[Jack Judd]

Hi Everyone.  Accountant has said I am nearing VAT threshold.  Have to keep an eye on things.  I thought it was tax year to tax year, so I could keep an eye on revenue.  Its rolling so at any time you could go over the 85k threshold and then be liable for paying VAT for that year and before if they start digging.  Any advice on benefits of VAT, setting up a second company for Gutter cleaning revenue?,  slowing down on work so you just don't go over, where to get best advice on VAT.  Just feel a little lost.  Its a jump up and not sure my domestics are going to appreciate 20%.   Any advice from those that have made the jump from a similar position will be mucho appreciated.  Jack

[Ooooooog]

You can claim vat back over last few years, if you do.

[Richard iSparkle]

I went flat rate registered 3 years ago. We pay 12% on income

It is bloody tough to make the switch. You loose a hell of a lot of profit!!

I would say it’s only worth getting registered if you want to turnover something like £130 000 and up

Otherwise stay under and things are simple
I want to be a 6 van operation so it’s unavoidable. 😃

Has been a hard few years for me tho

[Smudger]

Best advice as always is from a decent accountant

What do YOU want to do?

Personally, we went for it, on the run up we pushed hard on advertising and canvassing to get commercial work in - domestics gota 10% increase - first year of vat was fixed at 11%

It’s a hard move, in many ways harder than taking on staff, but if you can grow commercial it helps also any bespoke works like gutter clearing just changed from £70 to £70+vat

Back claim all you can - it will make you cry the amount to sign away each quarter to the tax man as we don’t really spend a lot to claim vat back

Darran

[Jack Judd]

But it will surely be a nightmare trying to stay under when  I can't help growing each year.  I am about 40% from commercial and that is where I continue to grow.  Is it possible to set up another company with someone else for say gutters and that to be considered a separate company?  I tend to be growing 8-10% per year so it will become unavoidable unless I stop taking on any more business.  I suppose I could cut down or slash my domestics and get more commercial and just work less. 

[Richard iSparkle]

But it will surely be a nightmare trying to stay under when  I can't help growing each year.  I am about 40% from commercial and that is where I continue to grow.  Is it possible to set up another company with someone else for say gutters and that to be considered a separate company?  I tend to be growing 8-10% per year so it will become unavoidable unless I stop taking on any more business.  I suppose I could cut down or slash my domestics and get more commercial and just work less. 

it wouldn't be a nightmare staying under no.

a nightmare is relinquishing control of your business and feeling forced to run a business you dont want

its simple enough to keep under the VAT threshold. put up your prices on regular jobs and cut out any jobs you dont want.

personally I;d stop gutter clears as they are harder graft than regular domestic customers.. i've heard some people only do them for cash in hand but thats not something i;d do myself.

you can then probably reduce your working hours and live with a great lifestyle under the VAT threshold.

if you want to grow, take on staff, develop new systems, and all the graft that comes with growing then go for it. if you're growing without much effort by 10% a year it will be easy enough to ramp that up

[zesty]

Are you approaching VAT as a single sole trader? If so that’s good going!

If sole trader, you can have a very nice income under the VAT threshold and work less to keep it that way? Just get rid of bad paying work, or houses you don’t like doing, aim for a monthly salary of x amount that’ll keep you under the VAT threshold.

[֍Winp®oClean֍]

You can do whatever you want Jack if this is YOUR business you are talking about.
Learn to say no or become a unpaid tax collector with all that comes along with it. Simple.👍
Just remember, the only thing that matters is how much of your turnover YOU PERSONALLY get to keep. Work out how much more time and effort it would take to increase that by enough to make it worth doing by going vat reg' and decide what you want in life.

[Status Check]

Jack I would go for it. Don't let VAT hold you back. It's a mistake that many a sole trader makes. If you don't want to work on the tools for the rest of your life register now.

Don't bother with the flat rate scheme. Just register for the full 20% then drive your business over the £150k mark.  Increase your new prices by 10% at the beginning of next year and increase your present customer base by 5% across the board.

Register for paying your VAT monthly if possible.

[Jack Judd]

Really value all your comments.  It feels comforting that I can raise revenue by 5k, still just be under, enjoy another couple of years of calm as we are moving as well, daughter will be starting her A 'levels in 8 months so its a GCSE year, smarten up the round, get rid of the low paid doemstic and continue to grow commercial, while freeing up more time to work on other possible projects, (on one hand), o the other hand it will only take one more of my care home chain developments and I will go over.  Have got myself into a position where I am seen as a commercial supplier with good references.  But  for a year or so I would be not that much over it so would I lose profit as that can't be an option with the amount of outgoings.    Does anyone know if VAT threshold is likely to come up or down.  Million dollar question I suppose.  I'm sure I heard on one budget there was talk of taking the threshold right down to 20-30k.  Thanks for advice and have a good weekend. 

