VAT Man - will he get me???

Lorian

You might find this site useful for VAT information too.

http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858808&topicId=1073859245&r.s=tl

Lifeisbutadream

Dead_Eye_Jones wrote:

im guessing he hadnt read it all through and didnt realise that was the figure you were getting!


off topic a little, but my missus gets paid less than the min wage by Surrey county council. Yep she's a teacher. Her wage slip even recognises the 100hrs a week she works (yep she really does) but her wage isnt even close to the £5.35 per hr min wage! The school system would go bust in a second...

So your not the only one legally on less than min wage...




Best of luck to ya, its a shame that setting up a new business has to be so tricky, but nuff respect to you guys, stick at it, sounds like it will work out in the longterm...

Thanks for that - you are right - if we worked just a few hours then the wages would be OK, but as we both work 7 days a weeks and to midnight some nights, thats when it kinda goes wrong!

We want it to work and hopefully it will! ONE day we may even make a decnt living from it!! Its all a learning curve - we keep coming up against things like this, but wont let it put us off! The fact that our customers keep coming ack tell us that we are doing something right.

And teachers def dont deserve the rough deal they get - good ones are worth their weight in gold

greyteam1959

Yes I know you are trying .....we all are but the simple fact of the matter is that Revenue and Customs will not make any allowances.
Ever.
The last time I made a genuine mistake I was penalised as tho I was a common criminal despite my absolute honesty.
Your accountant should be giving you help than just filling in a few forms...
Why not get in touch with your local Business Link and get some good free advice????
It really worries me that good hard grafters get themselves into trouble thro not keeping up to date with their payments to the all powerful Revenue and Customs

greyteam1959

What sort of business are you in ????
If you dont mind me asking

Lifeisbutadream

mervyn11 wrote:

What sort of business are you in ????
If you dont mind me asking

Not at all : Joinery

My husband has been a joiner for 20 years - he worked away from home for 7 years getting quite a lot of money (but giving quite a lot to the tax man!) whilst I brought the kids up and got £90 a week working as a business administrator 10 hours a week.

We just decided that we were sick of being apart - I was like been a single parent - so we decided to set up on our own - I look after all the business side of it and the buying of materials - I have never done it before and so am learning on the job.

My husband works 60 hours a week - out grafting - not including the time he spend quoting. I work 30 - 40, plus on an evening going through things with OH.

We pay the accountant minimal so she does minimal, but even so she would not have picked up on the turnover unless she was seeing our books monthly. That was my fault.

It can only get easier - we didnt expect everything to be perfect or to make much money for a while.
It is hard - and it is annoying that the taxman takes it all - when you genuinly work hard and do things by the book and lose out it is awful -

But we definately cant pay ourselves more than we do! not yet anyway. One day we will have a thriving business for our kids to take over - thats my dream anyway...:D

greyteam1959

But if you carry on as you are the Revenue and Customs will break your back before you get established.
You should have a very good little business here....if you take the right advice before its too late.
Ring Business link dont be afraid of them just tell it how it is you will be amazed how much FREE advice you can get.....listen to it and then follow if you think it is right for you.
In my opinion you should really be charging more than you are doing.
If you are not careful your costs are going to get infront of your income and we all know where that leads!!!!
Have you got your accounts on computer ????
A simple accounts package will also produce all sorts of management figures that you DO need and it does your VAT in seconds !!!!
Oh and by the way I am now in my 24th year of running my own business in the food trade

JasonLVC

Now that I know you do joinery I can offer some more advise to a degree.

You will have incurred input tax (that's the VAT you get charged by your suppliers and contractors) as well as for equipment you may have purchased to do your job like tools, etc. If you have the invoices and you've been charged VAT, you can reclaim that VAT back from HMRC once you are registered. The only time it will not work in your favour if your charges are predominantly labour only (ie, hubby provides his skills but not the materials) - but to have a turnover of £72k with one guy means he's either doing an awful lot or your bills include materials.

It is common practice for self-employed building traders to reach the £61k registration limit and then simply stop working. Instead, they'll go work for a local builder/subby and simply get paid a wage (ie, not going through the business). So for 9 months they work for themselves and raise invoices and for 3 months they'll take a 'holiday' and go work for barrat or Persimmon Homes and get paid his minimum wage/get a wage packet. Once the new financial year starts, you go back to your own business with no need to register for VAT. HMRC don't like this practice but can do nothing to you as your hubby is entitled to work for someone-else if he so chooses. As some trades are seasonal anyway, this is a good and legal method for avoiding VAT registration in a growing business. Yes, you'll not be able to do any work for your own company for a few months and the pay packet from your employer will be less than you can make yourself but you avoid the whole issue of registering for VAT, increasing your charges to customers, etc.

