Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: Marc Whitbread on January 27, 2015, 10:44:59 pm
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I am due to take the leap so using it as a time to review all costs.
Here is a typical reply from a accountant!
It's a £24 house 4/5 bed with con windows and has been this price for 5 years!!
Thanks for cleaning the windows yesterday. I have made a faster payment tonight.
Although we're pleased to hear the business is growing, an extra £4 is making it pretty pricey, so we will be looking for some other quotes for comparison. And of course you will now be able to reclaim the VAT paid on supplies, so the whole 20% won't be coming off your bottom line!
Kind regards
My Reply
I realise this however the reason for £4 increase is due to us never increasing your price in over 5 years of cleaning. We were due to do a price review this year however due to the VAT registration looming I have only taken VAT into consideration. If I was to charge the full 20% your price would have gone up by £4.80 instead of £4.00 In theory yes this is the case however I am still loosing some of my bottom line due to not passing on the full VAT charge to yourself also with being a service based company there is very little we can reclaim all but some fuel and a few supplies every quarter.
By all means I welcome you to get some other quotes if you feel necessary but I believe our service to still be of a competitive rate even with this raise in mind . Most cleaning companies insist on a monthly service that I know of so in theory some will be cheaper but when you double the price it actually comes out a lot more expensive.
Kind Regards,
Thoughts anyone? ;D
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In my opinion, and this is just my opinion, residential window cleaners should not be vat registered. I will always do my utmost to stay under the vat threshold, even if meant dropping a few customers.
You just can't charge vat for this kind of service, most people see it as a menial unskilled job and don't want to pay huge amounts of money to have it done, especially in uncertain economic times.
probably 90% of residential window cleaners are not vat registered and most customers would actually be shocked at being charged vat for this type of service.
Especially when they know they could easily swap you for someone cheaper.
The only way I would ever be vat registered is if I was confident I could absorb most of the costs without passing it my customers.
Most window cleaners I know in this neck of the woods split there business in order to avoid charging vat to customers.
Can you not do the same?
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Thoughts anyone? ;D
Assuming you're going ahead with your VAT registration and its encumbent price increase, then make a book of all your lost customers. Given your turnover to enter the VAT threshold i would imagine the loss of customers you will have will amount to a substantial amount for someone. Collate them all together to make a small monthly take and sell it as a small on going round. That way you can make a one off gain from your loss.
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Thanks for your reply Chris tbh I have been very fair and absorbed nearly all of the customers vat increases put the odd ones up a £1 or £2 however when a price hasn't been touched in 5 years and is under priced at that I feel it perfectly justified to use the pretence of VAT for a rise and at that not even a rise that I am pocketing. I have tried to go the non VAT route and if you need to employ to cope with demand it just isn't possible unfortunately I am going flat rate so it helps a tiny bit but I'll still loose the bulk also with your mention of splitting I know of people been caught out by doing this it is illegal in HMRC's eyes and if you get caught can be in for a lot of trouble. exluding the vat it just amused me that in 5 years it goes up once and its a major problem for a accountant with a 800k house and a 50 k car!
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Hi CleanClear I've tried to be as kind as I can on my customers well the ones I can afford to be and I must say the general attitude is well done we don't mind a few extra quid! I have probably nudged over 60 customers up a £1 or 2 or 3 on average depending on size etc and I haven't had any solid cancellations because of it. I don't forsee loosing many at all. I'm explaining to my customers that its a legal obligation for us and we don't expect them to pay the full 20% but we cant take the whole hit and 99% have been great about it you just get the odd one I guess!
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2 things about this:
Firstly, I would NEVER tell customers that I was increasing the price because of vat registration. That is simply not their problem, its yours. By all means, increase the price, but don't make an excuse for it.
Also, don't forget that some will immediately think "hang on, this window cleaner is earning £81,000! That's more than I earn and I'm clearly being overcharged. How dare someone who is a lowly window cleaner earn so much! He should know his place. He's sacked."
