Clean It Up
UK General Cleaning Forum => General Cleaning Forum => Topic started by: leuthedog on August 20, 2006, 01:42:15 pm
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In need of more advice or opinions.
I have read and heard of some businesses not registering for VAT due to not reaching the turnover that is needed in order to start paying VAT. However, I've also heard that some new businesses will register for VAT and will charge their clients VAT, even if they don't need to, since many companies expect to pay VAT - in this situation what happens to the money that is claimed from a company as VAT? If you have registered for VAT but your yearly turnover does not require you to pay anything then....well, who keeps the extra money?
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I think that you have this the wrong way round, if you charge your client's VAT, you then pay this direct to Revenue & Customs minus your own inputs, there is no extra money!
Hope this helps.
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Well, this is what I am confused about. If you don't have to pay VAT due to turnover and you pay the VAT would this money not be returned on the basis that your turnover has not exceeded that that is required?
Sorry if it appears to be a silly question but hearing what I had certainly confused the hell out of me! ;D
Thanks for your quick response btw!
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If you register for vat, you have to charge vat to clients then in turn as Robert said you have to pay it to revenue and customs.
There's no legal requirement to register for vat unless your turnover goes over 61K ( well i think that's the figure now, but i might be wrong)
Arthur
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If you are not required to register for VAT (current/expected turnover less than £61k) and you charge VAT on top of your prices then you have to register and pay the VAT charged to HMRC. You cannot charge VAT if you are not registered. You can charge VAT only after you have submitted a VAT registration application.
Hope that helps.
Regards
Nick
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You have to register for VAT if your turnover exceeds the current limit.
However you may also voluntarily register for VAT.
If you register you add 17.5% to all your invoices.
When you come to do your vat return you total up all your sales net of vat, then the amount of vat you have received.
Then you need to add up everything you have spent on supplies, fuel, rent, equipment etc. Then the amount of vat you have paid out on these things.
You then subtract what you have paid in vat from the amount you have received. This amount is then paid to revenue & customs.
It is all pretty straight forward. It has major benefits if your customers are mainly commercial as they will claim back the vat they have paid you on their returns. But it means you also claim back the vat you have paid out, which can be substantial if you are purchasing vehicles or equipment.
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basicly if you buy lets say a comercial van for £3500inc vat
if you are not vat registered the full cost of your buy is £3500
but if you are vat registered the real cost will only be £3000 as you will recieve the vat you have paid on the van.
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I suppose to sum up, if you have been issued with a VAT number you must charge VAT and this means you can claim the vat you pay back. As business's genrally make a proffit you will nearly always owe the VAT man money. This makes you an unpaid tax collector
PS you can't charge VAT if you don't have a VAT number! IE you're not VAT registered.
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Many thanks for all your replies. It has been extremely informative.
So all those companies that aren't VAT registered but charging VAT to their customers (simply because those companies expect to pay VAT) are breaking the law!
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You can only charge VAT if you have a VAT number or have submitted and application for VAT registration. In any other cases it is illegal to collect VAT from your clients.
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And punishable with major penalties.
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And punishable with major penalties.
Tell me about it i was in one of her Majestys holiday camps for a long time for getting involved in that nonsense :-[
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You’ve highlighted a very good point their Ron, perhaps if the prison system wasn’t so cushy for the inmates, they wouldn’t be as full as they are ;D
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hi, have been reading this conversation and just wonderd, if you put a tender in for a commecial company, but does not include VAT in the price but the other tenders does include it, will the client go with the VAT registerd company rather than urself without it if that makes sence?
regards
matt
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I do not think it will make much difference to the client, as they will use the VAT system to get their money back.
For example, cleaning contractor No1's cleaning tender is £20,000 per year all inclusive.
Cleaning contractor No2's cleaning tender is for £20,000 plus VAT = total tender of £24,242.42 (£4,242.42 being the VAT)
The extra VAT that they have to pay for goods (in this example £4,242.42) they can claim back on the VAT they have to collect for the Tax man from their invoices etc. Someone else further down the line will collect the £4,242.42 money.....in theory.
The Tax man (or customs) will always end up getting their money anyway.....no matter how far down the line. That will be from us who are not VAT registered and have to pay it and not claim it back.
At the end of the day, the contract is still worth £20,000 either way.
Hope that helps.
Kind Regards
Tim
P.S Sorry to those of you who only got half this message........chuffing pressed the "post" button before i had finished ::) ::) ::)
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It doesnt make any difference to them as they claim it back, but they will know that you are only a small company as your turnover will be lower than the threshold, I would recommend that any one starting a business registers for vat, apart from claiming it back yourself, if you get halfway through your year and get a large contract that takes you over the threshold at the year end, you will owe the vat on all sales for that year.
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If you are under the limit, but are purchasing a lot of equipment, a vehicle etc, i would agree, it makes sense to be registered as you can claim it back.
