Has vat registration cost you business?

[Festerfly]

i havent found that i've lost any work due to becoming VAT Registered in January but i do find the additional hassle and accounting side of things a right nightmare. Plus my accountant is mega money so i think i may have to change as i don't feel i can ask for advice without being charged!

 

[oldtimer]

I do work for a couple of letting agents who pass the bill on to the landlord the thing is adding VAT will not help me but at the same time I am not flat out plus I get calls from people saying is that quote with or without VAT and when I say I am not VAT registered then they are happy so there is 2 areas here if its domestic and customer facing VAT does not help you get jobs if it doing work for companies then VAT is probably the way to go Although I suspect if your are earning under the limit would the VAT man then not say sorry you will have to de-register ?

 

[Welchyboy]

I do work for a couple of letting agents who pass the bill on to the landlord the thing is adding VAT will not help me but at the same time I am not flat out plus I get calls from people saying is that quote with or without VAT and when I say I am not VAT registered then they are happy so there is 2 areas here if its domestic and customer facing VAT does not help you get jobs if it doing work for companies then VAT is probably the way to go Although I suspect if your are earning under the limit would the VAT man then not say sorry you will have to de-register ?

he wont ask you to de-register as its more cash in his pocket

 

[Cbigfoot]

i havent found that i've lost any work due to becoming VAT Registered in January but i do find the additional hassle and accounting side of things a right nightmare. Plus my accountant is mega money so i think i may have to change as i don't feel i can ask for advice without being charged!

Get a better accountant!

I use software for mine, as long as i put in all my invoices and recipets into it, and check against my bank account, it then process the return for me and takes no more than 10 minutes. Its the input of the stuff and the bank reconcile that takes time. It also reduces my accountancy fees, as all the stuff is in there already.

 

[SW1970]

opening two companies is a no-no my accountant has specifically advised me against this especially as i am part P registered and NIC A/C with my business, it would look a bit suspect with all the certs from two companies coming from one as you would cant be QS of two companies and to be honest i want to be running a professional and legit business not ducking and diving, but the taxman makes this very hard for small businesses like ours that are between two-levels

It's specifically identified as tax avoidance so is a definite no-no. It's known as artificial separation. On the whole VAT registration has been a good thing in my experience. However I suspect in domestic only situations things may not be so good.

 

[FWDiane]

Hi, I'm an accountant and I agree with the previous post, you get some great online software (some free, others costing up to about £25 pcm) that will calculate your Vat for you, and make the rest of your bookkeeping super easy and cut annual accountancy bills. And if you are Vat registered you can claim the Vat back on your accountancy fees!
Seriously, please don't consider opening a second company for your domestic cliemts, that's a definite no-no.
Vat registration is tricky as you will automatically be 20% more expensive than your competitors who are not, but it can give you 'status' in that you may appear to be a larger, more succesful firm than you are - ie those of your competitors that are not Vat registered are def not turning over in excess of £77k, whereas companies who are Vat registered 'likely' are.
Also, talk to your accountant over what purchases you can claim the Vat back on pre registration, you may be pleasantly surprised

 

[Snapester]

I have put two quotes in for work this week with non vat registered people, and i feel it has cost me the quote the rewire that was 2500 is now 2800 or so! And i cannot afford dropping my day rate so where as i was £250p/day im now £300!! which won't fit to well with most domestic work, whereas before being VAT registered i was cruising happily!! Motto is dont work to hard!

 

[imago]

I have put two quotes in for work this week with non vat registered people, and i feel it has cost me the quote the rewire that was 2500 is now 2800 or so! And i cannot afford dropping my day rate so where as i was £250p/day im now £300!! which won't fit to well with most domestic work, whereas before being VAT registered i was cruising happily!! Motto is dont work to hard!

Well you can drop 20% off of the price of materials which will reduce your price increase by £200 +, your travel costs will need adjusting as you get 20% back off of that (fuel, servicing etc) and so on.

Just because you're VAT registered doesn't mean you have to be 20% dearer across the board.

 

[Snapester]

How can I drop 20% off my materials if the customer isn't registered? Do you mean giving the customer materials for the price I get excluding vat? Sorry just learning this vat game!

 

[oldtimer]

What he means is if you charge a customer £300 + VAT = £360 but you bought £120 in material so you charge £60 vat but claim back £20 vat on the materials

 

[Welchyboy]

you wont actually profit from this only direct business costs will be cheaper, alot of people i talk to include the vat on materials within the cost of the job then add 20% VAT to the total
amount, then when you claim back the vat money you make a little profit, but just dont do this with domestic customers or non vat persons

 

[Snapester]

No i mean i charge £250 p/day but now being VAT registered I'm now £300p/day are you guys on similar level with prices?

 

[imago]

No i mean i charge £250 p/day but now being VAT registered I'm now £300p/day are you guys on similar level with prices?

There's little you can do about the labour element of the VAT. The materials VAT you claim back, so you can discount the VAT to the customer for that amount. So wher you say you have a rewire increase of £300:00, you don't need to. You only have to increase the price by the amount of VAT you apply to your labour.

It means sitting down and spending a bit of time working out how much cheaper things will be when you can claim back VAT. For instance, if you pay £1.41 per litre for diesel, it will only cost you £1.17 when you're VAT registered.

 

[Cbigfoot]

No i mean i charge £250 p/day but now being VAT registered I'm now £300p/day are you guys on similar level with prices?

Yes but everything you buy and use, tools, phone, fuel, accountacy fees, EVERYTHING you use for the business that has VAT charged on it (Which is nearly everything except insurance) now becomes cheaper to you. Therefore you can actually earn a little less than 250 per day and still be taking the same money home.

You have already been charging the VAT on all the materials to your clients anyway so the ONLY factor that can increase the price to your customer is the labour value.

Imago has it exactly right its about sitting down and working it out, and as FW Diane says you will be pleasantly surprised at just what you can claim!

 

[Cbigfoot]

How can I drop 20% off my materials if the customer isn't registered? Do you mean giving the customer materials for the price I get excluding vat? Sorry just learning this vat game!

When you get a quote for the materials from your supplier it will probably come without VAT added, if they do not ask them to do it that way.

Then put your mark up on the materials if you have any, put down your labour costs and finally add VAT to the total.