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    • SamPirul1985
    • By SamPirul1985 26th Oct 17, 10:07 PM
    • 4Posts
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    SamPirul1985
    Setting up a sole trader bussiness, reclaiming VAT
    • #1
    • 26th Oct 17, 10:07 PM
    Setting up a sole trader bussiness, reclaiming VAT 26th Oct 17 at 10:07 PM
    Hi, I have been reading a bit and still reading on the subject and I think I've almost there in figuring it all out, I thought I would ask to make sure I'm all on track.

    I want to start a small I.T. business in selling pre-built computer systems and components and also providing repair services to my friends and family and obviously grow from there.

    I obviously will not attract customers if my products cost more than the big known places, so my hope is if I buy at excluding VAT and from wholesalers, sell with full VAT and a little under to attract my customers and then finally reclaim that VAT and make the profit from there.

    Now in order to buy from some wholesalers I need to provide a VAT registration number, hence why I need to set up first before I can even actually get going.

    My questions are simply how and if it is actually possible to do this or am I missing something here?

    Secondly, if my business just doesn't go well and I have to just stop, then will they [gov] mistake my business as being some sort of VAT scam and want everything back? Will having all the invoices and customer details be enough? I obviously will only be claiming things that I actually sold so I don't think it will be even a lot. I think I have to build this business and work full time on the side in the long run and so it might not look like it's a viable business to them in that case, but these thoughts are just me being safe than sorry and at the same time making sure I actually have money to stay alive, however it's still worth making sure I have everything I need ready in such an event.
Page 2
    • motorguy
    • By motorguy 27th Oct 17, 9:33 PM
    • 15,662 Posts
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    motorguy
    There is absolutely no harm in trying to buy trade goods at trade prices, but they'll charge you VAT as they expect you to reclaim it. While you are still assembling systems for friends & family & even others there is no point being VAT registered as it just adds 20% to everything you do.

    Once you do hit the threshold, or realise you are going to, then you have to bite the bullet & register & that's where a good accountant can advise you - for example on whether to carry on as a sole prop or to go limited.

    Me, I'd go limited stat just to seperate my personal finances from the business money. As a sole prop, if you sell £100 pounds worth of goods at a car boot, when that money hits your bank account, HMRC won't distinguish between earnings as an IT bod & car boot income. As far as they look at it, every penny in is income, and they'll want their 20%. That you didn't buy the stuff to car boot, that you didn't reclaim any input tax on the stuff? They won't give a hoot.

    If you find yourself ever renting a property even if it is grandma's bungalow, then you get into the murky waters of Partial Exemption and it really is worth going limited to Stay Well Out of that!

    Hoping your idea takes off!
    Originally posted by DigForVictory
    Limited Co adds an awful lot of accountancy hassle and increases accountancy charges. I'd run with a separate business account - or even just a second account in my own name - and put all the business stuff purely through that.

    HMRC arent going to scrutinise your personal account but it is best to seperate business out to another account.

    If there is a real need to be a Limited Co at some point, you can convert then.
    You are not special. You are not a beautiful and unique snowflake.
    • fishybusiness
    • By fishybusiness 28th Oct 17, 8:58 AM
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    fishybusiness
    I think you're about 20 years too late with this business "idea". Selling your own pre-built computers to friends, family and small businesses is a recipe for disaster. I did it about 15 years ago and even then i was too late to the game (probably by about 10 years)
    Entirely agree - computers in general have become throw away items. The real profit used to be in the maintenance, not the initial sale.

    When ADSL broadband came along, so did viruses and spyware, so many people just not used to faster speeds and the rapidly expanding web. There was plenty of money to be made in repairs.

    Computers were still a relatively expensive commodity, and so repairs were worthwhile. Now in general a unit will be replaced once it becomes unreliable, negating the requirement for computer tech's to repair them.

    Look at what happened to PC World is you want evidence of market trends.
    • motorguy
    • By motorguy 28th Oct 17, 9:24 AM
    • 15,662 Posts
    • 8,973 Thanks
    motorguy
    Entirely agree - computers in general have become throw away items. The real profit used to be in the maintenance, not the initial sale.

