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One for VAT registered guys


P4dstar

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Evening chaps. Just want a bit of advice on understanding the VAT threshold. My accountant did try and explain it all but to be honest it just went straight over my head. I've read the government website but I want to check...

The first circumstance in which you have to register is;

 

"if you realise that your total VAT taxable turnover is going to be more than £85,000 in the next 30-day period.

You have to register by the end of that 30-day period. Your effective date of registration is the date you realised, not the date your turnover went over the threshold.

Example On 1 May, you realise that your VAT taxable turnover in the next 30-day period will take you over the threshold. You must register by 30 May. Your effective date of registration is 1 May."

The second circumstance is;

"If you exceeded the VAT threshold in the past 12 months

You must register if, by the end of any month, your total VAT taxable turnover for the last 12 months was over £85,000.

You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the second month after you go over the threshold.

Example Between 10 July 2017 and 9 July 2018 your VAT taxable turnover was £100,000. That’s the first time it has gone over the VAT threshold. You must register by 30 August 2018. Your effective date of registration is 1 September 2018."

 

I want to check I have understood this. In the first instance It reads that if you expect to take 85000 in one month you must register immediately and pay/charge VAT from the beginning of that month.

In the second instance it reads that if you take more than 85000 on a rolling 12 month period you must register but will only need to start charging/paying VAT from the second full month.

Have I understood that correctly?

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I mucked it up and got fined so I better keep out of this one ?

  • Haha 3
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11 minutes ago, Part Timer said:

I mucked it up and got fined so I better keep out of this one ?

Surely you're the best person to ask. An example of how not to do it ?

My accountant started talking about a rolling 90 day period. The Gov website only talks about the 30 day and the 12 month rolling period. I like the look of that 12 month rolling scheme as it gives you 2 months grace to get your ducks in a row before you have to start.

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9 minutes ago, P4dstar said:

Surely you're the best person to ask. An example of how not to do it ?

My accountant started talking about a rolling 90 day period. The Gov website only talks about the 30 day and the 12 month rolling period. I like the look of that 12 month rolling scheme as it gives you 2 months grace to get your ducks in a row before you have to start.

I was never told about it being rolling, to be fair I never asked or checked. I assumed it was trading year. I got it wrong and was fined, I was fortunate in the fact the 2 invoices that took me over both companies allowed me to resubmit them with VAT on as I seem to recall the VAT man would've reclaimed the VAT I should've charged on them. This was 15 years ago and not in this line of business.

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You have done very well in a short time if you are looking at registering for VAT , I just let the accountant deal with it and concentrate on getting more work , I hate paperwork and pay him to deal with it ????  

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7 hours ago, Pjj said:

You have done very well in a short time if you are looking at registering for VAT , I just let the accountant deal with it and concentrate on getting more work , I hate paperwork and pay him to deal with it ????  

Thank you mate, that very kind. I'm not quite there yet, just preparing. Also very conscious of looking like a willy waver so I tend to keep my head down on subjects like this where I can.

I've always tracked how much the customer base is worth on a monthly basis. I know that when I reach £7083 per month of regular work I am at the threshold. On top of the regular work there is also one off stuff to look at too. Of course if it's on a 12 month rolling basis reaching that figure won't instantly take me over the threshold. I've just run a report on Quickbooks and on a 12 month rolling basis I would have a lot of headroom, but I'll be creeping closer every month. This gives you the breathing space to make up enough customers to provide the revenue with their 12.5% once you're registered. If it's done over a 90 day period as my accountant suggested then the breathing space is drastically reduced.

I want to make sure I bring a full timer in at the right point and if we can use the initial time to build the round enough pay his wages and cover the incoming 12.5% vat bill then I'll weather the storm of going vat registered relatively easily. What I don't want to end up doing is avoiding the threshold and holding back. I only need a wage of about £30k from the business for now to live comfortably, everything else can be reinvested.

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It'd be good to hear from those that are VAT registered and how they found the transition as its also my next step (I think I'm actually late to register), my downfall is that I'm 99% residential. 

It's good to hear things are going well @P4dstar I always enjoy reading your updates, you seem like you have your head screwed on & are going about things in the correct way 

I'm sure someone will correct me if I'm wrong but I'm sure if you go on the flat rate you HAVE to spend X amount per month on new equipment & there's also limitations on what you can claim back, hopefully someone will come along and correct me if I'm wrong. 

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20 minutes ago, Doddy111 said:

I'm sure someone will correct me if I'm wrong but I'm sure if you go on the flat rate you HAVE to spend X amount per month on new equipment & there's also limitations on what you can claim back, hopefully someone will come along and correct me if I'm wrong. 

You don't have to spend anything on equipment, they calculate the percentage on what the average spend is across the industry. You can't claim any VAT back except on single purchases over £3K I believe.

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9 hours ago, Doddy111 said:

It'd be good to hear from those that are VAT registered and how they found the transition as its also my next step (I think I'm actually late to register), my downfall is that I'm 99% residential. 

It's good to hear things are going well @P4dstar I always enjoy reading your updates, you seem like you have your head screwed on & are going about things in the correct way 

I'm sure someone will correct me if I'm wrong but I'm sure if you go on the flat rate you HAVE to spend X amount per month on new equipment & there's also limitations on what you can claim back, hopefully someone will come along and correct me if I'm wrong. 