You will immediately cause jealousy from some, so why tell them? Just tell them the new price.
SECONDLY: For a business like window cleaning, where there are hardly any supplies that you can reclaim vat on, you should go on the flat-rate scheme.
I think from memory for window cleaning this is 12%, so simply increase your prices by 12% instead of 20%. That would make the £20 house only £22.40, which is a much more palatable amount.
(For those who don't know, flat rate scheme is where you pay only 12% (not 20%) BUT you do not claim any vat on things you purchase.)
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I agree with the customer.
If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!
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2 things about this:
Firstly, I would NEVER tell customers that I was increasing the price because of vat registration. That is simply not their problem, its yours. By all means, increase the price, but don't make an excuse for it.
Also, don't forget that some will immediately think "hang on, this window cleaner is earning £81,000! That's more than I earn and I'm clearly being overcharged. How dare someone who is a lowly window cleaner earn so much! He should know his place. He's sacked."
You will immediately cause jealousy from some, so why tell them? Just tell them the new price.
SECONDLY: For a business like window cleaning, where there are hardly any supplies that you can reclaim vat on, you should go on the flat-rate scheme.
I think from memory for window cleaning this is 12%, so simply increase your prices by 12% instead of 20%. That would make the £20 house only £22.40, which is a much more palatable amount.
(For those who don't know, flat rate scheme is where you pay only 12% (not 20%) BUT you do not claim any vat on things you purchase.)
I agree Pete, don't tell the customer it's a price increase because of VAT. A simple price increase letter should be fine, no need to go into detail.
Also agree with the flat scheme of 12%. I do think for VAT not to be so much of an issue you'd need to be turning over £130k+. This in turn means more customers, help getting the work done, more payment chasing etc. A good way of doing it is getting a fair bit if commercial work where you can charge 20% VAT and only pay 12% to the tax man. But then obviously corporation tax on the remaining 8% would need to be paid too. I think if you're near the VAT threshold then big plans need to be made to increase business and turnover dramatically.
Tom
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I agree with the customer.
If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!
It's funny how we're all different. I'd pay the VAT as he's obviously good enough to have enough work to be charging it. And also we pay VAT on pretty much anything. But there are more window cleaners non VAT reg than VAT reg ones so it's easy to save a couple of quid.
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Thanks for the replies I went backwards and forwards as to whether to tell people I asked a few customers their opinions on standard price rise vs vat and all of them said the they would rather be told vat than a standard price rise.
I have had a few where I have told them price is going up when the 2 or 3 have moaned I have then explained why its going up and they have then said fair enough suppose its not your fault. apart from this one out of about 70 rises or so I have not lost one customer yet however if I had just said your price is going up (because I want more money) I feel the result would have been quite different from the one I have had so far. It doesn't sit right with me to just say hey I'm putting your price up £3 and giving no reason other than "costs Rising" but each to their own apart from the vat I just found it funny for him to reply with that after no rise in over 5 years.
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In my opinion, and this is just my opinion, residential window cleaners should not be vat registered. I will always do my utmost to stay under the vat threshold, even if meant dropping a few customers.
You just can't charge vat for this kind of service, most people see it as a menial unskilled job and don't want to pay huge amounts of money to have it done, especially in uncertain economic times.
probably 90% of residential window cleaners are not vat registered and most customers would actually be shocked at being charged vat for this type of service.
Especially when they know they could easily swap you for someone cheaper.
The only way I would ever be vat registered is if I was confident I could absorb most of the costs without passing it my customers.
Most window cleaners I know in this neck of the woods split there business in order to avoid charging vat to customers.
Can you not do the same?
Technically that's illegal.
http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/vat/reg-how-to.htm#3
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 artificially separate 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.
Situations that HMRC may consider a single taxable person for VAT purposes include:
Separate entities selling to registered and unregistered customers. The VAT registered business sells only to VAT registered customers and the business 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 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.
Just sayin like.
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Soupy.
So what if you split the business.
