[eddie d]

mmmm
so you opt for the 10% vat option .
so £100 + 10% = 110 10 to the vat man ??
but you are now turning over 110  - 10% = 99 so its 11 to the vat man .??
whats the correct way to work it out .i think its the second option which is a bit of a ......

[Moderator David@stives]

you charge vat out at say 17.5% on £60'000 so that equals about £70'500 turnover , then you simply hand the taxman 10 % of £70'500

so you hand him a big fat £7050

[Clive McDonald]

Correct Dave but simplistic. He would probably argue that he doesn't actually charge VAT, only pays it.
(I assume he is talking about the flat rate option).

If we really could charge it at 17.5% and pay it at 10% that would be the theory. The reality is often that we have to swallow it in our costs.

I believe that turnover is after the deduction. So if what you paid would have been profit, at least you know you would have paid 20% of it in income tax anyway.

[Moderator David@stives]

Curious

I always thought Turnover is including vat .

[Trevor Knight]

There seems to be some confusion here, let me clear it up for you.

You send an invoice for £100 + VAT @ 17.5% Total invoice due £117.50.

Now you do this on every invoice irrespective of the amount, i.e £5 + VAT, £50 + VAT etc....

Now you keep your records EXACT with details exactly how much VAT you have collected from your invoice.

So using these figures as follows:

Jan invoiced £10,000 + VAT = £11,750 (£1,750 = VAT proportion)
Feb invoiced £9000 + VAT = £10,575 ( £1,575 = VAT proportion)
March invoiced £14,000 + VAT = £16,450 ( £2,450 VAT proportion)

So total amount of VAT collected in this quarter is £5,775. This is the amount you HAVE to send to the VAT office less any VAT you have paid yourself on any purchases.

You claim back ALL VAT on purchases from suppliers, rent, petrol, stationery, anything that you have paid VAT on.

So lets say over the same 3 month quarter you have paid out £2000 VAT on your own purchases you then only send the VAT man the balance:

VAT Invoiced          £5,775
VAT spent              £2000
Total Due to VAT    £3,775

Hope this clears it up for you?

[Moderator David@stives]

Trevor

Have you heard of the flat rate scheme ?

You can opt to pay 10% of your turnover for your vat liability

Dave

[Moderator David@stives]

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_InfoGuides&propertyType=document&id=HMCE_CL_001208#P34_3592

[Clive McDonald]

as usual you are right Dave. The website is the best place for info. They have a calulator that tells you which system would be better for you. I was trying to say earlier that IR accept the figure with it taken off. But take no notice of me website is the place.

[Trevor Knight]

Trevor

Have you heard of the flat rate scheme ?

You can opt to pay 10% of your turnover for your vat liability

Dave

Hi Dave,

No I hadn't heard of that scheme but my turnover exceeds the limit they set for that anyway, so couldn't use it.

Trev

[choice.clean]

here is a good tip form a limited company cost me about £300 its a seperate entity so it too can earn up to the vat threshold so if you run a sole trader too you have doubled your earnings and the vat man gets nowt.

[JM123]

yes its known as fraud - the vat man will be on to you in no time.

[Paul Coleman]

yes its known as fraud - the vat man will be on to you in no time.

I'm not sure if I am referring to the same thing but I think it is possible to do it if you have no visible interest in running the ltd company.  For instance, if the (male) window cleaner worked as a sole trader up to the VAT threshold and his wife and daughter (for instance) were directors of the ltd company and he cleaned windows for them - but only as an employee on the PAYE.
I'm sure there must be some rule against it and even if there wasn't, it would attract so much attention that they could make things hard for you.
Mind you, you would really have to go some to take one business up to the VAT limit never mind two.  You would probably be dead through being knackered before they got around to investigating.
I suppose it could be possible for a very hard working two person partnership to hit VAT levels but I couldn't see a sole trader doing it - even a highly accomplished one.

[choice.clean]

no quite legitimate get yourself a good accountant and employ some people to do the work i work one day aweek now vat people said they know it goes on but nowt they can do about it. as i was told years ago you can tell people but most people don't listen over and out. i'm going fishing now

[Trevor Knight]

here is a good tip form a limited company cost me about £300 its a seperate entity so it too can earn up to the vat threshold so if you run a sole trader too you have doubled your earnings and the vat man gets nowt.

A BIG NO NO!! you will be fried with the fish you just been out to catch.

1)  The VAT man is fully aware of this and will quiet legally audit your accounts and go through both business with a fine tooth comb. The second there is any possible conflict he will freeze your accounts, instruct the banks to withold your assets and then the TAX man will visit and also audit you. When he has finished if there is any way they can prove you have helped in any minute detail you will be fined and also an application to strike you off Companies Houses will be registered.

2) Set up your Ltd Company, this means you have to have AUDITED accounts as well as memorandems and you are liable for Corporation Tax, You HAVE to have Public and Employers Liability Insurance. the list goes on? A big cost to you for what savings?

All this is for what? If you work commercial clients they pay VAT on top of your invoice, if you work domestic include 17.5% into the price, keep yourself legal?

My advice, if your at the financial threshold then register for VAT or stick to where you are.

[choice.clean]

tut tut tut
so much negativity a ltd company is aseperate personality so let me illustrate it to you can the inland revenue come to you to pay your next door neighbours tax bill answer no.

[choice.clean]

is trevor knight a qualified accountant i doubt it typical window cleaning forum comment thats why i don't look in too often because any genuine help is replied with masses of negative comments. i have got liability for employer and i do all the legitimate stuff. advantage customers don't give 17.5% to tax man they give it to me how do i mean before someone thinks i charge em vat the answer is there is a limit to what you can charge think about it if i put them all up 17.5% i would in affect give myself a financial handicap on pricing. i'm sure this will get you all going but i aint even going to look at the replies but leave you all to do it the old fashioned way. just don't take awindow cleaners answer as fact if you want to follow my advice ask an expert an accountant or phone the vat man and ask him straight up he'll give you the professional answer.

[Moderator David@stives]

I agree with Trev , to split the round up you have to make sure both rounds have bsolutely nothing to do with each other , ie seperate vehicles seperate phone, different company names.

And what do you do when you answer the phone to a potential customer "hello this Jeckell window cleaners or is it hyde"

It is a dangerous game to play , I would just phone the vat man and ask him about what you are going to do.

Dont be suprised by the answer

Dave

[Moderator David@stives]

Have a read on here

http://www.ukbusinessforums.co.uk/forums/archive/index.php/t-13344.html

[DaveWilkinson]

Limited companies offer limited liability to debts etc, as a director you are held accountable to the
vat and revenue for the dealings of the company, If an employee is injured or worse still killed you
can be sent to prision for proffesional manslaughter if the company is held at fault.....oh yes and limited liabilty
only holds true if you can prove you run your company responsibly.

DAve

[choice.clean]

 i do have seperate vans and seperate business's one based at my home address and one at our business premises