[julieg]

I started a domestic cleaning service last year, which has now grown to a point where we need to look at registering VAT. This appears to have several implications eg increase pricing for client, which I was looking to do anyway. I am quite shocked as to how much VAT I will be paying compared to how much money I will be making an am wondering whether its worth it. I want to grow the business and know that there is lots of potential. It is hard work and I don't mind that but there needs to a reasonable return. I was charging around 12.50 per hour to clients, am based in surrey. Because of the VAT I need to look at charging around £19 per hour. Any thoughts out there?       

julieg

[Tim Downer]

Hi julieg

I thought VAT was about 17.5% ??

£12.50 plus VAT at 17.5% = £14.69!!

Even if you give yourself a 20% rise to your services £12.50 + 20% = £15.00 per hour plus VAT = £15.00 + 17.5% = £17.63

Regards

Tim

[gary j]

julie
      been on the flat rate scheme now for a year where i charge the customer 17.5% but pay the vat man 11% based on my vat inclusive sales. For the first year you will get a 1% reduction just try to keep your sales down to below 150,000 per annum otherwise you will have to revert back to normal accounting rules.

hope this helps

gary j

[Jan K]

Are your VAT applied overheads that high that you have to register, it is optional to register. I don't forsee my overheads being that high that I have to register, my Clients supply all the cleaning materials and machines and the only thing I am paying VAT on is my petrol, and you can claim a substantial amount of that back. Perhaps you could look at what you are paying VAT on and see if you can cut back there rather than increasing your prices. You could end up losing a lot of Clients as they would not be prepared to carry your increase. At the end of the day when you quoted your rates to your Clients they were happy with the price, otherwise they would have gone elsewhere. If you hike the prices up but aren't offering anything extra you will lose some..........take it from me I know it happened to me, luckily enough I managed to save some of my exisitng Clients by reverting back to my original price (an I only increase my prices from £7.00 to £8.00 per hour)!!

[Fox]

Jan ?? - What are you talking about?

Being VAT registered is not optional when you hit the turnover threshold.  This does not apply to purchase but to sales, so am finding your post completely confusing!

Julieg - Timbob is right in his calculation so where did you get the idea of increasing to £19.00 even with a decent % increase of profit this is high.  You will find that most clients will accept the conversion to VAT as they then see you as a thriving business (they also may want to put the invoice through their own books, where applicable).

Fox

[martin19842]

hi there,

jan

"Are your VAT applied overheads that high that you have to register, it is optional to register. "

if your turnover exceeds the threshold then you have to register for VAT.


julie, i dont understand your comment re surprised about amount of VAT to pay.  You offset input VAT against output VAT,  therefore whilst charging VAT on supplies to your clients, you will obviously reclaim VAT on purchases.

We registered from day one, and therefore clients know nothing else.

garyj, i agree re the flat rate VAT scheme, however i think that many companies with an expanding business, in this sector will find turnover quite quickly accelerate through the £150k barrier.

regards

martin

[Jan K]

yea sorry guys, i know that you have to register once you get to the threshold.........i misread Julie's post and was assuming that she was opting to register before she she reached the point of having to register!

[julieg]

thanks for the feedback that's helpful. My apologies I didn't come across very clear. So just to clarify I had in mind to up the price to about £15, because the business was not  making enough money.

We provide all the equipment and cleaning products. On this basis this more or less takes me to the threshold. On this basis I will be making a profit of around 17k charging the client £15 plus VAT, which seems an awful lot. I know I will lose a lot of clients, but I do want to run this as a business and 17k does not seem an unreasonable profit, given the amount of time and effort it takes to manage and support the business.   

Its ok for commercial cleaning because most companies can claim back the VAT but residential clients can't do that.

Julieg 

[Jan K]

Hi Julie!

You didn't post wrongly, it really was me misreading...........it is great you are making such a good profit and that your business is thriving, well done. 

[martin19842]

hi there,

julie,

are you looking at 17 k being profit after you have taken your salary.

there are several questons to be answered,

1.) how many clients have you got,?

2.) what is the average customer spending per week or calender month, ie how many hours cleaning per week.

3.) what percentage of your weekly charge are you using in material costs, ?

if you want to pm me, then i am more than willing to provide further detailed info if you wish.

we are launching our domestic side at the present timew to compliment our commercia cleaining operations, our commercial cleaning side is fully on target and therefore wouldnt expect anything less from the domestic side.  to give you an idea, we will be putting vehicles on the road, and looking for an annual turnover  of £94k, and delivering a nett profit of 20%

REGARDS

martin

[Prestige1]

Julie
hows your pricing going with the Vat? do you think its worth doing domestics?
Regards Phil

[Just a cleaner.]

My Clients supply all the cleaning materials and machines and the only thing I am paying VAT on is my petrol, and you can claim a substantial amount of that back.

Sounds weird that!  I don't mean to be rude - though I probably will appear to be. If you only provide labour with no other supplies you are not, according to Her Majesties Tax People, self employed.  Therefore you don't need to worry about VAT.

If you supply the labour of others without cleaning supplies and equipment then you are in essence an employment agency for cleaners not a cleaning company.

I'm confused.  I think we should debate that in more detail

Sorry if I have come across as a bit of a sod Jan

[Jan K]

tis pretty much irrelevant now as back then I had only been going a few months and was still learning.........the day-to-day running of the business has changed immensely

[Tim Downer]

Just thought i would throw this in without thinking, as i have just got into the office and not even put the kettle on!!

When i have too much work on for my teams, i have been using Blue Arrow cleaners. They are as you have said, an agency supplying cleaners only and they charge me VAT!!

No doubt after a cup of coffee i will realise what i have just said?

All the best to you all

Tim

[martin19842]

hi there

VAT is based upon turnover, and then the type of business you are in, some services are VAT exempt.

ie build cleaning new build homes, technically its VAT exempt, if you charge it, then they just realcaim it.

[martin19842]

hi tim,

not in the office today well not officially,

worked all weekend again in Park Royal , on a build clean 16,000sq ft. on cherry pickers.  got the call last wednesday viewed it early thursday, purchase order submitted, work completed last night.

so not bad, and a nice invoice value.

only problem is ive now worked the last two weekends aswell as the weeks.

and then in october weve got a builders clean after kitchen works, five mondays 1.00am - 6.00am.

hey its all fun
regards


martin