One business is window cleaning and is WFP and say I dunno gutter clearing which is ladder work.
How can they say it's the same business. ?
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That's two different businesses. He's talking about splitting the round to avoid registering for VAT.
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Soupy.
So what if you split the business.
One business is window cleaning and is WFP and say I dunno gutter clearing which is ladder work.
How can they say it's the same business. ?
Are you going to use the same car/van to get the gear to the customers house? If trad, do you use the same ladder to empty the gutters?
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That's two different businesses. He's talking about splitting the round to avoid registering for VAT.
I was asking for myself :)
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Soupy.
So what if you split the business.
One business is window cleaning and is WFP and say I dunno gutter clearing which is ladder work.
How can they say it's the same business. ?
Are you going to use the same car/van to get the gear to the customers house? If trad, do you use the same ladder to empty the gutters?
No No and No :)
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2 things about this:
Firstly, I would NEVER tell customers that I was increasing the price because of vat registration. That is simply not their problem, its yours. By all means, increase the price, but don't make an excuse for it.
Also, don't forget that some will immediately think "hang on, this window cleaner is earning £81,000! That's more than I earn and I'm clearly being overcharged. How dare someone who is a lowly window cleaner earn so much! He should know his place. He's sacked."
You will immediately cause jealousy from some, so why tell them? Just tell them the new price.
SECONDLY: For a business like window cleaning, where there are hardly any supplies that you can reclaim vat on, you should go on the flat-rate scheme.
I think from memory for window cleaning this is 12%, so simply increase your prices by 12% instead of 20%. That would make the £20 house only £22.40, which is a much more palatable amount.
(For those who don't know, flat rate scheme is where you pay only 12% (not 20%) BUT you do not claim any vat on things you purchase.)
I've never been VAT registered and probably never will be - so the following is someting I was told by another window cleaner who has gone down this route.
If you are planning to build a massive business, the flat rate scheme is only any good up to a point (I think it was £150k then). After that, the regular VAT scheme has to be employed. Switching from flat rate to normal VAT at around £150k can have its own headache attached apparently. It sounded to me like someone who intends to keep building beyond that amount might find it easier to have the headache of VAT registering and going for the more complex VAT system all in one go. Obviously, if there is no intention of reaching the level where complex VAT becomes compulsory, the flat rate would be fine.
Don't take my word for this as I am merely paraphrasing someone else's opinion.
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Just get all the custys to pay cash! Simples!
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That's two different businesses. He's talking about splitting the round to avoid registering for VAT.
Splitting the business is what I said, not the round. I know perfectly well splitting the round would be illegal but what I meant was as number 23 said, split the windows from the gutters, fascias, cladding, jet washing etc. That's perfectly legal.
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Company near me do bin cleaning, window cleaning, gutter cleaning, carpet cleaning. All 4 are run by the same guy from the same depot yet are completely separate from each other.
I know they pay vat on the bin side as it's all commercial but the other bits are not vat registered.
I do believe they will also be splitting the residential window cleaning from the commercial into 2 different businesses soon to avoid the vat for the residential.
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I am probably talking out of my Arse here but if you are VAT registered you claim back the VAT on expences meaning your overheads are lower, but you charge VAT on your fees.
So if your overheads are lower as you reclaim the VAT your charges to the customer can be lower, but with the VAT added that will make them the same as before VAT registration?
This is probably wrong but its how I understand it??
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I am probably talking out of my Arse here but if you are VAT registered you claim back the VAT on expences meaning your overheads are lower, but you charge VAT on your fees.
So if your overheads are lower as you reclaim the VAT your charges to the customer can be lower, but with the VAT added that will make them the same as before VAT registration?
This is probably wrong but its how I understand it??
I may be wrong but that's pretty much how I understand it too. However, if the main outgoing is labour - often the case with growing window cleaning firms, it's unlikely that VAT will be charged on that. So it's mainly vehicles & maintenance, fuel, poles and filtering equipment i.e. getting relatively little VAT back compared to what you have to pay the VATman. If you were, say, buying goods and selling them on, the differential would surely be much less.
