[Marc Whitbread]

I am due to take the leap so using it as a time to review all costs.

Here is a typical reply from a accountant!
 
It's a £24 house 4/5 bed with con windows and has been this price for 5 years!!


Thanks for cleaning the windows yesterday.  I have made a faster payment tonight.


Although we're pleased to hear the business is growing, an extra £4 is making it pretty pricey, so we will be looking for some other quotes for comparison.  And of course you will now be able to reclaim the VAT paid on supplies, so the whole 20% won't be coming off your bottom line!

 

Kind regards

My Reply


I realise this however the reason for £4 increase is due to us never increasing your price in over 5 years of cleaning. We were due to do a price review this year however due to the VAT registration looming I have only taken VAT into consideration. If I was to charge the full 20% your price would have gone up by £4.80 instead of £4.00 In theory yes this is the case however I am still loosing some of my bottom line due to not passing on the full VAT charge to yourself also with being a service based company there is very little we can reclaim all but some fuel and a few supplies every quarter.


By all means I welcome you to get some other quotes if  you feel necessary but I believe our service to still be of a competitive rate even with this raise in mind . Most cleaning companies insist on a monthly service that I know of so in theory some will be cheaper but when you double the price it actually comes out a lot more expensive.

Kind Regards,

Thoughts anyone? 

 

[chris turner]

In my opinion, and this is just my opinion, residential window cleaners should not be vat registered.  I will always do my utmost to stay under the vat threshold, even if meant dropping a few customers.
You just can't charge vat for this kind of service, most people see it as a menial unskilled job and don't want to pay huge amounts of money to have it done, especially in uncertain economic times.
probably 90% of residential window cleaners are not vat registered and most customers would actually be shocked at being charged vat for this type of service.
Especially when they know they could easily swap you for someone cheaper.
The only way I would ever be vat registered is if I was confident I could absorb most of the costs without passing it my customers.
Most window cleaners I know in this neck of the woods split there business in order to avoid charging vat to customers.
Can you not do the same?

[CleanClear]

Thoughts anyone? 

 

Assuming you're going ahead with your VAT registration and its encumbent price increase, then make a book of all your lost customers. Given your turnover to enter the VAT threshold i would imagine the loss of customers you will have will amount to a substantial amount for someone. Collate them all together to make a small monthly take and sell it as a small on going round. That way you can make a one off gain from your loss.

[Marc Whitbread]

Thanks for your reply Chris tbh I have been very fair and absorbed nearly all of the customers vat increases put the odd ones up a £1 or £2  however when a price hasn't been touched in 5 years and is under priced at that I feel it perfectly justified to use the pretence of VAT for a rise and at that not even a rise that I am pocketing. I have tried to go the non VAT route and if you need to employ to cope with demand it just isn't possible unfortunately I am going flat rate so it helps a tiny bit but I'll still loose the bulk also with your mention of splitting I know of people been caught out by doing this it is illegal in HMRC's eyes and if you get caught can be in for a lot of trouble. exluding the vat it just amused me that in 5 years it goes up once and its a major problem for a accountant with a 800k  house and a 50 k car!

[Marc Whitbread]

Hi CleanClear I've tried to be as kind as I can on my customers well the ones I can afford to be and I must say the general attitude is well done we don't mind a few extra quid! I have probably nudged over 60 customers up a £1 or 2 or 3 on average depending on size etc and I haven't had any solid cancellations because of it. I don't forsee loosing many at all. I'm explaining to my customers that its a legal obligation for us and we don't expect them to pay the full 20% but we cant take the whole hit and 99% have been great about it you just get the odd one I guess!

[Pete Thompson]

2 things about this:

Firstly, I would NEVER tell customers that I was increasing the price because of vat registration.  That is simply not their problem, its yours.  By all means, increase the price, but don't make an excuse for it.

Also, don't forget that some will immediately think "hang on, this window cleaner is earning £81,000!  That's more than I earn and I'm clearly being overcharged.  How dare someone who is a lowly window cleaner earn so much!  He should know his place.  He's sacked."

You will immediately cause jealousy from some, so why tell them?  Just tell them the new price.

