Charging VAT to domestic customers?

[Green Pro Clean Ltd]

If you intend to do the VAT yourself look at the Fixed Rate Scheme, personally believe you make a profit on it and it saves you loads of time and hassle. 

Fixed rate scheme is now almost a waste of time works out that you're still paying the government about 19% so you're only making 1% 1% is better than no percent but it's hardly worth the effort. When you go VAT registered and you need to either have the customers take the price and put up 20% or take the hit yourself the difference between your earnings and it won't be all fully clear is £102,000 full stop what I mean by that is you have to jump from £85,000 to £102,000 before you offset the difference in your takings caused by VAT. Hope that's a clear

 

[Part Timer]

Fixed rate scheme is now almost a waste of time works out that you're still paying the government about 19% so you're only making 1%

As I said you make a profit, my experience was you made more than 1%, but I'm not pushing that benefit. We spend money trying to find ways in saving us time doing our job, cleaning windows, being a business owner / sole trader isn't it also important to save time in the office if you can, as time is money. On the fixed rate scheme you log in to your account fill in 6 boxes, I recall, and press send. Rather than logging every expense and every invoice, now I don't know how long that takes but I would've thought it would be hours rather than a few minutes. Put in the same position again, having to be VAT registered, even if it cost me money I would still chose the flat rate scheme. Each to their own.

 

[PureShine]

Fixed rate scheme is now almost a waste of time works out that you're still paying the government about 19% so you're only making 1% 1% is better than no percent but it's hardly worth the effort. When you go VAT registered and you need to either have the customers take the price and put up 20% or take the hit yourself the difference between your earnings and it won't be all fully clear is £102,000 full stop what I mean by that is you have to jump from £85,000 to £102,000 before you offset the difference in your takings caused by VAT. Hope that's a clear

I've decided to up customers by 10% and take the remaining hit. Whatever amount of customers I lose I will replace. All new customers from now will be charged at higher price, i know this may mean i win a few less custys but overall will see more profit. Id rather have a smaller number of vans turning over a better profit rather than double the vans with a lower profit. Im not fussed about turnover, profit is what everyone is interested in. I can tell from some of your videos and posts on here that you know theres no point being a busy fool. The getting from 85k to 102k will be a bit of a pita but from then on I think the vat wont hurt as much. Its just the initial hit that will be a ball ache. By the looks of it standard rate is better if i have lots of expenditure on equipment, new vans etc which i dont. 

 

[Part Timer]

By the looks of it standard rate is better if i have lots of expenditure on equipment, new vans etc which i dont. 

Again check up on this, I believe any capital expenditure over £3k you can still claim the VAT back when you're on the fixed rate. Now I don't know if this is off any one item, 74' pole, or if it's off any 1 invoice, say if you bought a £1200 gutter vac, £1500 poles and cameras etc and the total invoice was over £3k

 

[lloyd323]

This is very interesting to me also as i believe at the end of the year i would have reached the threshold for VAT. As pure shine says it is preventing me from further growth in the future. My knowldge about this is very minimal and i don't fully understand it. Please correct me if i'm wrong:

You pay this below after Net profit






















 






[SIZE=10pt]Personal Allowance[/SIZE]



[SIZE=10pt]Up to £11,850[/SIZE]



[SIZE=10pt]0%[/SIZE]





[SIZE=10pt]Basic rate[/SIZE]



[SIZE=10pt]£11,851 to £46,350[/SIZE]



[SIZE=10pt]20%[/SIZE]





[SIZE=10pt]Higher rate[/SIZE]



[SIZE=10pt]£46,351 to £150,000[/SIZE]



[SIZE=10pt]40%[/SIZE]                                                                    









 


 


 




 


 


Now this is the part i'm unsure of but i think i got it - if i register VAT, you have to charge an extra 20% on every single service you provide as well as paying your normal 20 or 40% (dependant what your expenses are)  tax rate? So effectively i could be paying 40% Higher tax rate as well as 20% VAT for each service i provide? 60% in total! Thanks.

 

[Minty]

This is very interesting to me also as i believe at the end of the year i would have reached the threshold for VAT. As pure shine says it is preventing me from further growth in the future. My knowldge about this is very minimal and i don't fully understand it. Please correct me if i'm wrong:

You pay this below after Net profit






















 






[SIZE=10pt]Personal Allowance[/SIZE]



[SIZE=10pt]Up to £11,850[/SIZE]



[SIZE=10pt]0%[/SIZE]





[SIZE=10pt]Basic rate[/SIZE]



[SIZE=10pt]£11,851 to £46,350[/SIZE]



[SIZE=10pt]20%[/SIZE]





[SIZE=10pt]Higher rate[/SIZE]



[SIZE=10pt]£46,351 to £150,000[/SIZE]



[SIZE=10pt]40%[/SIZE]                                                                    









 


 


 




 


 


Now this is the part i'm unsure of but i think i got it - if i register VAT, you have to charge an extra 20% on every single service you provide as well as paying your normal 20 or 40% (dependant what your expenses are)  tax rate? So effectively i could be paying 40% Higher tax rate as well as 20% VAT for each service i provide? 60% in total! Thanks.