Also, there would be a higher accountancy fee that would need to be covered.
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Investigated splitting the franchise business and the cleaning business.
The VAT consultant said that the businesses were definitely different enough. He also said that each business would need its own vehicles, tools, paperwork, computers and even broadband accounts.
He gave me the case of a plumber in (I think) Essex which had a commercial and a domestic business. They were lumped together after HMRC found out that one of the businesses had been round the corner from the other and they had provided a spare part.
He said that if I split the businesses and was out cleaning and a franchisee in the next street needed a spare part, I'd need to come home, change out of my uniform, get into the car, take the part, come home, change back and go out in the van.
Since I had the chat with the VAT consultant, I just smile wryly when I hear the "split the business, it's simple "advice.
Vin
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That's two different businesses. He's talking about splitting the round to avoid registering for VAT.
I was asking for myself :)
I couldn't split my round up because the kit i was using wouldn't be solely used on VAT reg jobs.
Well, I could. The accountant said i could probably do it for a year. Maybe longer. But sooner or later they'd find out and call it tax 'evasion' rather than 'avoidance'. The kicker being, only one is illegal.
I could 'just about' get away with splitting the office cleaning and window cleaning. But she sort of frowned when i asked. Not a 'no' per se. But asking for trouble.
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I ain't splitting up anything was just wondering. :)
79,999 is more than enough for 7 months work of the year.
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I agree with the customer.
If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!
Most people won't find a £1.75 or so increase on their bill every month or two months such a hardship.
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I agree with the customer.
If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!
Most people won't find a £1.75 or so increase on their bill every month or two months such a hardship.
You shouldn't underestimate the "principle" factor. I wouldn't utter a word about paying VAT to domestic customers.
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I agree with the customer.
If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!
Most people won't find a £1.75 or so increase on their bill every month or two months such a hardship.
£1.75 would be the VAT on a £9 clean my average clean is about £15 so an extra £3 to the tax man, I personally would not pay it if there were alternatives
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I avoid vat at all costs where possible, apart from when it would be to the detriment of the service or product. I don't recall having ever failed to achieve a none vat purchase of equal or better standard to the vat charged alternative.
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I agree with the customer.
If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!
Most people won't find a £1.75 or so increase on their bill every month or two months such a hardship.
£1.75 would be the VAT on a £9 clean my average clean is about £15 so an extra £3 to the tax man, I personally would not pay it if there were alternatives
If you added 12% (flat rate) it would be £1.80 on £15.
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Investigated splitting the franchise business and the cleaning business.
The VAT consultant said that the businesses were definitely different enough. He also said that each business would need its own vehicles, tools, paperwork, computers and even broadband accounts.
He gave me the case of a plumber in (I think) Essex which had a commercial and a domestic business. They were lumped together after HMRC found out that one of the businesses had been round the corner from the other and they had provided a spare part.
He said that if I split the businesses and was out cleaning and a franchisee in the next street needed a spare part, I'd need to come home, change out of my uniform, get into the car, take the part, come home, change back and go out in the van.
Since I had the chat with the VAT consultant, I just smile wryly when I hear the "split the business, it's simple "advice.
Vin
So is your franchise business VAT registered?
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I agree with the customer.
If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!
Most people won't find a £1.75 or so increase on their bill every month or two months such a hardship.
£1.75 would be the VAT on a £9 clean my average clean is about £15 so an extra £3 to the tax man, I personally would not pay it if there were alternatives
If you added 12% (flat rate) it would be £1.80 on £15.
Exactly. You don't HAVE to charge 20% VAT. Like 8weekly said increase by 12% and pay flat rate 12%. Any commercial work charge 20%VAT and pay 12%. Still have to pay tax on the 8% but it all helps.
