Mainly domestic; are you VAT registered?

[Welchyboy]

hey

Im at the point where im struggling to stay under the VAT limit and im thinking of buying a new van in the next few months so i will need to shortly register for VAT, has any of you lads who do a fair bit of domestic work had problems with the extra hassle or cost to the customer? or has it worked out better for you!
I have tried to avoid it up to now cause all i get on nearly every job is the old 'can you do it cheaper for cash mate'
Although I would think commercial customers would be no problem

Anyone?

 

[IQ Electrical]

I never want to get on the wrong side of the Tax man, I'd rather overpay than have them chasing me for money, I just read that they can go back 20 years now, and I think it used to be 7 years, and I also read in todays paper that they are going to be coming down on all kinds of tradesmen and starting investigations into people they think are working cash in hand (doing homers) so no doubt they will start pestering everybody who is in the construction trades....

They can't 'come down hard' if you pay what you owe!

Is there some vendetta going on between you and Revenue & Customs?

I'll say what I always say on these forums, I just want to stick to the facts and not opinion and myth.

What you posted regarding registering for VAT and then having to pay for the previous 12 months is absolutely not true, why don't you read the information and admit you were wrong, for the benefit of everyone reading this thread in the future?

Do you believe that once you hit the high rate of income tax that you are then taxed at 40% on everything you earned in the previous 12 months?
It's a similar principle and just as silly!

 

[Paul.M]

Ive just read the hmrc website and the threshold is £68k. I think what grant is trying to say is if you don't register and don't charge vat from the start of the financial year but go over the threshold in the last couple of months of that year they will charge for that full year and not just the 2 months that you are over. Could be very costly. But on the flip side you can claim the vat that you have paid in that financial year to offset your bill.

The hmrc website is not as easy to read as they say it is but a very good link and at the end of the day we can call them and ask.

 

[IQ Electrical]

The threshold is £70,000.

I've registered 2 businesses for VAT as the threshold was in sight and can guarantee you that they do not then say 'right, you owe VAT on your last 12 months sales!'

Just think about it and read the information again!

Then read the first 'paragraph' of post 17.

 

[Welchyboy]

I asked my brother about this he is a chartered accountant and he said you register for vat before you hit £70,000 then you must start charging 20% on labour but you cant put it as VAT on your invoice till you get a vat number, then you just save it as you will have to pay this money over from the day you register, they wont bill you for the whole year or go back on your invoicing unless they find you have been earning over £70,000 before you register, oh and its not £ 70,000 per account year its £70,000 over any 12 consecutive months so dont get caught out!!!

 

[IQ Electrical]

I asked my brother about this he is a chartered accountant and he said you register for vat before you hit £70,000 then you must start charging 20% on labour but you cant put it as VAT on your invoice till you get a vat number, then you just save it as you will have to pay this money over from the day you register, they wont bill you for the whole year or go back on your invoicing unless they find you have been earning over £70,000 before you register, oh and its not £ 70,000 per account year its £70,000 over any 12 consecutive months so dont get caught out!!!

Quod Erat Demonstrandum.

 

[grantr37]

Got the Tax mans business card here from office, am going to phone him tomorrow and ask about what the peculiarities of the current VAT system are, he will put me right...

 

[baldelectrician]

I'm not busy enough to have to worry about vat as my turnover would have to more than double for me to have to worry about it.

What I encourage is to get the client to go to the wholesaler and but the materials and I provide labour. I do this if the materials are more than a few hundred.
It helps as the client sees how dear the materials have now become.

It is especially good with showers as if the item goes ---- up then the client bought it and not you (and they are liable to deal with any repair issues and you didn't supply it)

 

[malcolmsanford]

I'm not busy enough to have to worry about vat as my turnover would have to more than double for me to have to worry about it.

What I encourage is to get the client to go to the wholesaler and but the materials and I provide labour. I do this if the materials are more than a few hundred.
It helps as the client sees how dear the materials have now become.

