[Perfect Windows]

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

[Perfect Windows]

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.



Vin

[ChumBucket]

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!!

[8weekly]

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!!

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. 

[ChumBucket]

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!!

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! Pretty much proves my point! LOL

[CleanClear]

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 

[Perfect Windows]

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  

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

[CleanClear]

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  

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.

[CleanClear]

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 ?

[Perfect Windows]

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