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My accountant told me if you I hit the vat threshold it will cost me £10,000 a year
extra
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My accountant told me if you I hit the vat threshold it will cost me £10,000 a year
extra
Unless you pass it on, in which case it won't cost a penny. When I hit it, I will pass it on and will tell them. To be honest those that cancel because I have gone vat registered are the type of customer I don't want or target.
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My accountant told me if you I hit the vat threshold it will cost me £10,000 a year
extra
Unless you pass it on, in which case it won't cost a penny. When I hit it, I will pass it on and will tell them. To be honest those that cancel because I have gone vat registered are the type of customer I don't want or target.
It still costs as the extra your charging customers is going to the vat man and not into your pocket, so if you think about it
you could be charging these higher prices and not be vat registered.
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It still costs as the extra your charging customers is going to the vat man and not into your pocket, so if you think about it
you could be charging these higher prices and not be vat registered.
Can you please stop stating obvious facts and let them believe being VAT registered is better, thanks !!!
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Being VAT registered isn't better. It's not really something you have a choice in after you've made the decision to grow beyond the threshold (it was 58k when I went past it).
Sure you can 'split the business' but unless you do it extremely well and know exactly what you are doing you'll end up worse off.
When we hit the threshold we put the prices up 10% which is about our normal increase. The flat rate then was 11% so we took a 1% hit.
As for not telling your customers, I have an inc VAT on all receipts along with my VAT reg number. No one gives a toss.
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It still costs as the extra your charging customers is going to the vat man and not into your pocket, so if you think about it
you could be charging these higher prices and not be vat registered.
Can you please stop stating obvious facts and let them believe being VAT registered is better, thanks !!!
You are making the mistake of thinking that going VAT registered is a choice. It isn't if you run a legitimate business and go over the threshold. Only a fool would choose to be a tax collector for the VAT man and only a fool would think that anyone would consider it desirable.
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It still costs as the extra your charging customers is going to the vat man and not into your pocket, so if you think about it
you could be charging these higher prices and not be vat registered.
Can you please stop stating obvious facts and let them believe being VAT registered is better, thanks !!!
You are making the mistake of thinking that going VAT registered is a choice. It isn't if you run a legitimate business and go over the threshold. Only a fool would choose to be a tax collector for the VAT man and only a fool would think that anyone would consider it desirable.
It is a choice mate.
One chooses to go over the threshold if the work comes in.
Or deliberately stays under it, legally.
Perhaps by selling some work as the business grows.
Thereby choosing to stay under.
A lot choose to go over as they want to grow their business.
A lot choose to stay under for their own reasons.
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It would seem at times on here, people see it as some kind of achievement, something to boast about, not having a clue of the implications!! That's CIU!! ;D
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Investigated splitting the franchise business and the cleaning business.
The VAT consultant said that the businesses were definitely different enough. He also said that each business would need its own vehicles, tools, paperwork, computers and even broadband accounts.
He gave me the case of a plumber in (I think) Essex which had a commercial and a domestic business. They were lumped together after HMRC found out that one of the businesses had been round the corner from the other and they had provided a spare part.
He said that if I split the businesses and was out cleaning and a franchisee in the next street needed a spare part, I'd need to come home, change out of my uniform, get into the car, take the part, come home, change back and go out in the van.
Since I had the chat with the VAT consultant, I just smile wryly when I hear the "split the business, it's simple "advice.
Vin
So is your franchise business VAT registered?
Not yet but the problem I will come upon reasonably soon is caused by the fact that I still do a cleaning round as well. The combined turnover will be the problem, so I (briefly) considered splitting the businesses until I saw what the implications of that decision might be. When you're thinking of (as a very small business) getting down to the level of having two desks as part of the separation of businesses, you have to give up. I really do take with a pinch of salt the tales of "just split the business" as a simple process. The people in those tales are either not telling the truth or they are going to get a hell of a shock when they get a retsrospective VAT bill plus penalties for the past six years.
Vin
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It still costs as the extra your charging customers is going to the vat man and not into your pocket, so if you think about it
you could be charging these higher prices and not be vat registered.
Can you please stop stating obvious facts and let them believe being VAT registered is better, thanks !!!