It is especially good with showers as if the item goes ---- up then the client bought it and not you (and they are liable to deal with any repair issues and you didn't supply it)

Good theory but is it really. What happens when you send the customer to buy a 17th edition board and the wholesalers is 75 pounds and they see that a B & Q one is 55 pound ............and buy that.

So your client is quite happy to schlep all the way down to an wholesaler for you and buy the material, how do they manage lengths of oval tubing in the mini.

You obviously also don't work on a mark up on material, which as always been a standard practice and can in fact cover quite a bit of cost on travel, and paperwork which quite often you don't allow for.

I have to admit I'm not a great lover of clients buying thier own stuff, if it does fail before the year out, invaribly they will call you and that starts a whole new ball game of I'm not covering this, or not covering that, with thier reply that it failed becasue of the way you installed it, MK told me that, it's really not worth the hassle.

If a customer insisted on purchasing their own material, then I would add to my quote that I will not be held responsible if that fails, and make them sign it. You can not do that if the material you suggest the client buys fails, as they will say you recommended it, it's a real minefield IMO

 

[IQ Electrical]

I agree with Malcolm, material markup is essential when we're squeezed tight on labour margins etc.
I can't imagine saying 'here's a shopping list' to a client, it's rather unprofessional too.

Don't be afraid of VAT, just learn the facts and some of the advantages to your business.

 

[baldelectrician]

I get the client to buy the stuff if the materials cost is high

I buy my own consumer units and guarantee them, if the client wants me to fit one they have bought I do point out if there are any problems then they are responsible

I offer the client what they want- I had a chap want a 14 way staight rcbo consumer unit (hager) and he said he would order through tlc, saves me at least £350 on my turnover. I will have new tails and other bits and charge accordingly

Don't get me wrong- I prefer to source the stuff myself and fit it, but flexability is the name of the game these days

 

[alpasty]

I am VAT registered, and agree with the posts above, you would only be liable for paying backdated VAT if you go over the threshold without registering. If you register on time, you will not be liable for any VAT on income earned before registration, when you were below the threshold. I registered about a month before I predicted I would go over the threshold.

I am not sure about the current situation, but when I registered I was able reclaim the VAT on capital expenditure (tools, van, equipment) bought in the previous three years, which was helpful.

A word of warning, if you want to de register, you will be liable for VAT on all business assets for which you claimed VAT, at their current value, even if they are retained.

One other point about being registered, in general is that as previously mentioned, it only actually increases the price to your customer on the labour part of the invoice. Commercial customers often specifically choose a VAT registered business, as the it is the only way in which they can reclaim the VAT on the materials used in the job (unless they buy them themselves). I kept most of my regular customers after registering, and new customers seen to have more faith in a VAT registered company/sole trader.

 

[grantr37]

And the tax man eventualy turns round and says "right wheres your materials invoices".......and you say "um um I got the customer to buy them themselves"....to which he replies "DO YOU THINK I'M DAFT!!!!?????!!!!????"......."YOURE GETTING IT"

 

[IQ Electrical]

And the tax man eventualy turns round and says "right wheres your materials invoices".......and you say "um um I got the customer to buy them themselves"....to which he replies "DO YOU THINK I'M DAFT!!!!?????!!!!????"......."YOURE GETTING IT"

You're not getting it are you?

I even posted the link to the HMRC site explaining all of this!

You keep accounts to show what you've turned over.

You keep receipts to show what you paid out in relation to generating the turnover.

You issue invoices to show where the turnover came from.

You charge VAT on sales.

You reclaim VAT on purchases.

You pay the difference to HMRC.

This is all standard business practice, nothing new and nothing complicated!

 

[baldelectrician]

And the tax man eventualy turns round and says "right wheres your materials invoices".......and you say "um um I got the customer to buy them themselves"....to which he replies "DO YOU THINK I'M DAFT!!!!?????!!!!????"......."YOURE GETTING IT"

Remember- it's how you do your business.
It's quite easy for me to prove a customer buys the stuff themselves. I always sent them to the same wholesaler where they will be looked after and the wholesaler gives a recpt and takes payment on card.
Easy peasy