im not really sure how the vat works but they don't need to know that they are paying vat do they?
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Lee
I have just gone vat registered (8/3/13) and so far it's been ok for me what I have done is put all commercial up by 20% and then gauged my domestics some have gone up 20% and some 10% but because I can claim vat back I don't mind loosing out on the odd domestic
Another plus is you can claim vat back on all equipment and vehicals spent over the last 4 years
Are you sure about this? Surely if something was bought 4 years ago you would have claimed it as a business expense to reduce your taxable income for that financial year?
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Yes I'm very sure but its only on vehicals and equipment you still have and still have the recites for