    When ADSL broadband came along, so did viruses and spyware, so many people just not used to faster speeds and the rapidly expanding web. There was plenty of money to be made in repairs.

    Computers were still a relatively expensive commodity, and so repairs were worthwhile. Now in general a unit will be replaced once it becomes unreliable, negating the requirement for computer tech's to repair them.

    Look at what happened to PC World is you want evidence of market trends.
    Originally posted by fishybusiness
    Totally agree.

    Plus if the computer is running, theres no need for upgrades, etc. I've a laptop here thats 7+ years old and running away merrily. Same with desktops - an i3, 4GB RAM and Windows 10 and it'll quite happily run for years. And even if a business is buying laptops or PCs they usually budget £300-£500 so you've scope for maybe £50 profit which is peanuts for the amount of wallying about you will do (AND be their 24x7 support for a year in that price)

    I hated supporting small businesses. They were adverse to paying for maintenance contracts, so you could only ever bill them for a call out and hourly rates. All very well but they would leave it last minute then make it YOUR problem to fix urgently.
    Last edited by motorguy; 28-10-2017 at 9:31 AM.
    You are not special. You are not a beautiful and unique snowflake.
    • martindow
    • By martindow 28th Oct 17, 2:18 PM
    • 7,255 Posts
    • 4,045 Thanks
    martindow
    Wholesalers want to assure themselves that they are supplying traders rather than individuals. A VAT number shows this but if you can't supply this most of them are happy with evidence of a business bank account or names of other companies who already supply you for instance. Strangely many wholesalers put great store by letter headings which anyone can knock up in five minutes on a computer.
    • bris
    • By bris 28th Oct 17, 3:45 PM
    • 7,033 Posts
    • 6,037 Thanks
    bris
    It's impossible, I looked into buying parts to build custom pc's about 6-7 years ago and found you cant actually buy the components wholesale unless you have tens of thousands of pounds to buy the parts at enough discount to be cheaper than the huge retailers.


    Your understanding of VAT is also seriously flawed, you can never make a profit from VAT, at least not the way your thinking.
    • fishybusiness
    • By fishybusiness 28th Oct 17, 5:32 PM
    • 1,128 Posts
    • 698 Thanks
    fishybusiness
    you cant actually buy the components wholesale unless you have tens of thousands of pounds to buy the parts at enough discount to be cheaper than the huge retailers.
    If you did, you would also need an outlet to shift them quickly as component value seems to drop through the floor constantly as new parts come along with higher spec.
    • Uxb
    • By Uxb 1st Nov 17, 7:55 PM
    • 966 Posts
    • 1,038 Thanks
    Uxb

    In fact i dont think ive ever come across a company that wouldnt sell something to me because they wanted a VAT number. They want the money, they never ever care about the VAT number.
    Originally posted by spadoosh
    Sadly I have
    I've on many occassion come up agaist a total block when trying to buy something - OK this is not mainstream consumer stuff.
    We do not sell to end users - only to installers/retailers/professionals type of reply.
    no VAT number - no dealing with you

    Frankly I'd not let any of their so called professional installers anywhere near me!
    • Mistral001
    • By Mistral001 10th Nov 17, 11:14 AM
    • 3,257 Posts
    • 2,499 Thanks
    Mistral001
    I've looked at five wholesalers/trade account websites and they all ask for it, some ask for turnover, details of my business, no of employees. I'm not even quite sure why these specifically matter to them and why they specifically ask.

    I haven't asked them, but all their application forms seem to want it, so look, I will go ask, if they don't then great.
    Originally posted by SamPirul1985
    They do this so that they know that you are a business and not some amateur who wants computer parts at discounted prices for their own personal use. It also means that they have an address that has been verified by an authority.

    If you are a sole trader with say a large shop or small factory with several employees and a sizeable turnover, they would probably talk to you and accept business and bank references so as to gain a good customer even though you were not Ltd .
    • Suarez
    • By Suarez 13th Nov 17, 1:43 PM
    • 935 Posts
    • 610 Thanks
    Suarez
    How can you buy without paying VAT?
    Originally posted by NineDeuce
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