One for VAT registered guys

[Part Timer]

There’s no going back now lads I’m officially registered, it feels like an absolute kick in the teeth especially when I’m 99% residential but hopefully I’ll be able to push through and come out the other side ??

View attachment 23945

Have you gone fixed rate, if you're mainly local and don't have many expenses that have VAT on them it will save you money

 

[Doddy111]

Have you gone fixed rate, if you're mainly local and don't have many expenses that have VAT on them it will save you money

Yes mate how do you think it’ll save me money? 

 

[Part Timer]

Yes mate how do you think it’ll save me money? 

On a normal VAT return you will claim all of your VAT back from your receipts, so say you spend, on average, a £1200 per month on consumables, diesel, resin, filters etc, in that £200 is VAT so you will claim the £200. Let's say your turnover including VAT is £9000, on the normal VAT return you'd owe £1500 and subtract the £200 from your expenses, therefore paying HMRC £1300 to settle your VAT bill.

On the Fixed Rate scheme, I believe the first year is discounted by 1% and you pay back 11% of turnover so in your first year, based on the above figures you would pay 11% of £9k. This would mean you pay HMRC £990, a difference of £310.

It also takes a few minutes to do the return rather than having to keep, or scan if you have the software, every receipt. You can still claim the VAT back from purchases over £3K and go back a number of years as well.

You're still out of pocket as you've had to register but not as much as you would've been if you went on the normal VAT scheme. @P4dstar has probably looked at this more in depth, my knowledge is based on memory from 6 years ago.    

 

[P4dstar]

On a normal VAT return you will claim all of your VAT back from your receipts, so say you spend, on average, a £1200 per month on consumables, diesel, resin, filters etc, in that £200 is VAT so you will claim the £200. Let's say your turnover including VAT is £9000, on the normal VAT return you'd owe £1500 and subtract the £200 from your expenses, therefore paying HMRC £1300 to settle your VAT bill.

On the Fixed Rate scheme, I believe the first year is discounted by 1% and you pay back 11% of turnover so in your first year, based on the above figures you would pay 11% of £9k. This would mean you pay HMRC £990, a difference of £310.

It also takes a few minutes to do the return rather than having to keep, or scan if you have the software, every receipt. You can still claim the VAT back from purchases over £3K and go back a number of years as well.

You're still out of pocket as you've had to register but not as much as you would've been if you went on the normal VAT scheme. @P4dstar has probably looked at this more in depth, my knowledge is based on memory from 6 years ago.    

To be fair I only found out a couple of days ago that you get a 1% discount in the first year.

In my head I simplify it like this.... Forget charging vat or not. Just look at what you earn.

If you take 100k and aren't on the flat rate scheme you pay 20k to the revenue

If you take 100k and are on the flat rate scheme you pay 12k to the revenue (Or 11k in the first year)..... Simples.

 

[Part Timer]

To be fair I only found out a couple of days ago that you get a 1% discount in the first year.

In my head I simplify it like this.... Forget charging vat or not. Just look at what you earn.

If you take 100k and aren't on the flat rate scheme you pay 20k to the revenue

If you take 100k and are on the flat rate scheme you pay 12k to the revenue (Or 11k in the first year)..... Simples.

If you take £100K and you're not on the flat rate scheme you pay back £16,667.

 

[P4dstar]

If you take £100K and you're not on the flat rate scheme you pay back £16,667.

I did think my maths were skewed there. I meant £120k didn’t I ??‍ 

 

[Part Timer]

I did think my maths were skewed there. I meant £120k didn’t I ??‍ 

At £120K on fixed rate you'll owe £14.400, after 1st year ?

I'll not bother tagging you in next time ?

 

[RWCleaning]

Find this thread interesting despite it meaning nothing to me at the moment. While moping my kitchen floor at minute ago after reading the previous posts I had a thought: (and please correct me if it’s a mad/stupid idea)

But- Those of you who are going Vat registered presumably have someone else working with you, would it not be easier if instead of just having say for example “Ryan’s window cleaning” with say 2 vans on the road, who offer, not just windows cleaning, but the usual gutter cleaning, roofing cleaning blah blah etc. Would it not be easier and better money wise instead of all keeping it one business, make a second business with the second van, call that van “Ryan’s High spec exterior cleaning” then you can have two separate vans with both technically different businesses, one ‘window cleaning’ the other ‘various different cleaning services’ as you can still be the owner of two different business correct?  So you can have two vans (with potentially 2 employees in each or whatever) with the possibility of turning over £84,999 each without having to go vat registered. Especially those would are 99% domestic based and don’t want to go vat registered. 