Thanks mate, that's really kind of you.

From what I've read you can register for the flat rate scheme as long as you're planning to earn less than 150k in the first year and remain on the scheme until you reach 230k. You can only claim vat back on capital gains purchases (Equipment etc) where you spend more than 2k. I think for example if you decided to buy some stationary and make the order up to 2k (That would be a lot of pens ?) you wouldn't get the vat back but if you paid a supplier for a new system you would.

9 hours ago, Part Timer said:

You don't have to spend anything on equipment, they calculate the percentage on what the average spend is across the industry. You can't claim any VAT back except on single purchases over £3K I believe.

When you say single purchases, if you were to buy a fitted system with speed liner, hose reels and system would that count as one purchase or multiple with the vat only being returned on the items individually over 2k?

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16 minutes ago, P4dstar said:

Thanks mate, that's really kind of you.

From what I've read you can register for the flat rate scheme as long as you're planning to earn less than 150k in the first year and remain on the scheme until you reach 230k. You can only claim vat back on capital gains purchases (Equipment etc) where you spend more than 2k. I think for example if you decided to buy some stationary and make the order up to 2k (That would be a lot of pens ?) you wouldn't get the vat back but if you paid a supplier for a new system you would.

When you say single purchases, if you were to buy a fitted system with speed liner, hose reels and system would that count as one purchase or multiple with the vat only being returned on the items individually over 2k?

You'd have to get the total invoice value or single amount value clarified by the VAT people, would think it's a single item rather then a bundle.

I believe you can stay in the fixed rate scheme as long as your turnover is below £250K not £150K. Again I'd check that out.

You do also realise the 12% you pay back is 12% of your turnover including VAT. So if your turnover for a quarter is £25K your VAT repayment is 12% so £3600. 25000 x 1.2 = 30000 and 12% of that is £3600 leaving you £1400 to cover your VAT on your expenses.

When I was in it I made a small profit on it and would think your costs, as a percentage of turnover, will be lower.

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2 hours ago, Part Timer said:

You'd have to get the total invoice value or single amount value clarified by the VAT people, would think it's a single item rather then a bundle.

I believe you can stay in the fixed rate scheme as long as your turnover is below £250K not £150K. Again I'd check that out.

You do also realise the 12% you pay back is 12% of your turnover including VAT. So if your turnover for a quarter is £25K your VAT repayment is 12% so £3600. 25000 x 1.2 = 30000 and 12% of that is £3600 leaving you £1400 to cover your VAT on your expenses.

When I was in it I made a small profit on it and would think your costs, as a percentage of turnover, will be lower.

All far to complicated for me I leave all this to the accountant that’s what I pay him for , I hate paperwork ???

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Well my Accountant is registering me for flat rate on Monday, scary times but I welcome the challenge ?

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Dont forget guys if you are expanding and are LTD the corporation tax is going up to 25% in a couple of years. Thats put me right off tbh, 25% plus VAT, no thanks.

Edited by adamangler
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11 minutes ago, adamangler said:

Dont forget guys if you are expanding and are LTD the corporation tax is going up to 25% in a couple of years. Thats put me right off tbh, 25% plus VAT, no thanks.

This will only apply if the Ltd business is generating X amount of profit.  I think it was something like £250k profit.

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It would be good to get the vat back on a new van, that's the reason I would want to be vat registered. 

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On 10/03/2021 at 03:02, Pjj said:

All far to complicated for me I leave all this to the accountant that’s what I pay him for , I hate paperwork ???

But that hot water nice! ?

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2 hours ago, NewGuy said:

This will only apply if the Ltd business is generating X amount of profit.  I think it was something like £250k profit.

It staircases up to 25% mate. 250k profit isn't that high really, its gonna affect a lot more companies than they would have you believe.

4 hours ago, Doddy111 said:

Well my Accountant is registering me for flat rate on Monday, scary times but I welcome the challenge ?

Good on you mate. Necessity is the mother of invention, if you need to make more profit it will force you to. It'll be interesting to hear how you get on.

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1 hour ago, P4dstar said:

It staircases up to 25% mate. 250k profit isn't that high really, its gonna affect a lot more companies than they would have you believe.

 

It will not affect us at all.  I really do not believe there are any window cleaners out there generating profits (not revenue) of £250k.  This is profits we are talking about.  If there really are window cleaners out there with profits in this region, just pay yourself a higher salary to keep your profits margins below £250k.

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1 hour ago, NewGuy said:

It will not affect us at all.  I really do not believe there are any window cleaners out there generating profits (not revenue) of £250k.  This is profits we are talking about.  If there really are window cleaners out there with profits in this region, just pay yourself a higher salary to keep your profits margins below £250k.

It would be nice wouldn't it, certainly worse problems to have. That wouldn't work in practice though as it would take them into the 40% tax bracket. Sad really but they screw the honest folk. 

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15 minutes ago, P4dstar said:

It would be nice wouldn't it, certainly worse problems to have. That wouldn't work in practice though as it would take them into the 40% tax bracket. Sad really but they screw the honest folk. 

But don’t forget it’s only money earnt over £40k that is taxed at that rate. Every penny below £40k is still taxed at 20%, except for the personal allowance which is tax free. 
 

Honestly, the 25% corporation tax won’t affect any of us. No way any of us are going to generate profits of £250k. I just can’t see it. 

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