Should we be VAT registered?

hwalkerh

Hi

Just starting up a consultancy business aimed at small companies.

I am buying software and equipment which will incur a VAT charge of around £2500. Current forecast turn over around £50k.

Should we be VAT registered so that we can claim this VAT back? Or do you think it will put some customers off? i guess that if they are VAT registered then it doesn't make a difference to them as they can claim it back anyway.

Is it worth the hassle of VAT registering and VAT returns as it will only be the initial set up costs that we will pay VAT on.

Any advice would be great

paulwf

Have you checked if all your customers are VAT registered?

Horace

If you are just starting up is it really worth registering for VAT? The threshold for VAT is £70K and it is unlikely that you will turnover that in the first or even second year of trading. Have a look at the HMRC website for details about VAT registration and decide whether or not you want to register voluntarily.

POPPYOSCAR

We run a small business and I hate doing the vat returns they have to be in within the time frame or you can be fined, but £2500 is a lot of money so I would register.

Most of the customers we deal with are vat registered but it would depend on how many of yours are as obviously if you are and they arnt that will put your price up to them but then they would have to find someone else who isn't registered to use to benefit, if you see what I mean!

Why is this the only thing you would be claiming vat back on? There must be other things you will buy with vat on that you will need, i.e. paper, petrol, other supplies etc.

hwalkerh

I think there will be other smaller things that we would be able to claim VAT on like stationary but this will be minimal in comparison to the start up costs. Its is the start up costs making me consider it.

Horace wrote: »

If you are just starting up is it really worth registering for VAT? The threshold for VAT is £70K and it is unlikely that you will turnover that in the first or even second year of trading. Have a look at the HMRC website for details about VAT registration and decide whether or not you want to register voluntarily.

Horace - you just seem to ask the question that i was asking. I was hoping for advice, pros and cons of what people think.

POPPYOSCAR

Do you have an accountant?If not I suggest you do get one as the tax system is very complex and your accountant will be able to advise you on the VAT aspect.Don't wait to get one until you have to submit your first accounts do it now.

I think I am right in saying that you can choose to de-register at a future
date as long as your t/o is within the limits.

Also be aware that the VAT inspectors do visit usually within the first five years for a new set up.We have had three inspections in 20 years.
They go through your books and ask you a few questions.(not trying to put you off or anything!!)

hwalkerh

Yeah we have an accountant. I will contact him tomorrow.

I think that for the type of customers we have most of them will have a turn over of more then £70k so i am thinking that it might be worth it.

POPPYOSCAR

I think it would look more professional to them if you were registered as well then.

POPPYOSCAR

RJDAssociates wrote: »

Have you looked at the Flat Rate VAT scheme? Makes admin easy and could be a good little earner.

Yes thats a good idea if you are always charging vat and not claiming much back as you pay a certain percentage of your t/o depending on what type of business you are in.We looked at this but decided against it as a proportion of our t/o is zero rated and we would have actually paid more in vat on this scheme.

Mekka

Don't forget that all transactions would need to have vat added which could you make you less competitive price wise to non registered clients. However by not being registered you sort of admit to customers that your turnover is under the threshold which can sometimes give the impression your turnover is low and therefore you are not succesful.

I registered quite early on as the advice given was that you get to a point were you are "trying not to sell stuff" to avoid registration :-)

isplumm

POPPYOSCAR wrote: »

Yes thats a good idea if you are always charging vat and not claiming much back as you pay a certain percentage of your t/o depending on what type of business you are in.We looked at this but decided against it as a proportion of our t/o is zero rated and we would have actually paid more in vat on this scheme.

Hi,

As the OP is running a consultancy business - similar to what I do - the flat rate scheme might be a good idea - if you are a service company like me with low expenses, then I think it is a good idea - of course if you are company that buys & sells things, then the FRS is not for you.

For me I charge 17.5% VAT & pay 11.5% VAT - one green form a quarter - 2 mins to fill in - no receipts to keep - very easy - remember that you pay VAT on the Gross amount - so if you charge the customer £100 + VAT = £117.50, you would pay £13.51 VAT (11.5% of £117.50), not £11.50 (11.5% of £100).

Mark