As I said I could be completely wrong, just popped it my head. 

 

[ched999uk]

Find this thread interesting despite it meaning nothing to me at the moment. While moping my kitchen floor at minute ago after reading the previous posts I had a thought: (and please correct me if it’s a mad/stupid idea)

But- Those of you who are going Vat registered presumably have someone else working with you, would it not be easier if instead of just having say for example “Ryan’s window cleaning” with say 2 vans on the road, who offer, not just windows cleaning, but the usual gutter cleaning, roofing cleaning blah blah etc. Would it not be easier and better money wise instead of all keeping it one business, make a second business with the second van, call that van “Ryan’s High spec exterior cleaning” then you can have two separate vans with both technically different businesses, one ‘window cleaning’ the other ‘various different cleaning services’ as you can still be the owner of two different business correct?  So you can have two vans (with potentially 2 employees in each or whatever) with the possibility of turning over £84,999 each without having to go vat registered. Especially those would are 99% domestic based and don’t want to go vat registered. 

As I said I could be completely wrong, just popped it my head. 

You could do that but if HMRC investigated then you have to explain why you have 2 different businesses both doing cleaning! Remember HRMC follow different rules i.e. you are guilty until you can prove innocent ? 

Maybe you could have 2 businesses - 1 domestic (no vat) the other Commercial (VAT registered). But again HMRC could look on that as you are trying to avoid Vat on domestic. Unfortunately for us mere mortals HMRC have us by the short and curlies.

 

[Part Timer]

Find this thread interesting despite it meaning nothing to me at the moment. While moping my kitchen floor at minute ago after reading the previous posts I had a thought: (and please correct me if it’s a mad/stupid idea)

But- Those of you who are going Vat registered presumably have someone else working with you, would it not be easier if instead of just having say for example “Ryan’s window cleaning” with say 2 vans on the road, who offer, not just windows cleaning, but the usual gutter cleaning, roofing cleaning blah blah etc. Would it not be easier and better money wise instead of all keeping it one business, make a second business with the second van, call that van “Ryan’s High spec exterior cleaning” then you can have two separate vans with both technically different businesses, one ‘window cleaning’ the other ‘various different cleaning services’ as you can still be the owner of two different business correct?  So you can have two vans (with potentially 2 employees in each or whatever) with the possibility of turning over £84,999 each without having to go vat registered. Especially those would are 99% domestic based and don’t want to go vat registered. 

As I said I could be completely wrong, just popped it my head. 

The only way you can do this is, the easiest way, just do window cleaning with one and everything else with the other. One would need to be a Limited Company with a business partner and the other one a sole trader, or Partnership, as long as the partner is different to the Limited company. Ideally both Limited with different partners. I doubt you could just set up as 2 sole traders.

You would also need 2 vans, and not names that are similar, 2 bank accounts etc etc.

 

[Master Jedi Alejandro]

You could do that but if HMRC investigated then you have to explain why you have 2 different businesses both doing cleaning! Remember HRMC follow different rules i.e. you are guilty until you can prove innocent ? 

Maybe you could have 2 businesses - 1 domestic (no vat) the other Commercial (VAT registered). But again HMRC could look on that as you are trying to avoid Vat on domestic. Unfortunately for us mere mortals HMRC have us by the short and curlies.

Yeah, and it’s not just fines but they’ll backdate the VAT also. 
 

I know someone who was opening a separate business entirely to window cleaning but wanted to use a similar name, logo, to keep a kind of consistency. Accountant heavily recommended against it as one company would be VAT registered & other wouldn’t. HMRC could decided this was a attempt to avoid VAT & cause a lot of issues. And it isn’t a case of ‘ohh they’ve never had a problem with it’ as it may take years until they decided to investigate you. 

