SB: Small Business Start Up Discussion

codetown

robertbruce wrote:

3- Voluntary VAT registration makes most sense when you are dealing in a business-to-business environment, but if you are trading with the consumer directly, it is best to wait until you MUST register. This is because your selling prices will include an element of VAT, thus artificially inflating your price in the early days when you need to be more competitive. That is actually why the threshold exists.. to give smaller businesses a chance to get established.
.... Bob.

Bob,
I am trying to understand some basics here.
I am interested in registering a small company for some consultancy and design work. The limited company is a good option to keep separate personal assets from the work-related issues.

I am not interesting in registering VAT as I doubt will reach (at least initially) turnovers close to 60k, but cannot seem to follow your reasoning.
Doesn't any company (whether or not it has VAT registration) have to charge customers a net price + VAT?

Assume you work for a week for a customer to write some programs, shouldn't you charge him your net cost + VAT? (where wat should cover the pure tax part of the work that you will have to pay at the end of the year)?

I thought also that by using this model (net cost +VAT), if the other committent of the work is a company itself, it can recover the VAT costs for this work out of their general yearly VAT charges, so they gain as well from having this separated.

Could anyone comment?

Savvy_Sue

codetown wrote:

Assume you work for a week for a customer to write some programs, shouldn't you charge him your net cost + VAT? (where wat should cover the pure tax part of the work that you will have to pay at the end of the year)?

Are you confusing Value Added Tax with Income Tax? It almost sounds as if you are wanting to add VAT onto your sales to cover the amount of tax you will have to pay HMRC at the end of the year, but the two are quite separate ...

You don't add what you expect to pay in income tax to your invoices: you make sure that the price you are charging covers not only any costs incurred, but also paying yourself something, AND your liability for income tax and NI.

Sorry if I'm stating the obvious, but being a bear of small brain that's how I understood this part of your question.

robertbruce

Hi CODETOWN
To take one step back and look at your business options, you simply choose whether or not to register for VAT when you have less than £60k turnover per annum. The minute you reach £60k, that choice is taken away from you as HMRC insist that you register at that level.

If you chose NOT to register for VAT then you are not involved in the handling or charging of any VAT for HMRC and so simply ignore it. Whatever you invoice, that is the final figure and the person you invoice does not claim any VAT back as he was not charged VAT by you in the first place.

If someone charges you for something, eg you buy a computer, and this is charged at £500 +vat (£87.50) you pay the full invoice total of £587.50 and once again, that is the end of the matter as far as you are concerned. (Naturally, he will pay HMRC the VAT he collected from you as the consumer)

If YOU were VAT registered, then you would have claimed back the £87.50 from HMRC, who is quite happy because the same amount was paid to them by the computer seller, so everything squares up. The government only benefits here from the use of the cash for the short period it takes for it all to square up.

My point is that IF you have a client list which is mainly VAT registered itself, you should be VAT registered as you will not really have charged those customers any extra after all VAT is squared up. You will be able to claim back the VAT you were charged though.

On the other hand, if your client list is made up of NON-REGISTERED people or businesses, then you would not want to be adding that extra 17.5 % on to your prices as they CANNOT get it back from HMRC.

I hope this helps make it easier, but it is a complicated subject that is difficult to simplify. Just ask if you need any more info. Cheers. Bob.

busterkeye

is there any places out there that help people start up a small biz?

I am a plasterer and after working with someone for over 4 years he as decided to work by his self, so this is leaving me in the possition to start up by myself, but I need some support to start off (no van need more tools) I cant afford to go get a loan at the moment so thats out of the question. I have a little work coming in but its hard when I have no van to get to the job

My father in law started on his own a few moths ago and got some help from Business Link 4,500pound to exact, so yes they will get a call from me, but I was wondering if anyone knows of anyone else?

MDUK

Are you under 30?if so try the princes trust

Savvy_Sue

MDUK wrote:

Are you under 30?if so try the princes trust

I'm a bit concerned that the removal of the post which immediately followed this one, and the continued presence of two which said it was dodgy, may leave readers with the impression that there's something wrong with The Prince's Trust. There isn't, and as far as I can see there's nothing wrong with the link to their site! You do have to be under 30 though!

busterkeye

thanks I darent click the link whats wrong with it?

Savvy_Sue

busterkeye wrote:

thanks I darent click the link whats wrong with it?

As I said, nothing is wrong with the link to The Prince's Trust. BUT between MDUK's post and helen21's post, someone posted a link which either looked like spam or very dodgy. Helen and Al Mac both reported it to Abuse, AND commented on it, and then the dodgy post was removed. I know it was there 'cos I saw it before it disappeared!

If you're under 30, definitely worth going to The Prince's Trust. Good luck!

Savvy_Sue

PM bridie, the board guide?

bridiej

Done .