[britishwill]

Hi guys

I am in a dilema.

I am right on the threshold with a turnover near £68,000. The problem I have is the VAT that I will have to add if I go over the amount will obviously mean I am worse off. I only have two commercial so the clients and the rest domestic so I cannot claim it back. Does anyone know if we pay the normal VAT rate ie 17.5%? The reason I ask is as I understand if you go for the flat rate VAT scheme you cannot claim back VAT but you could pay less VAT in return. Does anyone have any experience with this or advice. I have recently had a baby and the wife would love not to have to go back to work if I could bring in more dosh but I do not want to be worse off?
Has anyone else been in this situation.

Cheers

Will

[Sean Dyer]

you have two options 1. swallow the vat maybe raise prices where possible and go on flat rate about 10 - 11 % this may be a viable amount to raise prices??

2. stay under it and minimize overheads etc.. depends what you need to earn, or want to earn as to what you will do

theres no future in increasing your business unless you go over it though, if thats your plan i am currently sitting very close to it too but have one guy working with me and can make a comfortable living under it so will continue to do so for now..

by the way its 70 000 now

[bassjamm]

Hi Will,

As Sean mentioned, you can go for the flat rate which is around 11% for Window Cleaning I think.  You can still claim for some stuff with this if my memory serves me right.  I looked into this a while back as I'm approaching the threshold too.

I was looking into setting up a Limited company as well though and being a Director of that company, putting all my expenses through it, therefor releasing the pressure off my current business (but obviously maximising taxable income), and then running the limited company to the VAT limit before merging the two under one name to make the VAT pill a bit easier to swallow.

I'd need to speak with an accountant before taking action on that though as there are a lot of what if's.

Might be worth a thought though?

[britishwill]

Hi Sean

Yeh I forgot it 70 now!

Its just I think I will get bored if I cannot expand and grow to a point that being around 100 in my head. What makes me annoyed is that the government do not seem to want to make people like us and others in similar situations the change to make some money and grow bigger. I have hardly any cash payers maybe £50 a month! My other WC mates enjoy more cash payers!

[Sean Dyer]

split your window cleaning in to two??

thats called artificial separation and the taxman wont have it....

if you are approaching 70 000 and want to keep going you gotta pay vat simple as , if you do things legally that is !

same as you got to pay tax over a certain amount...

you can try seperating and similar things but it only causes hassle for later especially if you ever want to sell your business as such

[deeege]

Split your round into 2 and set up a new limited company. 2 companies with a turnover of £34k each and plenty of room to expand.

Seriously though, get advice from a tax accountant, a good one should and will save you thousands.

[Sean Dyer]

Hi Sean

Yeh I forgot it 70 now!

Its just I think I will get bored if I cannot expand and grow to a point that being around 100 in my head. What makes me annoyed is that the government do not seem to want to make people like us and others in similar situations the change to make some money and grow bigger. I have hardly any cash payers maybe £50 a month! My other WC mates enjoy more cash payers!

i know what you mean, the vat limit is very cleverly placed to make it hard to make a good living just below it, unless you have very low overheads, the only extremely high over head in my case and i would imagine anyone turning 70 000 a year is at least one member of staff, then tax and equipment, but if run right you can turn a reasonable profit...

[Sean Dyer]

Split your round into 2 and set up a new limited company. 2 companies with a turnover of £34k each and plenty of room to expand.

Seriously though, get advice from a tax accountant, a good one should and will save you thousands.

you cant do that

otherwise everyone would have loads of companies turning 70 000 and avoid vat ...

the tax man is no stupid, if you believe he is one day you will be in for a shock because in my experience they always catch up and the longer you get away with it the worse it is as there is soo much back payment to do !! !

[Dean Taberner]

The vat threshold is 72k now,

Dean.

[Sean Dyer]

you sure dean i thought the 70 k rise was this years??

just checked it was put to 70 april 2010 so unless theres been a raise since???

[deeege]

There are LOTS of people doing exactly this perfectly legally and on a huge scale. Your right about arteficial seperation purely for VAT purposes, but there are plenty of reasons to have parent / holding companies.

I'm no tax accountant, but I have experience of being a director of a £950k turnover company (not w/c) that was split into 3 after advice from a specialist tax accountant.  We were also audited twice in 9 years and the hmrc found nothing of concern.

I'm not saying splitting a company that's fractionally under the vat threshold is the greatest of ideas, but seek proper advice, you'd be surprised at exactly what you can legally do.

[Dean Taberner]

Yes mate its 72k we are in the process of registering and have been on the small business course at our local tax office.

[Sean Dyer]

There are LOTS of people doing exactly this perfectly legally and on a huge scale. Your right about arteficial seperation purely for VAT purposes, but there are plenty of reasons to have parent / holding companies.

I'm no tax accountant, but I have experience of being a director of a £950k turnover company (not w/c) that was split into 3 after advice from a specialist tax accountant.  We were also audited twice in 9 years and the hmrc found nothing of concern.

I'm not saying splitting a company that's fractionally under the vat threshold is the greatest of ideas, but seek proper advice, you'd be surprised at exactly what you can legally do.

splitting 950 k into 3 isnt about avoiding vat though

the post is about whether to go vat reg or not...

the fact is that at 70 k you must register

if you split a company into two to avoid this it doesnt work , there is no way round it, there are ways to reduce tax etc but vat is an unavoidable consequence of going over a turnover of 70 k with a single business

2 seperate businesses might be different ie windows and owning a shop but they still would not like it...

[deeege]

Your right splitting 950 into 3 wasn't to avoid vat.

The point of my post though was to seek proper advice from a tax accountant.

[bad trippy]

Split the round and give the other round a new name under your Mrs??

[mci services]

why not just pay the vat and feel good for being honest, and up prices if needed.

everybody slates dole cheats on here so are tax evaders exempt

[deeege]

Good point stu, but there's a big difference between evading tax and following good advice which saves you or your company money.

[Perfect Windows]

There's a reasonably clear guide to the flat-rate scheme at: http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm . Looks like our rate will be 12% from next year.

You can still claim back VAT on capital goods that cost more than £2K. http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#8

I agree that the best general advice is check with your accountant; you pay him for advice on stuff like this and it'll pay you back.

Vin

[kate1]

http://www.ukbusinessforums.co.uk/forums/

Hi Will

If you go to the above site, accounts and finance, theres lots of accountants on there that give advice for free.

[Jack Wallace]

A good thread this, I am also on the verge and have decided to go LTD at the same time I register for VAT. (looks like being oct/nov)

I spoke to my accountant who said no way should I consider splitting the company, the tax man will see right through that ploy and nail me for it.
The way I see it i only have 2 choices, Back off and stay under the limit. or register and get out and bring in as much new work as I can to go through the limit and back to where I am now profit wise.
It means I will go backwards for a while but it will give me the drive I need to push onwards, after that the sky is the limit.
I am getting a new vehicle asap in preparation for this.
Timing is very important, if done correctly you can work it so you have a couple of months from declaring to paying (if I understood my accountant right)