 

[harunh]

Find this thread interesting despite it meaning nothing to me at the moment. While moping my kitchen floor at minute ago after reading the previous posts I had a thought: (and please correct me if it’s a mad/stupid idea)

But- Those of you who are going Vat registered presumably have someone else working with you, would it not be easier if instead of just having say for example “Ryan’s window cleaning” with say 2 vans on the road, who offer, not just windows cleaning, but the usual gutter cleaning, roofing cleaning blah blah etc. Would it not be easier and better money wise instead of all keeping it one business, make a second business with the second van, call that van “Ryan’s High spec exterior cleaning” then you can have two separate vans with both technically different businesses, one ‘window cleaning’ the other ‘various different cleaning services’ as you can still be the owner of two different business correct?  So you can have two vans (with potentially 2 employees in each or whatever) with the possibility of turning over £84,999 each without having to go vat registered. Especially those would are 99% domestic based and don’t want to go vat registered. 

As I said I could be completely wrong, just popped it my head. 

Na u cant do that mate , thats just tryna avoid VAT , u can do this but then your just leaving yourself as a wide target

 

[phillip]

It is a good idea.

But in the real world 

As stated above highly unlikely HRMC would take kindly to the idea.

Got to be totally legit from the word go.

Vat inspectors have more powers than SOCA or any law department in the way of confiscation.

You work so hard for a shiny new car and house. Only to loose the lot and go to prison. No thank you.

Call HRMC up and put it to them. See what they say ?

It would be interesting to know ?

Only my opinion, but hey what do I know, I am just a window cleaner.

?

 

[RWCleaning]

Some interesting points, as I said I don’t know anything about this field so just interested. ?

How come some multi million pound companies don’t charge Vat? 

 

[Part Timer]

You work so hard for a shiny new car and house. Only to loose the lot and go to prison. No thank you.

That's why you should set up 2 Limited Companies with different Directors.

 

[scottish cleaning service]

I think you pay vat every quarter.

 

[P4dstar]

At £120K on fixed rate you'll owe £14.400, after 1st year ?

I'll not bother tagging you in next time ?

Hang on, hang on, hang on.... I think you're complicating it. I'm tryna simplify it for simple people like me. If you take 100k you charge 20k vat... Take the vat out of the equation for a second and you have taken 120k... What I was saying is you then pay 11k of the 20k to the revenue... Working out how much vat to charge etc just gets confusing unless you're clients are all commercial. I find it easier to look at total takings and then deduct vat like you would deduct income tax.

 

[Part Timer]

What I was saying is you then pay 11k of the 20k

But you don't, you pay £13.2K, The calculation is 11% of turnover + the VAT so you pay 11% of 120K not of £100K

 

[P4dstar]

But you don't, you pay £13.2K, The calculation is 11% of turnover + the VAT so you pay 11% of 120K not of £100K

Now I'm f%&king baffled. How could you ever charge vat then? If you charge 20% vat on 100k you charge 120k. Lets assume you're not on the flat rate scheme for a second.... The revenue then want 20% of 120k which is 24k... Thats 4k more than the vat that you charged?

 

[Part Timer]

Now I'm f%&king baffled. How could you ever charge vat then? If you charge 20% vat on 100k you charge 120k. Lets assume you're not on the flat rate scheme for a second.... The revenue then want 20% of 120k which is 24k... Thats 4k more than the vat that you charged?

Calm down, now you're complicating it. If you're not on the fixed rate you claim the VAT back from your Vatable expenses, deduct that from the VAT you've charged and pay HMRC the difference. So say your Vatable expenses, diesel, resin, filters, Insurance etc, are £15K then there will be £2.5K of VAT to deduct from the VAT you've charged. So you would pay the VAT man £17.5K 

On the fixed rate scheme, for the first year you pay 11% of your turnover plus 11% of the VAT. So on £100K you will then charge £20K VAT so the calculation is 11% of £120K which is £13.2K. Year 2 the calculation would be 12% of £120K which is £14.4K

Comprende ?  

 

[Pjj]

Calm down, now you're complicating it. If you're not on the fixed rate you claim the VAT back from your Vatable expenses, deduct that from the VAT you've charged and pay HMRC the difference. So say your Vatable expenses, diesel, resin, filters, Insurance etc, are £15K then there will be £2.5K of VAT to deduct from the VAT you've charged. So you would pay the VAT man £17.5K 

On the fixed rate scheme, for the first year you pay 11% of your turnover plus 11% of the VAT. So on £100K you will then charge £20K VAT so the calculation is 11% of £120K which is £13.2K. Year 2 the calculation would be 12% of £120K which is £14.4K

Comprende ?  

Glad I have an accountant ?????