[Richard iSparkle]

Don't bother with the flat rate scheme. Just register for the full 20% then drive your business over the £150k mark.  Increase your new prices by 10% at the beginning of next year and increase your present customer base by 5% across the board.

Register for paying your VAT monthly if possible.

Out if interest why not go flat rate? I thought it was advantageous as we don’t have enough expenses to claim.

What’s your perspective on it?

I wouldn’t want to miss a trick!

[Ooooooog]

Don’t pay your vat monthly, use it as a bank!

[Soupy]

Jack I would go for it. Don't let VAT hold you back. It's a mistake that many a sole trader makes. If you don't want to work on the tools for the rest of your life register now.

Don't bother with the flat rate scheme. Just register for the full 20% then drive your business over the £150k mark.  Increase your new prices by 10% at the beginning of next year and increase your present customer base by 5% across the board.

Register for paying your VAT monthly if possible.

Why wouldn't you go flat rate to start?

This is a conversation that should be had with a good accountant.

[Stoots]

I would try to maximise profit under the VAT threshold.

Take home profit is all that really matters.

Why not just shove your prices right up and lose a load and still turnover the same for less labour cost.

[zesty]

Turning over more than 85k as sole trader is impressive to say the least.

To be honest, I’d be happy keeping it at 70-80k turnover and keeping it simple, with a huge wage.

If your plan is to employ, then it’s obviously unavoidable.

[Crystal-clear]

I went flat rate registered 3 years ago. We pay 12% on income

It is bloody tough to make the switch. You loose a hell of a lot of profit!!

I would say it’s only worth getting registered if you want to turnover something like £130 000 and up

Otherwise stay under and things are simple
I want to be a 6 van operation so it’s unavoidable. 😃

Has been a hard few years for me tho

Could you confirm the exact flat rate scheme as I thought it was 16.5 percent now below 150 for us?
Is it actually 11 with the 1 percent first year discount but that was before 2017 so the correct rate should be 16.5 or 15.5 respectively with the first year discount making flat rate not worth it anymore

Highlighted below however were classed as a limited cost bussniess as its goods only not fuel wages etc.
If you spend a small amount on goods
You’re classed as a ‘limited cost business’ if your goods cost less than either:

2% of your turnover
£1,000 a year (if your costs are more than 2%)
This means you pay a higher rate of 16.5%. You can calculate if you need to pay the higher rate and work out which goods count as costs.

If you aren’t a limited cost business, you use your business type to work out your flat rate.

Flat rates for types of business
Type of business   Current VAT flat rate (%)
Accountancy or book-keeping   14.5
Advertising   11
Agricultural services   11
Any other activity not listed elsewhere   12
Architect, civil and structural engineer or surveyor   14.5
Boarding or care of animals   12
Business services not listed elsewhere   12
Catering services including restaurants and takeaways   12.5
Computer and IT consultancy or data processing   14.5
Computer repair services   10.5
Entertainment or journalism   12.5
Estate agency or property management services   12
Farming or agriculture not listed elsewhere   6.5
Film, radio, television or video production   13
Financial services   13.5
Forestry or fishing   10.5
General building or construction services*   9.5
Hairdressing or other beauty treatment services   13
Hiring or renting goods   9.5
Hotel or accommodation   10.5
Investigation or security   12
Labour-only building or construction services*   14.5
Laundry or dry-cleaning services   12
Lawyer or legal services   14.5
Library, archive, museum or other cultural activity   9.5
Management consultancy   14
Manufacturing fabricated metal products   10.5
Manufacturing food   9
Manufacturing not listed elsewhere   9.5
Manufacturing yarn, textiles or clothing   9
Membership organisation   8
Mining or quarrying   10
Packaging   9
Photography   11
Post offices   5
Printing   8.5
Publishing   11
Pubs   6.5
Real estate activity not listed elsewhere   14
Repairing personal or household goods   10
Repairing vehicles   8.5
Retailing food, confectionery, tobacco, newspapers or children’s clothing   4
Retailing pharmaceuticals, medical goods, cosmetics or toiletries   8
Retailing not listed elsewhere   7.5
Retailing vehicles or fuel   6.5
Secretarial services   13
Social work   11
Sport or recreation   8.5
Transport or storage, including couriers, freight, removals and taxis   10
Travel agency   10.5
Veterinary medicine   11
Wholesaling agricultural products   8
Wholesaling food   7.5
Wholesaling not listed elsewhere   8.5

[Crystal-clear]

Can anyone clarify the VAT flat rate scheme today for us?

since were classed as a minimum spend business the flat rate should be selected as 16.5 percent right so not 12 or am I wrong.

