VAT or no VAT?

[buzzlightyear]

https://www.bing.com/ck/a?!&&p=6dc78d6c07e367c91d8e186ec6b4d9e0faf0e68edac104358d3696ea8103fa1fJmltdHM9MTczOTA1OTIwMA&ptn=3&ver=2&hsh=4&fclid=0798af7c-fad8-64cd-0b4d-bd0cfbe865af&psq=claiming+vat+if+not+vat+registered&u=a1aHR0cHM6Ly93d3cuY3J1bmNoLmNvLnVrL2tub3dsZWRnZS9hcnRpY2xlL2Nhbi1pLWNsYWltLXZhdC1iYWNrLWlmLWktYW0tbm90LXZhdC1yZWdpc3RlcmVk&ntb=1

 

[UNG]

If you are trading below the VAT threshold it has to be a considered decision to register for VAT
Things to consider are what VAT accounting method you will use, cash accounting, accrual accounting and flat rate scheme are a few methods and each has it's benefits and negatives
Then there are the likely visits from the VAT inspector every 5 years or so which usually takes up half to a full day
If you use an accountant your accountancy costs will inevitably increase alternatively doing it yourself you will have to negotiate the "making tax digital" system to file your quarterly returns

Take your time and get some advice to make sure it is right for you and not just a select few of your customers

 

[buzzlightyear]

You must register if your taxable turnover in the last 12 months was more than the VAT registration threshold of £90,000 or if you expect your turnover to go over £90,000.plus the more you earn, thieves will have it off you. plus more you earn the more tax you pay.
if you are self employed you must think very carefully.

 

[littlespark]

Ok. I’m not making 90k that’s for sure.

His argument is he wants to buy the materials that I’ve already had delivered…. At my CEF price on my CEF account.
I’m going to invoice him for last weeks time anyway… and add any materials on site and installed. ( there’s another unopened drum of cable)

The govt will take the vat either way…. But would they actually take it twice?
There must be some procedure in place. I can’t be the first non vat registered selling to a vat registered?

I’ll email my accountant tonight and see what they advise.

 

[buzzlightyear]

The govt will take the vat either way…. But would they actually take it twice?

Read post 16.

 

[buzzlightyear]

You are not VAT registered, so let him pay for the invoice plus vat, he claims
You charge him time, but not the materials. Hay presto.

 

[Simon47]

The vat has to be added somewhere on the supply chain.

The govt will take the vat either way…. But would they actually take it twice?

No, it won't get charged twice - at least not directly *.

As a non registered trader :

You buy the goods on which VAT is charged. You cannot reclaim this VAT so the cost to you is the VAT-inclusive price.
You do not add VAT on your labour.
So the cost to your client is "goods+VAT + labour". Because you are not registered, the VAT element is not recoverable anywhere.
The end result is that the materials cost your client 20% more *.

By allowing the client to buy the materials, they can reclaim the VAT, so they avoid that 20% markup.

If you were registered, then you reclaim the VAT on the materials so the cost to you is the ex-VAT price. When you invoice the client you charge VAT on the whole amount, which your client can reclaim. So nett, no VAT has been paid - it's just gone round the loop a couple of times !

* arguably, if you have paid VAT on materials which the client can't reclaim, there is double charging in that your client will charge VAT on the sales who's profits pay for those materials that VAT couldn't be reclaimed on.


For completeness, for a non-registered client is :

If you are not registered, the client pays VAT on the materials whether you buy them or the client does. There’s no VAT on your labour.

If you are registered, then you reclaim the VAT on materials, but charge VAT on the whole bill. So your labour costs the client 20% extra.


So, for non-registered clients (almost all domestic clients), it's better to be non-registered as your labour won't have a non-recoverable 20% markup.

For registered clients, there's a benefit to be registered OR let them buy the materials. Otherwise there's a non-recoverable 20% markup on materials.

 

[pirate]

Much good advice here. It all depends on your turnover, but if you can avoid VAT registration, do so. The VAT man is the enemy. Especially if you are a sole trader. You do not want the VAT man at your door under any circumstances!
Sorry...that's my doorbell!
Sh*t...

 

[tony9i9i9i]

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.

You could let him buy the materials and only charge labour, which keeps your turnover lower and if you ever have to go back due to his faulty materials, you can invoice your time.

 

[ferg]

My accountant told me to avoid it like the plague.
Apparently in order for it to be worthwhile I would need to be going a long way beyond it.
Otherwise get customers to buy expensive materials and forgo the mark up.
I have had the same advice from former, retired, VAT inspectors.