SECONDLY: For a business like window cleaning, where there are hardly any supplies that you can reclaim vat on, you should go on the flat-rate scheme.

I think from memory for window cleaning this is 12%, so simply increase your prices by 12% instead of 20%.  That would make the £20 house only £22.40, which is a much more palatable amount.

(For those who don't know, flat rate scheme is where you pay only 12% (not 20%) BUT you do not claim any vat on things you purchase.)

[ChumBucket]

I agree with the customer.

If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!

[Tom-01]

2 things about this:

Firstly, I would NEVER tell customers that I was increasing the price because of vat registration.  That is simply not their problem, its yours.  By all means, increase the price, but don't make an excuse for it.

Also, don't forget that some will immediately think "hang on, this window cleaner is earning £81,000!  That's more than I earn and I'm clearly being overcharged.  How dare someone who is a lowly window cleaner earn so much!  He should know his place.  He's sacked."

You will immediately cause jealousy from some, so why tell them?  Just tell them the new price.

SECONDLY: For a business like window cleaning, where there are hardly any supplies that you can reclaim vat on, you should go on the flat-rate scheme.

I think from memory for window cleaning this is 12%, so simply increase your prices by 12% instead of 20%.  That would make the £20 house only £22.40, which is a much more palatable amount.

(For those who don't know, flat rate scheme is where you pay only 12% (not 20%) BUT you do not claim any vat on things you purchase.)

I agree Pete, don't tell the customer it's a price increase because of VAT. A simple price increase letter should be fine, no need to go into detail.

Also agree with the flat scheme of 12%. I do think for VAT not to be so much of an issue you'd need to be turning over £130k+. This in turn means more customers, help getting the work done, more payment chasing etc. A good way of doing it is getting a fair bit if commercial work where you can charge 20% VAT and only pay 12% to the tax man. But then obviously corporation tax on the remaining 8% would need to be paid too. I think if you're near the VAT threshold then big plans need to be made to increase business and turnover dramatically.

Tom

[Tom-01]

I agree with the customer.

If my window cleaner tried to charge me vat he'd be finished & replaced with a none vat one. It's business, end of. I pay enough tax without the window cleaner collecting even more!

It's funny how we're all different. I'd pay the VAT as he's obviously good enough to have enough work to be charging it. And also we pay VAT on pretty much anything. But there are more window cleaners non VAT reg than VAT reg ones so it's easy to save a couple of quid.

[Marc Whitbread]

Thanks for the replies I went backwards and forwards as to whether to tell people I asked a few customers their opinions on standard price rise vs vat and all of them said the they would rather be told vat than a standard price rise.

I have had a few where I have told them price is going up when the 2 or 3 have moaned I have then explained why its going up and they have then said fair enough suppose its not your fault. apart from this one out of about 70 rises or so I have not lost one customer yet however if I had just said your price is going up (because I want more money) I feel the result would have been quite different from the one I have had so far. It doesn't sit right with me to just say hey I'm putting your price up £3 and giving no reason other than "costs Rising" but each to their own apart from the vat I just found it funny for him to reply with that after no rise in over 5 years.

[Soupy]

In my opinion, and this is just my opinion, residential window cleaners should not be vat registered.  I will always do my utmost to stay under the vat threshold, even if meant dropping a few customers.
You just can't charge vat for this kind of service, most people see it as a menial unskilled job and don't want to pay huge amounts of money to have it done, especially in uncertain economic times.
probably 90% of residential window cleaners are not vat registered and most customers would actually be shocked at being charged vat for this type of service.
Especially when they know they could easily swap you for someone cheaper.
The only way I would ever be vat registered is if I was confident I could absorb most of the costs without passing it my customers.
Most window cleaners I know in this neck of the woods split there business in order to avoid charging vat to customers.
Can you not do the same?