It makes sense, does it not? Especially if you have to spend the money anyway - you might aswell get it claimed back if you can!!
Tim
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ok thanks for the repsonce.
so if you already have customers but dnt charge VAT on ur invoices now but them register for VAT will u have to tell them or just bill the with the VAT?
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I would probably let them know with either a letter enclosed with the Invoice for the accounts dept (the Invoice having the VAT included) or just contact the accounts dept via a letter for their records before the next Invoice was due.
Tim
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ok thanks
so u will get two seperate tax bills, one for VAT and other income TAX
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Their are a few ways you can do it, one is cash accounting scheme only if your turnover is less than 660k pa, you fill in a vat return every 3 months you minus what you have paid against what you have collected, this sum is then paid.
heres a link with loads of info:
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&resetCT=true&id=HMCE_CL_001208
regards
BSF
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thanks for your help
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Some of the contracts I have tendered for will not look at you unless you are VAT registered
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ok thanks for the repsonce.
so if you already have customers but dnt charge VAT on ur invoices now but them register for VAT will u have to tell them or just bill the with the VAT?
If you don't charge VAT now then your'e NOT VAT registered, when you become VAT registered you will be given a VAT regisration Number this then should be printed on you're invoce and VAT ADDED ON to the charge you make the client then claims the VAT back you charged him, so if client is VAT registered it makes no difference to him
IE you want £100 for a days labour, you bill client for £100 then add the VAT on to bottom of bill 17% = £17.50 total invoice £117.50 the client claims VAT element back if he's vat registered useing his reg number. You keep your £100 and pay the VAT element of your bill to CUSTOMS AND EXISE DEPT under your VAT number when you VAT returns are due.
The £100 that's yours you pay tax on at the end of the year when you submitt your books the two are really seperate as I said before when you are vAT registered you are simply an unpaid tax collector. As you are making a proffit you genrally pay more than you get back!
Not being VAT registered can make you uncompettitive when large amounts of materials is used, If say I was a Carpet fitter and the local hotel wanted all new carpets as I'm not VAT registered i can't charge VAT, but I pay VAT on the carpet from the wharehouse so, £1000 carpet bought VAT added on at warehouse £170 so I paid £1170 for carpet. When I bill the VAT registered hotel for carpet at £1170 (what I paid cos I'm not loosing out but cant show it as vat) they can't get the VAT element (£170) back from exise dept, so you se it can make you 17.5% over priced on materials aspect of a job.
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Drivewasher.....Surely those that are VAT registered would sell their carpets for £1,170 also.....because thats what they would have paid for it? Ok, they are going to be able to claim the VAT back......but you would have your VAT charge ontop of the £1,170 = £1,418......now you are more overpriced then the smaller company.
Am i wrong on that? (seeing as i am not VAT, but thats how i would see it)
Regards
Tim
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Tim,
I know I'm rambling now but my point is if your NOT vat registered you are 17.5% dearer on materials, because you have paid vat and pass it on as included in the price of goods (you can't list it as vat) you still have to get your cost of the good back off the client, even make a bit on it so you build the vat youv'e paid in the price otherwise you would sell thm £1170 of goods for £1000, don't forget the goods only cost £1000.
That's why companys don't quote price with vat as when dealing with other vat reg companys it doesn't matter as each company claims it back.
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Drivewasher.....Surely those that are VAT registered would sell their carpets for £1,170 also.....because thats what they would have paid for it? Ok, they are going to be able to claim the VAT back......but you would have your VAT charge ontop of the £1,170 = £1,418......now you are more overpriced then the smaller company.
Am i wrong on that? (seeing as i am not VAT, but thats how i would see it)
Regards
Tim
Here we go again, the old vat issue has reared its head again….
For starters £1000 plus 17.5% is £1175, not £1170, vat on £1170 is £204.75 = £1374.75……. not £1418.00??? a 20k contract plus vat is 23.5k not £24,242.42??? Tim.
If the example for the carpet was bought by a vat registered company at £1000 plus vat £1175.00, its cost him a grand (he claims back £175) if it was bought by a non registered company its cost £1175.00, so the vat registered company can sell it cheaper than the non registered company.
Getting back to the main post, its much better to register for vat from the start of your venture, as you can claim it back for all equipment and supplies, it also looks better to your commercial customers (as in your not a tiny company) domestic customers no, because you have to allow in your labour charge the 17.5% vat, which isn’t good because they aren’t vat registered and means they cant claim it back.
Regards
BSF ;D
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Mmmmmmm......looks like i will need a new calculator.
At least i can claim the money back from the Tax man when i get it.
Tim
:P :P
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Sorry!!! it was me who suggested £170 was 17.5% of £1000, I always rond figures in my head off. But as you see it did demonstrate the point.