VAT or no VAT?

[littlespark]

Hello. Long time no see. I’ve been up to my eyeballs in treadmills, weights and a great number of super fit individuals who are making me feel totally inadequate as a specimen of human being…. Anyway…

The customer has baulked at my invoice due to the cost of materials… and is suggesting that he pay CEF directly as he is VAT registered and I am not.

Most of my customers since I started SE have been domestic, and any commercial work I’ve done, no one has ever asked to pay like that.
I’ve never had a problem in 8 years being self employed, and the accountant said when I started it wouldn’t be worth me registering for VAT at the beginning… maybe it’s time to change.

I’m just wondering if it would be better to be vat registered myself, and the pros and cons either way.


As an example invoice, say I have £40 an hour for time, plus basically retail price for materials (with a little mark up) Total at the bottom, and a note to say I’m not VAT registered.

Being registered, I would have to state my VAT number… would I still charge £40, or would I charge £33 and add the 20% at the bottom to bring it up to 40?


I’m going to ask the accountant as well on Monday…. But I thought I’d get feedback from youse first.

 

[Bob Geldoff1234]

The vat you give to the tax man so if you reduce your money to £33 plus vat then your taking a pay cut.
Your real price is £40 plus vat.This then makes you dearer for domestic customers and your work will suffer.
If your only doing commercial then maybe its worth it but for domestic it will make you dearer.
My accountant has told me to try to stay out of vat unless your going to earning WELL over the threshold.
If your below the threshold and do mainly domestic then stay well away is my advice.

 

[littlespark]

Great advice.

Customer is just going to have to stick it.


The materials in question is a drum of large SWA, so a few hundred just on the VAT…
I’m having to find a good price, deal with the wholesaler, organise delivery’s,…. I need a markup too.


Can a VAT registered company claim VAT back on materials sourced from a non VAT source…. Ie me.

 

[SparkySy]

I was not vat registered for the first 5 years.
I went Ltd last May and vat.
Yes it does make you dearer to the domestic market, but that is mainly due to it being on the invoice, not included in the price of materials.
To be fair all my domestic customers, which is not many were happy to pay vat and still continue to use my services.
For the bulk of my business, it's actually a massive help, as the customers are vat registered too.
The only thing about it is that you end up with more paperwork.
I have now got Xero software to do my day to day accounting, and an excellent accountant for the vat and CIS returns.
This has obviously added to my costs too so when I did change I upped my hourly rate and added vat.
So far the last 9 months have been the busiest I have been since around 2007.
I am so glad I did it, so far it has all been worthwhile.

My biggest hope is that Labour don't f#@k it up for every small business as they seem to be doing at the moment.
The only thing they have successfully done since being elected is to p/$$ off many different sectors of society, including pensioners, farmers and businesses to name a few!

 

[Simon47]

If you allow the customer to buy the materials - they can reclaim the VAT.
If you buy them, you will have to pay the VAT - but no, your customer cannot reclaim it.

As to registering or not, consider a number of factors - principally to mix of registered/not registered customers, and mix of labour and materials.
If you register: you do not change your labour rate to registered customers, but make materials cheaper to them; for non-registered customers you make your labour more expensive (+VAT), but do not change materials.