Technically that's illegal.

http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/vat/reg-how-to.htm#3

Do not avoid registering for VAT by artificially separating business activities
If you run more than one business the sales in all those businesses must normally be added together to determine whether or not you must register for VAT.
However, if you are involved in the running of several separate legal entities, you may not need to combine the sales of those businesses to find whether you need to be VAT registered.
If HMRC decides that you artificially separate one business into smaller parts to avoid registering for VAT, it can decide that the entire business is a single taxable person and therefore must be registered for VAT.
Situations that HMRC may consider a single taxable person for VAT purposes include:
Separate entities selling to registered and unregistered customers. The VAT registered business sells only to VAT registered customers and the business not registered for VAT sells to customers who are not registered for VAT.
The same equipment or premises being used by different entities on a regular basis. The premises and/or equipment are owned by one of the parties, who charges rent to the others. This situation may occur in businesses such as launderettes and takeaway food operations.
Splitting up what is usually a single sale. This is common in industries such the bed and breakfast trade, where one business supplies the bed and another the breakfast.
If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, the matter will be investigated and you may be prosecuted.

Just sayin like.

[Clever Forum Name]

Soupy.

So what if you split the business. 

One business is window cleaning and is WFP and say I dunno gutter clearing which is ladder work.

How can they say it's the same business. ?

[Soupy]

That's two different businesses. He's talking about splitting  the round to avoid registering for VAT.

[davids3511]

Soupy.

So what if you split the business.  

One business is window cleaning and is WFP and say I dunno gutter clearing which is ladder work.

How can they say it's the same business. ?

Are you going to use the same car/van to get the gear to the customers house? If trad, do you use the same ladder to empty the gutters?

[Clever Forum Name]

That's two different businesses. He's talking about splitting  the round to avoid registering for VAT.

I was asking for myself

[Clever Forum Name]

Soupy.

So what if you split the business.  

One business is window cleaning and is WFP and say I dunno gutter clearing which is ladder work.

How can they say it's the same business. ?

Are you going to use the same car/van to get the gear to the customers house? If trad, do you use the same ladder to empty the gutters?

No No and No

[Walter Mitty]

2 things about this:

Firstly, I would NEVER tell customers that I was increasing the price because of vat registration.  That is simply not their problem, its yours.  By all means, increase the price, but don't make an excuse for it.

Also, don't forget that some will immediately think "hang on, this window cleaner is earning £81,000!  That's more than I earn and I'm clearly being overcharged.  How dare someone who is a lowly window cleaner earn so much!  He should know his place.  He's sacked."

You will immediately cause jealousy from some, so why tell them?  Just tell them the new price.

SECONDLY: For a business like window cleaning, where there are hardly any supplies that you can reclaim vat on, you should go on the flat-rate scheme.

I think from memory for window cleaning this is 12%, so simply increase your prices by 12% instead of 20%.  That would make the £20 house only £22.40, which is a much more palatable amount.

(For those who don't know, flat rate scheme is where you pay only 12% (not 20%) BUT you do not claim any vat on things you purchase.)

I've never been VAT registered and probably never will be - so the following is someting I was told by another window cleaner who has gone down this route.
If you are planning to build a massive business, the flat rate scheme is only any good up to a point (I think it was £150k then).  After that, the regular VAT scheme has to be employed.  Switching from flat rate to normal VAT at around £150k can have its own headache attached apparently.  It sounded to me like someone who intends to keep building beyond that amount might find it easier to have the headache of VAT registering and going for the more complex VAT system all in one go.  Obviously, if there is no intention of reaching the level where complex VAT becomes compulsory, the flat rate would be fine.
Don't take my word for this as I am merely paraphrasing someone else's opinion.

[steve rix]

Just get all the custys to pay cash! Simples!

[chris turner]

That's two different businesses. He's talking about splitting  the round to avoid registering for VAT.

Splitting the business is what I said, not the round. I know perfectly well splitting the round would be illegal but what I meant was as number 23 said, split the windows from the gutters, fascias, cladding, jet washing etc. That's perfectly legal.

[chris turner]

Company near me do bin cleaning, window cleaning, gutter cleaning, carpet cleaning. All 4 are run by the same guy from the same depot yet are completely separate from each other.
I know they pay vat on the bin side as it's all commercial but the other bits are not vat registered.
I do believe they will also be splitting the residential window cleaning from the commercial into 2 different businesses soon to avoid the vat for the residential.