[leuthedog]

In need of more advice or opinions.

I have read and heard of some businesses not registering for VAT due to not reaching the turnover that is needed in order to start paying VAT. However, I've also heard that some new businesses will register for VAT and will charge their clients VAT, even if they don't need to, since many companies expect to pay VAT - in this situation what happens to the money that is claimed from a company as VAT? If you have registered for VAT but your yearly turnover does not require you to pay anything then....well, who keeps the extra money?

[Robert Parry]

I think that you have this the wrong way round, if you charge your client's VAT, you then pay this direct to Revenue & Customs minus your own inputs, there is no extra money!
Hope this helps.

[leuthedog]

Well, this is what I am confused about. If you don't have to pay VAT due to turnover and you pay the VAT would this money not be returned on the basis that your turnover has not exceeded that that is required?

Sorry if it appears to be a silly question but hearing what I had certainly confused the hell out of me! 

Thanks for your quick response btw!

[Art]

If you register for vat, you have to charge vat to clients then in turn as Robert said you have to pay it to revenue and customs.

There's no legal requirement to register for vat unless your turnover goes  over 61K ( well i think that's the figure now, but i might be wrong)

Arthur

[Nick Vassilev]

If you are not required to register for VAT (current/expected turnover less than £61k) and you charge VAT on top of your prices then you have to register and pay the VAT charged to HMRC. You cannot charge VAT if you are not registered. You can charge VAT only after you have submitted a VAT registration application.

Hope that helps.

Regards
Nick 

[John Kelly]

You have to register for VAT if your turnover exceeds the current limit.
However you may also voluntarily register for VAT.

If you register you add 17.5% to all your invoices.
When you come to do your vat return you total up all your sales net of vat, then the amount of vat you have received.
Then you need to add up everything you have spent on supplies, fuel, rent, equipment etc. Then the amount of vat you have paid out on these things.
You then subtract what you have paid in vat from the amount you have received. This amount is then paid to revenue & customs.
It is all pretty straight forward. It has major benefits if your customers are mainly commercial as they will claim back the vat they have paid you on their returns. But it means you also claim back the vat you have paid out, which can be substantial if you are purchasing vehicles or equipment.

[need a cleaner]

basicly if you buy lets say a comercial van for £3500inc vat

if you are not vat registered the full cost of your buy is £3500

but if you are vat registered the real cost will only be £3000 as you will recieve the vat you have paid on the van.

[drivewasher]

I suppose to sum up, if you have been issued with a VAT number you must charge VAT and this means you can claim the vat you pay back. As business's genrally make a proffit you will nearly always owe the VAT man money. This makes you an unpaid tax collector

PS you can't charge VAT if you don't have a VAT number! IE you're not VAT registered.

[leuthedog]

Many thanks for all your replies. It has been extremely informative.

So all those companies that aren't VAT registered but charging VAT to their customers (simply because those companies expect to pay VAT) are breaking the law!

[Nick Vassilev]

You can only charge VAT if you have a VAT number or have submitted and application for VAT registration. In any other cases it is illegal to collect VAT from your clients.

[John Kelly]

And punishable with major penalties.

[ronaldo]

And punishable with major penalties.

Tell me about it i was in one of her Majestys  holiday camps for a long time for getting involved in that nonsense 

[Mr BSF]

You’ve highlighted a very good point their Ron, perhaps if the prison system wasn’t so cushy for the inmates, they wouldn’t be as full as they are

[cavanagh_matthew@y]

hi, have been reading this conversation and just wonderd, if you put a tender in for a commecial company, but does not include VAT in the price but the other tenders does include it, will the client go with the VAT registerd company rather than urself without it if that makes sence?

regards
matt

[Tim Downer]

I do not think it will make much difference to the client, as they will use the VAT system to get their money back.

For example, cleaning contractor No1's cleaning tender is £20,000 per year all inclusive.

Cleaning contractor No2's cleaning tender is for £20,000 plus VAT = total tender of £24,242.42 (£4,242.42 being the VAT)

The extra VAT that they have to pay for goods (in this example £4,242.42) they can claim back on the VAT they have to collect for the Tax man from their invoices etc. Someone else further down the line will collect the £4,242.42 money.....in theory.

The Tax man (or customs) will always end up getting their money anyway.....no matter how far down the line. That will be from us who are not VAT registered and have to pay it and not claim it back.

At the end of the day, the contract is still worth £20,000 either way.

Hope that helps.

Kind Regards

Tim


P.S Sorry to those of you who only got half this message........chuffing pressed the "post" button before i had finished  :  :  :

[Mr BSF]

It doesnt make any difference to them as they claim it back, but they will know that you are only a small company as your turnover will be lower than the threshold, I would recommend that any one starting a business registers for vat, apart from claiming it back yourself, if you get halfway through your year and get a large contract that takes you over the threshold at the year end, you will owe the vat on all sales for that year.

[Tim Downer]

If you are under the limit, but are purchasing a lot of equipment, a vehicle etc, i would agree, it makes sense to be registered as you can claim it back.

It makes sense, does it not? Especially if you have to spend the money anyway - you might aswell get it claimed back if you can!!

Tim

[cavanagh_matthew@y]

ok thanks for the repsonce.
so if you already have customers but dnt charge VAT on ur invoices now but them register for VAT will u have to tell them or just bill the with the VAT?

[Tim Downer]

I would probably let them know with either a letter enclosed with the Invoice for the accounts dept (the Invoice having the VAT included) or just contact the accounts dept via a letter for their records before the next Invoice was due.

Tim

[cavanagh_matthew@y]

ok thanks
so u will get two seperate tax bills, one for VAT and other income TAX