Your confusing personal tax with vat. 

You have to charge Vat On top of your price/invoice when the threshold is met. The vat you charge/collect is then paid to the taxman quarterly. Vat is based on your turnover 

 

[Part Timer]

VAT is basically a tax on your customers, if you can fully transfer the 20% to them and they're not in a position to claim it back, i.e. they're not VAT registered. If you currently charge £15 to clean their windows, then go VAT registered you will have to charge them £15 + £3 VAT, £18. If you don't up there prices then the £15 charge breaks down to £12.50 + £2.50 VAT so you're now cleaning their windows for £12.50 nett. This is the conundrum you will face, the VAT you have to pay the Government is what you have charged to your customers so if you've managed to pass the charge on then you will be better off, you can reclaim the VAT back from your expenses, diesel, poles etc. If you can't pass the full amount of VAT on, what the OP was concerned about, then yes effectively it's an additional tax you will have to pay.   

 

[lloyd323]

Your confusing personal tax with vat. 

You have to charge Vat On top of your price/invoice when the threshold is met. The vat you charge/collect is then paid to the taxman quarterly. Vat is based on your turnover 

VAT is basically a tax on your customers, if you can fully transfer the 20% to them and they're not in a position to claim it back, i.e. they're not VAT registered. If you currently charge £15 to clean their windows, then go VAT registered you will have to charge them £15 + £3 VAT, £18. If you don't up there prices then the £15 charge breaks down to £12.50 + £2.50 VAT so you're now cleaning their windows for £12.50 nett. This is the conundrum you will face, the VAT you have to pay the Government is what you have charged to your customers so if you've managed to pass the charge on then you will be better off, you can reclaim the VAT back from your expenses, diesel, poles etc. If you can't pass the full amount of VAT on, what the OP was concerned about, then yes effectively it's an additional tax you will have to pay.   

Thanks guys. Yes that's how i thought it worked, the way i worded it probably didn't help. Kind of put a damper on future plans. Looks like price increases in quotes from now on. Not entirely sure how much higher i can push and get away with it, we will see.

 

[PureShine]

Again check up on this, I believe any capital expenditure over £3k you can still claim the VAT back when you're on the fixed rate. Now I don't know if this is off any one item, 74' pole, or if it's off any 1 invoice, say if you bought a £1200 gutter vac, £1500 poles and cameras etc and the total invoice was over £3k

Im so confused. Im going to see a different accountant to the last one and run all this past him. Whatever will be will be. I appreciate all the suggestions/info you guys have given me. Much appreciated ?

This is very interesting to me also as i believe at the end of the year i would have reached the threshold for VAT. As pure shine says it is preventing me from further growth in the future. My knowldge about this is very minimal and i don't fully understand it. Please correct me if i'm wrong:

You pay this below after Net profit






















 






[SIZE=10pt]Personal Allowance[/SIZE]



[SIZE=10pt]Up to £11,850[/SIZE]



[SIZE=10pt]0%[/SIZE]





[SIZE=10pt]Basic rate[/SIZE]



[SIZE=10pt]£11,851 to £46,350[/SIZE]



[SIZE=10pt]20%[/SIZE]





[SIZE=10pt]Higher rate[/SIZE]



[SIZE=10pt]£46,351 to £150,000[/SIZE]



[SIZE=10pt]40%[/SIZE]                                                                    









 


 


 




 


 


Now this is the part i'm unsure of but i think i got it - if i register VAT, you have to charge an extra 20% on every single service you provide as well as paying your normal 20 or 40% (dependant what your expenses are)  tax rate? So effectively i could be paying 40% Higher tax rate as well as 20% VAT for each service i provide? 60% in total! Thanks.

You could always pay yourself a smaller salary and pay the remainder as a dividend, will help lower your personal tax

 

[Part Timer]

Just ring the VAT helpline, very helpful people 

 

[PureShine]

Just ring the VAT helpline, very helpful people 

I will do. Appreciate all your help mate. Thank you

 

[vertigo]

Fixed rate scheme is now almost a waste of time works out that you're still paying the government about 19% so you're only making 1% 1% is better than no percent but it's hardly worth the effort. When you go VAT registered and you need to either have the customers take the price and put up 20% or take the hit yourself the difference between your earnings and it won't be all fully clear is £102,000 full stop what I mean by that is you have to jump from £85,000 to £102,000 before you offset the difference in your takings caused by VAT. Hope that's a clear

Hello Darren,

Can you expand on this?

