Charging VAT to domestic customers?

[PureShine]

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

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

Me too mate. Trust me id rather it be 12% ?

 

[Part Timer]

Me too mate. Trust me id rather it be 12% ?

Well if it is 16.5% then don't do Fixed Rate. Anything above 14% is a no go in my experience 

 

[PureShine]

Im just going to go and see accountant next week cause its driving me nuts. Easiest way is just go see him, get it resolved and crack on past that threshold as fast as possible. Either way i will have to pay it so won't allow it to make me wobble in terms of my long term goals

Well if it is 16.5% then don't do Fixed Rate. Anything above 14% is a no go in my experience 

I know what you mean. Iv almost set my mind now as it will be 20% vat, im prepared mentally for that and will continue to grow the customer base as planned. Anything lower than 20% is just a bonus. If i see it this way i wont feel so disheartened. I can still make good money per man per van after factoring in vat at 20%. 

 

[Tendering window cleaners]

Going VAT registered is a material change to your normal operations, and as such, should be considered very carefully.This question only ever comes up when you start approaching the mandatory threshold, currently £85,000. When a window cleaner becomes registered, he or she will be a net contributor for as long as they are registered.It is un realistic and plain reckless to think that the input side of your weekly purchases will negate your output tax.Consider the following real life scenario...

You have a van on the road 5 days producing on average £2000 every week, the output tax on this is £334 pounds.

A typical van on this round will drink £100 in diesel, this produces £16.67 in inputs.

Paying a man £150 a day relates to £750 (no input)

Your employer (secondary) PRSI and Pension contributions will come to approx £80 pw on top of that. (no input)

On an average week, you will struggle to find any further legitimate inputs, you may on occaision incur some vatable maintenance on the vehicle, there may be the odd bit of equipment purchase however, the reality is that each week, other than the relief on the fuel purchase, you will be a net contributer.

So if you are hovering near to the threshold, you should consider a combination of the following, up your prices (which fuels the turnover issue) but at the same time shed any under performing customers.This results in the same earnings for what should be less work.

or

If you are on the march, there a couple of ways you can proceed in the short term.As in the former, tidy up and streamline your current round, then set up another round in your wifes name, this will be a seperate legal entity.Promote that round on the basis of quoting for jobs from the onset to include VAT. I would suggest you do not mention VAT to ordinary house holders, it complicates things, you will be shocked at how many indignant people you will un earth.As far as the forces of darkness are concerned, the second business, as long as you are not the net benificory will only have to register once that gets enough leg to produce £85k.You will of course be producing more profit as a familly and as such will find your joint liability rise.

Our vans produce on average £650 pw on five days.

There are no creative ways to swerve VAT, the forces of darkness have been at this game a lot longer than most and as such, know the score.They also have a secret weapon which is known as "retrospective inquiries" you do not want to be on the wrong end of one of those.

Speak to an accountant, set your business up on a solid foundation,just accept the feeling of being hard done by and crack on.

Set up and maintain a seperate VAT account from your trading account for the new round,then set up an auto transfer of your VAT content each week, do this religiously and you will never catch a cold when it comes to the quarters payment, depending on who you are banking with, if you have a mortgage, you may be able to use the vat account as an offset against your repayments, it matters a huge amount over the period of your mortgage.

Good luck

 

[vertigo]

If you are on the march, there a couple of ways you can proceed in the short term.As in the former, tidy up and streamline your current round, then set up another round in your wifes name, this will be a seperate legal entity.Promote that round on the basis of quoting for jobs from the onset to include VAT. I would suggest you do not mention VAT to ordinary house holders, it complicates things, you will be shocked at how many indignant people you will un earth.As far as the forces of darkness are concerned, the second business, as long as you are not the net benificory will only have to register once that gets enough leg to produce £85k.You will of course be producing more profit as a familly and as such will find your joint liability rise.

Hi,

Thanks for your detailed response. I agree with most of what you have said but would I would not recommend disaggregation of your window cleaning business. You would not want to have a VAT inspection a few years down the line after you have split your company. The VAT bill from HMRC could be quite alarming and the fines could be even more. Please see notes below. 

Of course you could argue that your wife business is totally separate to yours but would you really want to try and defend your case in court or risk losing your business if you lost and couldn't pay the VAT that was owing and the legal costs and fines?


Disaggregation, VAT and HMRC


By setting up two businesses, business owners believe they can allocate their revenue across different businesses to ensure they do not exceed the VAT registration threshold (in 2018/19 the threshold is £85,000 for an individual business). If the threshold is not exceeded, businesses don’t need to register for VAT and may have a competitive advantage.

HMRC believes this practice qualifies as tax avoidance and has set specific rules designed to ensure only legitimate ‘business splitting’ occurs. This means you must prove there is no ‘financial, economic or organisational’ link between your businesses. If you can’t provide strong evidence there are no such links, HMRC can impose penalties and/or prosecute you. Examples of the links HMRC look for when deciding whether businesses are related or not are shown below:

Financial

• Businesses have the same bank account
  
• A common business profit or financial interest that benefits both businesses
  
• Financial dependency on one another.
  

Economic

• Sharing equipment
  
• Operating from the same offices
  
• Sharing advertisements.
  

Organisational

• Common employees and/or managers.
  

There may be legitimate reasons for splitting your business, and there can be positive indicators to HMRC that this is the case if your businesses operate with the following characteristics:

• Separation of bank accounts and business records
  
• Each business is separately registered with HMRC and submit their own tax returns.
  

Customers should be convinced that they are dealing with two businesses Any charges for goods and services between the split businesses must be conducted at arm’s length.