Hi Matt,
My turnover is still below the VAT limit as I don't have any other source of revenue apart from franchise royalties. As each member of any Franchised organisation is an individual business, then only those that achieve in excess of the limit are liable to register. If I were over the limit then I would have to charge VAT on the royalties which would increase the payments from the franchisees. I can't see this being very popular
. In practice I would leave the payments as they are and carry the VAT burden myself. That would reduce my income, of course but if I were still building my part of the business I would simply appoint another franchisee (or two), the income from that would cover my extra outgoings to the VAT man and generate a bit more profit for me. It's unlikely any individual franchisee would exceed the limit, but if they did the possibility is catered for in my contract - they would have to absorb the VAT without putting up my prices to the customer or replace any they lost as a result of adding VAT. It wouldn't affect me as the franchisees are my customers, not vice versa.
Cheers,
Ian
Ps If you want to continue this discussion can I suggest you start another thread?