[Status Check]

Hello Chris,

Going by your description of your business you would be 16.5% but check with your accountant.

 Click on the link below to check.

https://www.tax.service.gov.uk/check-your-vat-flat-rate/vat-return-period

[Status Check]

Don't bother with the flat rate scheme. Just register for the full 20% then drive your business over the £150k mark.  Increase your new prices by 10% at the beginning of next year and increase your present customer base by 5% across the board.

Register for paying your VAT monthly if possible.

Out if interest why not go flat rate? I thought it was advantageous as we don’t have enough expenses to claim.

What’s your perspective on it?

I wouldn’t want to miss a trick!

Richard, the flat rate scheme is too restrictive for me hence why I pay 20% . I spend a lot on marketing, rent, VAT on lease vehicles etc etc.

[Smudger]

You pay vat on rent ?

[Crystal-clear]

Hello Chris,

Going by your description of your business you would be 16.5% but check with your accountant.

 Click on the link below to check.

https://www.tax.service.gov.uk/check-your-vat-flat-rate/vat-return-period

This is precisely it thanks for the clarification.
For example we would only qualify if we were to spend more than 2% of our annual turnover on goods. However that would be always a surplus to what we need for example poles.

Example on a £90,000 per year turnover.
It will need to be over £1800 ( you would have already had the equipment from previous years to get that amount ) so that spend would purely be surplus.
So £90,000 £15,000 vat due (before all allowable claim backs a couple of thousand can be realistic
So £13,000 due.
On 12 percent £9642 plus the £1800 is
£13442.00 you have to add that cost technicality as to have that lower amount you had to spend it
And spending it gives you no gain.
So it actually works out worse off.also if you're spending alot the standard will be even less as you cant claim stuff on the 16.5 option.
Shame really as the 12 percent and 11 percent first year were good options for the first year till 2017 since they changed it.

[Ooooooog]

You pay vat on rent ?

We do.

[Crystal-clear]

You pay vat on rent ?

We do.

It can be confusing there is no vat on domestic property rents
but commercial property landlords have the right to charge VAT if they choose to.

[Richard iSparkle]

Hello Chris,

Going by your description of your business you would be 16.5% but check with your accountant.

 Click on the link below to check.

https://www.tax.service.gov.uk/check-your-vat-flat-rate/vat-return-period

This is precisely it thanks for the clarification.
For example we would only qualify if we were to spend more than 2% of our annual turnover on goods. However that would be always a surplus to what we need for example poles.

Example on a £90,000 per year turnover.
It will need to be over £1800 ( you would have already had the equipment from previous years to get that amount ) so that spend would purely be surplus.
So £90,000 £15,000 vat due (before all allowable claim backs a couple of thousand can be realistic
So £13,000 due.
On 12 percent £9642 plus the £1800 is
£13442.00 you have to add that cost technicality as to have that lower amount you had to spend it
And spending it gives you no gain.
So it actually works out worse off.also if you're spending alot the standard will be even less as you cant claim stuff on the 16.5 option.
Shame really as the 12 percent and 11 percent first year were good options for the first year till 2017 since they changed it.

our annual cost on poles alone is over 2% thankfully

[Status Check]

You pay vat on rent ?

Hi,

Yes I pay VAT on our rent.

[Smudger]

and your forgetting fuel...


I rent off the council no VAT - Same as private rents around here no VAT - so that's quite a surprise people charge it when they don't have to

Darran

[Jack Judd]

wow.  My income has a sole trader is boosted by having one guy work for me self employed 5 days a week.  This under scrutiny should be ok as he also has his own business and works most nights after finishing with me.  He is autistic and one heck of a work ethic.

 Second guy works for me one day a week and has is own gardening business , so strictly speaking their are sub-contractors but really helps push up revenue which I am now thinking is not brilliant as they probably help generate 20-30% extra revenue compared to me on my own. 
Frees up my time, but this increased revenue will be eaten by VAT.