You are making the mistake of thinking that going VAT registered is a choice. It isn't if you run a legitimate business and go over the threshold. Only a fool would choose to be a tax collector for the VAT man and only a fool would think that anyone would consider it desirable.
If you're predominantly doing commercial work, being VAT registered is a good thing. And you can voluntarily register even under the threshold.
Here's some simple accounts.
Turnover - 10,000
Expenses - 2,400 (£2,000 plus £400 VAT)
Profit £7,600
Register for VAT
Turnover - £12,000 (£10,000 plus £2,000 VAT)
Expenses - £2,400 (£2,000 plus £400 VAT)
Payment to Inland Revenue = £2,000 of VAT charged less £400 of VAT paid = £1,600
Profit £8,000
So, if you only do commercial you're better off being VAT registered.
(http://i1359.photobucket.com/albums/q797/Onionman9999/Flamewar_zpssceubcuw.jpg) (http://s1359.photobucket.com/user/Onionman9999/media/Flamewar_zpssceubcuw.jpg.html)
Vin
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Investigated splitting the franchise business and the cleaning business.
The VAT consultant said that the businesses were definitely different enough. He also said that each business would need its own vehicles, tools, paperwork, computers and even broadband accounts.
He gave me the case of a plumber in (I think) Essex which had a commercial and a domestic business. They were lumped together after HMRC found out that one of the businesses had been round the corner from the other and they had provided a spare part.
He said that if I split the businesses and was out cleaning and a franchisee in the next street needed a spare part, I'd need to come home, change out of my uniform, get into the car, take the part, come home, change back and go out in the van.
Since I had the chat with the VAT consultant, I just smile wryly when I hear the "split the business, it's simple "advice.
Vin
So is your franchise business VAT registered?
Not yet but the problem I will come upon reasonably soon is caused by the fact that I still do a cleaning round as well. The combined turnover will be the problem, so I (briefly) considered splitting the businesses until I saw what the implications of that decision might be. When you're thinking of (as a very small business) getting down to the level of having two desks as part of the separation of businesses, you have to give up. I really do take with a pinch of salt the tales of "just split the business" as a simple process. The people in those tales are either not telling the truth or they are going to get a hell of a shock when they get a retsrospective VAT bill plus penalties for the past six years.
Vin
I agree, the consequences could be devastating!!
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It would seem at times on here, people see it as some kind of achievement, something to boast about, not having a clue of the implications!! That's CIU!! ;D
I do think growing very profitably to a turnover of over £85,000 is an achievement. Do you not?
Unfortunately it brings the problem of VAT. But it is not unmanageable as can be seen from others that get through it. Most customers won't give a flying duck about VAT.
I would say "that's CIU" to those always trying to second guess what customers think or how they will respond. Whether it's rain, price, VAT, WFP - whatever, most customers just want a regular reliable service and won't care about any of the things you lose sleep over. Take it easy. ;)
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It would seem at times on here, people see it as some kind of achievement, something to boast about, not having a clue of the implications!! That's CIU!! ;D
I do think growing very profitably to a turnover of over £85,000 is an achievement. Do you not?
Unfortunately it brings the problem of VAT. But it is not unmanageable as can be seen from others that get through it. Most customers won't give a flying duck about VAT.
I would say "that's CIU" to those always trying to second guess what customers think or how they will respond. Whether it's rain, price, VAT, WFP - whatever, most customers just want a regular reliable service and won't care about any of the things you lose sleep over. Take it easy. ;)
Again...... SO CIU! ;D ;D Pretty much proves my point! LOL
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If you're predominantly doing commercial work, being VAT registered is a good thing. And you can voluntarily register even under the threshold.
Here's some simple accounts.
Turnover - 10,000
Expenses - 2,400 (£2,000 plus £400 VAT)
Profit £7,600
Register for VAT
Turnover - £12,000 (£10,000 plus £2,000 VAT)
Expenses - £2,400 (£2,000 plus £400 VAT)
Payment to Inland Revenue = £2,000 of VAT charged less £400 of VAT paid = £1,600
Profit £8,000
So, if you only do commercial you're better off being VAT registered.