Some builders also get their clients to supply materials and the company only supplies labour. This normally keeps the turnover well below the £61k although you need to be careful to not do this for ALL your customers as HMRC could argue you are avoiding VAT by deliberatly not supplying materials theyn would consider intrinsic to the job being done. There's not been any cases where this has been proven in court though, so advise to just do enough to keep below the threshold without making all your clients supply their own materials.

greyteam1959

JasonLVC
This answers the ladies imminent VAT question but she really needs to get the whole business setup issue sorted dont you agree??

Lifeisbutadream

mervyn11 wrote:

But if you carry on as you are the Revenue and Customs will break your back before you get established.
You should have a very good little business here....if you take the right advice before its too late.
Ring Business link dont be afraid of them just tell it how it is you will be amazed how much FREE advice you can get.....listen to it and then follow if you think it is right for you.
In my opinion you should really be charging more than you are doing.
If you are not careful your costs are going to get infront of your income and we all know where that leads!!!!
Have you got your accounts on computer ????
A simple accounts package will also produce all sorts of management figures that you DO need and it does your VAT in seconds !!!!
Oh and by the way I am now in my 24th year of running my own business in the food trade

Well done for been in your 24th year! I hope that we can say the same in 22 years...

I have set up my own computer package - I have now updated it to show VAT - I have also updated it to show my rolling turnover and to alert me of anything I need to know (i.e. if bank has less in than is about to go out!). Again, this is all from learning on the job.

We put all of our savings into the business, so were able to take losses in the first year. We had not accounted for the VAT problem, but we will find a way out of it - we have not borrowed against the business yet and will do if we have to :mad:

I will ring Business Link - thanks for that. I know that we should put our costs up. However, most people want something doing for nothing! We have to keep our prices competitive to keep getting the work. The VAT thing has actually made us have to DROP our prices! in all quotes at the moment we have put lower labour charges so that the customer does not know that they will be paying VAT - it tends to put a lot of people off when they can get the work done from someone who isnt VAT registered. We are going to gradually increase our prices though and I have spent the last month liaising with letting agencies and companies to try and get more business work so that VAT doesnt matter.

Of course the taxman wont care about that though - as long as he gets 17.5% of everything we have!!

JasonLVC

You should be able to put your losses against income tax as normal.

HMRC are fairly ruthless, but they will not consider you to be a fraudster, just a business that made a mistake. It does not have any concession in law to ignore penalties, although depending upon the officer dealing with your case, they may take a more leniant approach in terms of registering your from, say, January instead of November - but ultimately, they are charged to ensure tax is paid and so they'd be going against their job description to let it pass.

You can always appeal. The tribunal will not accept lack of funds as an excuse not to pay the fine or for registering late (indeed, HMRC may seek to wind up the business if you try that tactic) but if you have a genuine one-off, odd event (ie, if you were pre-disposed dealing with a family death or in hospital and as a result you crept over the limit without anyone noticing it), then it's worth a try. HMRC rarely seek costs unless they feel your appeal is particularly vexatious- which it wouldn't be.

£3,202 + £160 penalty is your total liability - that means in the period from November to March (5 months) you had sales of around £21,500 (or £4,300 per month). Seriously look at what INPUT TAX you've incurred since November. If it is more than £3,202+£160 then you'll be in a repayment situation and therefore not liable to any fines at all as the penalties apply only if you OWE them, not if they OWE you!. In effect you will calculate what you should have paid to HMRC from November and then calculate what you can recover from your expenditure and on your 1st VAT return if you are claiming more than you owe then there's no issue.

If you can buy some expensive tools to get your input VAT to pass what you owe since November but before you get your VAT registrsation number then you're home and dry. Do you follow what I mean (it can get complex!)?. If you tot up your expenditure from November and it only comes to, say £3,000 then you need to find another £202 to take it up to £3,202 which is what you're paying over and so no loss to the revenue, no penalties. It may be worth the expense of some more capital items to avoid the penalty and worry.

You could buy some expensive items and then return them after the VAT returns gone in 9so get the timing exactly right in terms of when you buy and return), so you'd have to pay that VAT back to HMRC on your next return and is a little bit on the naughty side to say the least, but would mean your first return was repayment and your next one may not be, but then no penalties as you'll now be compliant and submitting VAT returns on time, etc.

(only do this last bit if you are very confident and brazen though!)