VAT seems to be something I am kicking my self about.  Too busy working and generating income and it then just creeped up.  My accountant should of been on it.  I thought it was tax year to tax year and was going to take some time off in the winter months.  Rolling year as meant, possibly gone over.  If I have, will I be hit with 20% on everything I have earned  in that 12 month period? 

with 85K turn over, - costs - income tax, it is not that amazing what is left.  My costs run at about 40% so take home is ok but i have some heavy out going due exceptional circumstances. It would seem that VAT registered will work it you are way above 100k and around the 85k mark you can be left quite a bit worse off. 

Am I able to set up 2 LTD companies, windows and gutters and have them operate as separate companies or is this illegal.  I already imagine the answer!  Why would I choose a flat rate?

[Crystal-clear]

wow.  My income has a sole trader is boosted by having one guy work for me self employed 5 days a week.  This under scrutiny should be ok as he also has his own business and works most nights after finishing with me.  He is autistic and one heck of a work ethic.

 Second guy works for me one day a week and has is own gardening business , so strictly speaking their are sub-contractors but really helps push up revenue which I am now thinking is not brilliant as they probably help generate 20-30% extra revenue compared to me on my own. 
Frees up my time, but this increased revenue will be eaten by VAT.

VAT seems to be something I am kicking my self about.  Too busy working and generating income and it then just creeped up.  My accountant should of been on it.  I thought it was tax year to tax year and was going to take some time off in the winter months.  Rolling year as meant, possibly gone over.  If I have, will I be hit with 20% on everything I have earned  in that 12 month period? 

with 85K turn over, - costs - income tax, it is not that amazing what is left.  My costs run at about 40% so take home is ok but i have some heavy out going due exceptional circumstances. It would seem that VAT registered will work it you are way above 100k and around the 85k mark you can be left quite a bit worse off. 

Am I able to set up 2 LTD companies, windows and gutters and have them operate as separate companies or is this illegal.  I already imagine the answer!  Why would I choose a flat rate?

No only income after £85k will be liable to 20 percent VAT Any assets which you hold within the last 4 years purchased you can claim back so big purchases like a van poles batteries anything like that not fuel and consumables but on going your running costs once you're registered which include VAT that will be refunded against the bill.
So if you're holding any large assets like a van too you may well get a VAT refund first submission.

Setting up two limited companies has and can be done but essentially you're asking for trouble and isnt recommended as they are similar businesses and it's too obvious that you've separated it to literally avoid VAT. This has been covered on the forum before Think of vat as your favourite food how would you feel if someone takes it away from you? Vat is the government's favourite tax because it's purely on income lol regardless on how much profit you're making !

A flat rate is beneficial if you have low costs as windys do actually.. however since 2017 they have made that a lot less attractive for us by stating unless we have have goods that we retain that's more than 2% of our turnover flat rate is 16.5 but if your spending over £2000 on goods you'll qualify for the lower rate 12% 1% discount first year so 15.5 and 11 respectively. However you cannot claim anything back unless it's over £2,000 on goods purchases (I believe) but things like leafleting marketing fuel you won't get that back. Forcing yourself to spend 2% of your turnover on poles for example maybe a false economy as it's definitely surplus stock if this was before 2017 flat rate would be much more beneficial but right now hmm not sure..

most people go for the standard 19% first year because it would probably average out to 16% with the claim backs anyway.
But then if you're spending money leafleting it could go down quite a lot more than that more like the 11 percent which is the low flat.

Whichever way you look at it it's definitely a slight hit on your profits to find the balance make sure your expenses are reasonable including your wages I understand you won't be able to change those. Generally if you're going into VAT it's expected that you spend more and grow at least a bit more otherwise if you have no intention then it would make sense to simply take some time off and stay under the threshold.

Sorry for the lengthy reply but I hope this helps somewhat make sure you consult your accountant best of luck

[Ooooooog]

Push on to 200k turnover or stay under the threshold and refine the work.

[NWH]

Yeah you will be able to claim back for the last 4 years and you know all that’ll do it will allow you to get you’re Vat bill down slightly more lol,nothing more in you’re back pocket.
Why don’t you refine you’re work so you just keep cleaning cream,you can stay under the Vat limit and earn more money for yourself,if you want to go over the Vat limit no point in just limping over the line you need to be flying over it.
Sit down and work out how much you need to be earning to end up with just what you get now when you factor Vat in,I have done and it kept me sitting down 😂,you employ 2 people go Vat if you earn 50-60k at the mo my target would be 150k the time the government have got you doing there books for em and made you work harder for the same money.