Based on the above examples, tax credits would make up earnings in both cases to the same minimum amount or equivalent. Only one of them will have the headache of filling in VAT returns ;D
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If you're predominantly doing commercial work, being VAT registered is a good thing. And you can voluntarily register even under the threshold.
Here's some simple accounts.
Turnover - 10,000
Expenses - 2,400 (£2,000 plus £400 VAT)
Profit £7,600
Register for VAT
Turnover - £12,000 (£10,000 plus £2,000 VAT)
Expenses - £2,400 (£2,000 plus £400 VAT)
Payment to Inland Revenue = £2,000 of VAT charged less £400 of VAT paid = £1,600
Profit £8,000
So, if you only do commercial you're better off being VAT registered.
Based on the above examples, tax credits would make up earnings in both cases to the same minimum amount or equivalent. Only one of them will have the headache of filling in VAT returns ;D
OK.
Turnover - 70,000
Expenses - 16,800 (£14,000 plus £2,800 VAT)
Profit £53,200
Register for VAT
Turnover - £84,000 (£70,000 plus £14,000 VAT)
Expenses - £16,800 (£14,000 plus £2,800 VAT)
Payment to Inland Revenue = £14,000 of VAT charged less £2,800 of VAT paid = £11,200
Profit £56,000
£2,800 for filling out a simple (and it is simple) form four times a year. Not what I'd call "foolish".
Now make a cocky comment on that.
Vin
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If you're predominantly doing commercial work, being VAT registered is a good thing. And you can voluntarily register even under the threshold.
Here's some simple accounts.
Turnover - 10,000
Expenses - 2,400 (£2,000 plus £400 VAT)
Profit £7,600
Register for VAT
Turnover - £12,000 (£10,000 plus £2,000 VAT)
Expenses - £2,400 (£2,000 plus £400 VAT)
Payment to Inland Revenue = £2,000 of VAT charged less £400 of VAT paid = £1,600
Profit £8,000
So, if you only do commercial you're better off being VAT registered.
Based on the above examples, tax credits would make up earnings in both cases to the same minimum amount or equivalent. Only one of them will have the headache of filling in VAT returns ;D
OK.
Turnover - 70,000
Expenses - 16,800 (£14,000 plus £2,800 VAT)
Profit £53,200
Register for VAT
Turnover - £84,000 (£70,000 plus £14,000 VAT)
Expenses - £16,800 (£14,000 plus £2,800 VAT)
Payment to Inland Revenue = £14,000 of VAT charged less £2,800 of VAT paid = £11,200
Profit £56,000
£2,800 for filling out a simple (and it is simple) form four times a year. Not what I'd call "foolish".
Now make a cocky comment on that.
Vin
Hang on. You've edited your quote now. You did say if you where on tax credits that you must be doing something wrong. Thats incorrect, but we can come back to that. The 10K turnover you gave is not a good example, as i pointed out. Now you appear to view my reply as "cocky " , and you want another one ?
Ok, the math you have done above whilst it is correct it is not a realistic account or anywhere near a typical account of such a turnover. It would entail a sole operator cleaning approx £1,350 work evry week of the year. And even with an extortionate amount of fuel used per week, a top end vehicle lease and system lease should not get you near them expense figures for one man. Maybe there's a wage in there, go on break it down some more....
I do broadly agree, for commercial work mainly, its neither here nor there.
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I do broadly agree, for commercial work mainly, its neither here nor there.
Of course you will need to pay the VAT whilst you wait for your invoices to come in, or do they let you pay it on a cash recieved basis ?
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As I said, they were "simple accounts". They were intended to illustrate the point, which is that if you do commercial work, the VAT you pay out on VATable inputs becomes profit if you voluntarily register. They were not intended to be used for a forensic accounting exercise.
Vin