service only sole trader,should i register for vat?

southernalignment

hi,i am a mobile service only soletrader under the vat threshold.
i supply no physical goods.
i have the usual business costs for a mobile service..insurance,fuel,equipment,stationery and so forth.
i am trying to work out when and if it is worth me registering for vat.

i am now fully set up and will be purchasing very little in the way of these items approx £1000.00a year apart from fuel which i expect to be under £5000.00 a year.
the real question is would i be much better of registering for vat.

i understand it is a lot more paperwork and hassle and i value my time more than gaining a small financial advantage.

so should i or shouldn't i?

many thanks Mark

chalkie99

Depends on who your customers are.

If they are themselves VAT registered businesses then you can add VAT onto your bills which they can then claim back so costing them nothing.

You can then reclaim the VAT you have paid out on your business purchases. As an added advantage it might make you look a little more established/professional in the eyes of potential business customers and subliminally give them more confidence to use you.

If your customers are private individuals or non-VAT registered businesses then you will upset them by adding 20% to their bills.

southernalignment

hi,not really that bothered about the impression i give by being vat registered as over the last 10 years i have done work for nearly anyone who is likely to become a customer and therefore my credentials and abilities are established.
was really looking for an answer to if it would be of a great financial advantage to myself to register for vat on approximately £6000.00 of outgoings a year.
if i value my time at £20.00 an hour to me and i spend 50 hours sorting it out i would need a financial advantage of £1000.00 to break even on it.
i am unlikely to get near the vat threshold as a sole trader.
rgds Mark

heretolearn_2

As long as you keep records as you go then it won't take you more than about 15 minutes to do your VAT return.

Or even if you don't and have to sit and add up all your fuel receipts and other odds and ends vat, do you really think that would take you a couple of days each time? Couple of hours more like.

But only you can work out if you think it's worth the effort. You'll need to do a 1/4ly VAT return. They aren't hard.

The point about your customers is a valid one though. You'll need to charge them VAT so if they are private individuals or non-VAT registered businesses, you'll either be putting your prices up by 20% or absorbing the VAT yourself and lowering your profit margin considerably. You need to consider whether you need the edge of a lower price or not depending on your field/competition etc.

VAT is charged on services as well as goods.

steve1980

Will the saving of VAT on your purchases be outdone by your costs to your customers?

phill99

Having run a business that has been both VAT registered (compulsory registration) and one de-registered, I would be very reluctant to have to register again. You end up being an unpaid tax collector for the government and get fined if the submission or payment is late. Even if you do the return yourself, it still costs you your time and effort and in return you get nothing but grief.

Did I gain any customers by being VAT registered? No. Did I loose any customers by being VAT registered? Oh yes. Because I was 17.5% (the rate applicable at the time) dearer than many of my competitors and most of my customers where private individuals.

Steer clear of it if you can.

Mistral001

I asked the same question of a few people when started several years ago and I got basically the same answer as phill99 gave above ie. steer clear. However, most of the people in my business charge VAT and not charging VAT I think has made me look a bit amateurish in comparison. I definitely do think I have lost business as a result of that and I would disagree with phill99 on that basis. Or at least I have lost some big commercial clients anyway.

isplumm

southernalignment wrote: »

hi,i am a mobile service only soletrader under the vat threshold.
i supply no physical goods.
i have the usual business costs for a mobile service..insurance,fuel,equipment,stationery and so forth.
i am trying to work out when and if it is worth me registering for vat.

i am now fully set up and will be purchasing very little in the way of these items approx £1000.00a year apart from fuel which i expect to be under £5000.00 a year.
the real question is would i be much better of registering for vat.

i understand it is a lot more paperwork and hassle and i value my time more than gaining a small financial advantage.

so should i or shouldn't i?

many thanks Mark

Hi,

Well I work in IT and registered for VAT on the Flat Rate Scheme - very simple - no keeping of receipts - charge customers 20% VAT on net pay 14.5% (or similar) on gross. Very simple. If you are a service company then it is worth it ...

I have my own LTD company, so might be different for a sole traders?

Mark