The flat rate scheme would be 11% for the first year then 12% thereafter. 

Any VAT on capital expenditure over £2k can be reclaimed.

How do you get to 19% in your above statement?

 

[Part Timer]

The 11% isn't 11% of your turnover, it's actually your turnover + VAT x 11% so that works out to be 13.2% then 14.4% the following year. 

I'll assume the balance is what he has calculated in not being able to claim back from the likes of diesel etc. 

 

[vertigo]

Thanks for the explanation Part Timer.

It's probably safe to say that if a window cleaning business wants more than two vans on the road the flat rate system is a waste of time. Probably best to just register for VAT at the full rate. I think the flat rate system is only eligible if your turnover is under £150k.

 

[Part Timer]

Thanks for the explanation Part Timer.

It's probably safe to say that if a window cleaning business wants more than two vans on the road the flat rate system is a waste of time. Probably best to just register for VAT at the full rate. I think the flat rate system is only eligible if your turnover is under £150k.

I actually think, regarding the flat rate scheme, it's the best way to go. The time it saves you alone makes it worthwhile. 

The best way to find out is diligently go through the process of doing a VAT return. Log how long it will take you and run the fixed rate scheme in parallel. See how much each month you claim back and what is left from fixed rate and see if the 5.6% left from fixed rate is comparable. You will then know the best method for you when you have to register. 

Just checked the upper threshold is £230K

 

[Green Pro Clean Ltd]

It's not a 'fixed rate' across all industries. Different industries different 'fixed rate' 

My.last word as it always is with matters relating to accounts.... ask an accountant.  

I'm just a window cleaner. 

 

[vertigo]

Window cleaning is 11% the first year  then 12% thereafter. 

 

[PureShine]

I read cleaning services are 16.5% on flat rate 

I read that it changed from 12% in 2016/2017

 

[Green Pro Clean Ltd]

This is very interesting to me also as i believe at the end of the year i would have reached the threshold for VAT. As pure shine says it is preventing me from further growth in the future. My knowldge about this is very minimal and i don't fully understand it. Please correct me if i'm wrong:

You pay this below after Net profit






















 






[SIZE=10pt]Personal Allowance[/SIZE]



[SIZE=10pt]Up to £11,850[/SIZE]



[SIZE=10pt]0%[/SIZE]





[SIZE=10pt]Basic rate[/SIZE]



[SIZE=10pt]£11,851 to £46,350[/SIZE]



[SIZE=10pt]20%[/SIZE]





[SIZE=10pt]Higher rate[/SIZE]



[SIZE=10pt]£46,351 to £150,000[/SIZE]



[SIZE=10pt]40%[/SIZE]                                                                    









 


 


 




 


 


Now this is the part i'm unsure of but i think i got it - if i register VAT, you have to charge an extra 20% on every single service you provide as well as paying your normal 20 or 40% (dependant what your expenses are)  tax rate? So effectively i could be paying 40% Higher tax rate as well as 20% VAT for each service i provide? 60% in total! Thanks.

NONE of the above bears any relevance to VAT --  VAT is based on your total TURNOVER ONLY -- there are no deductions, higher rates etc.   

If you start a company and VAT register before you turn over a single penny then in year 1 only do £10'000 you still pay VAT on that whole £10K    

I'll type in caps as I want to be clear on this - VAT IS ON YOUR TOTAL TURNOVER -- NOT TURNOVER AFTER ALLOWANCES, DEDUCTIONS ETC - THE VAT IS THE VERY FIRST THING YOU PAY ON YOUR TURNOVER - AFTER THAT YOU CAN SEE WHATS LEFT AND START TO CALCULATE WHERE ALLOWANCES ETC COME INTO EFFECT.  

 

[vertigo]

I read cleaning services are 16.5% on flat rate 

I read that it changed from 12% in 2016/2017

I'm sure it's still 12% Hope it is.

https://www.gov.uk/hmrc-internal-manuals/vat-flat-rate-scheme/frs7300

 

[Part Timer]

When I was registered it fell into the "business services not listed elsewhere" which is 12%. As I said before ring the VAT helpline and they'll talk you through it. 

I read cleaning services are 16.5% on flat rate 

I read that it changed from 12% in 2016/2017

Can't find Cleaning Services on the list. 

https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay