I'm a 25 year old student. Should I form a company to avoid paying VAT on stuff?

Ryan.Maloney

Hi.

I'm 25 years old, at uni living in central London

I'm a 'budding entrepeneur' (or wannabe!).

I sell stuff on eBay and am getting into web design

I am thinking of buying a new monitor and computer equipment (costs over a thousand pounds) and was thinking...

if I formed a Company I could avoid paying VAT

Is it worth the hassle?

I am a full time student, but web-design is my hobby - I enjoy it , I find it easy and I have set up a website for a friends business


How big a fee will I have to pay to Companies House? What other charges will there be? Do I need other people to be 'Directors'?

I would really love some advice - I am totally clueless to this sort of stuff!

CIS

As a company, you'll still have to account for VAT.

Unless you register for VAT , you cant claim back what you pay out, but you then need to cahrge VAT to customers.

Suewre

I think you have to have quite a large turnover in order to register for VAT

CIS

Its around £5K p/m compulsary, or any amount voluntarily.

jellybabies_2

simple answer.......no.

Trow

More complicated answer

Starting a company is a complicated business

1) you need to get an accountant for your year end accounts and tax as it is probably too complicated for you as an individual, whereas it is much simpler as a sole trader

2) to pay yourself through the company, everything needs to either be done via payroll or dividends (assuming there is a profit reserve in the company)

3) you will have to charge VAT on sales. This is ok if you can remain competitive with your prices with VAT on, OR if you are mostly selling to companies that are VAT registered. However this means that usually if youare making a profit you have to pay money to the VAT men every three months.

4) if you want to register for VAT purely for the short term to avoid paying VAT on your capital purchases, and then deregister - forget it. They will reclaim most of the VAT from those purchases from you.

5) The costs of the accountant and the company registration will be more than you save in VAT - probably.

6) you need at least one other person to be in the business with you - they can be either a director or the company secretary or both

motorguy

Ryan.Maloney wrote:

Hi.

I'm 25 years old, at uni living in central London

I'm a 'budding entrepeneur' (or wannabe!).

I sell stuff on eBay and am getting into web design

I am thinking of buying a new monitor and computer equipment (costs over a thousand pounds) and was thinking...

if I formed a Company I could avoid paying VAT

Is it worth the hassle?

I am a full time student, but web-design is my hobby - I enjoy it , I find it easy and I have set up a website for a friends business


How big a fee will I have to pay to Companies House? What other charges will there be? Do I need other people to be 'Directors'?

I would really love some advice - I am totally clueless to this sort of stuff!

Being part way through the process of having started a limited company and registering currently for VAT....

They will ask you for a significant amount of proof that you are a business that is trading and ask you for reasons as to why you want to voluntarily register if you aren't currently about the £60K pa 'must register' threshold. Also they get a bit jumpy try to register a business from a residential address so you would need to be able to justify that too. Things they asked us for were bank statements, invoices from companies we have bought as a trade purchase from, invoices to our customers etc.

So its not just a matter of registering for VAT and you will get the registration - they do 'vet' it.

Lots of companies advertise offering you a complete company set up package for maybe £100ish. A quick google search or exchange and mart will find you those. We did our own and registered through companies house for about £38, though you need a solicitor to sign off your articles etc.

In your situation, no i wouldn't bother. Not until its properly justifiable...

motorguy

Oh, if you register a company, you will HAVE to submit company accounts every year, even if you don't actually trade..

Essex-girl_2

Keep all the receicpts then if you do start a business up in the near future and then really want to register for vat then you can claim back on stuff you bought for the business for the last 1 or 2 years (sorry cant be more precise but you can look at the HRMC.Gov website).

I have been registered for VAT for 7 years as Ive exceeded the turnover and beleive me hate doing my returns and having inspections.

koru

You don't have to be a company to be registered for VAT. You just have to be making supplies of goods or services that are subject to VAT.

There is a threshold of income above which you must register for VAT, but you can voluntarily register, no matter how low your income. But whether it would be a good idea to do so - probably not.

motorguy

koru wrote:

You don't have to be a company to be registered for VAT. You just have to be making supplies of goods or services that are subject to VAT.

There is a threshold of income above which you must register for VAT, but you can voluntarily register, no matter how low your income. But whether it would be a good idea to do so - probably not.

you can voluntarily ASK to register, it doesn't mean it will be granted.