Approaching VAT limit, do not want to register for VAT

martindow

paddyrg wrote: »

No, I do 'normal' VAT, not flat-rate. The administration overhead really isn't so huge :-)

I agree with this. It instils a degree of discipline in keeping books up to date and lets you see where the business is going.

warwicktiger

Be careful too, the registration is required if you hit the limit in a rolling 12 month period, not a calendar or accounting year.

lovinituk

berbastrike wrote: »

Sales are around £75k since April (new business), plus current stock £2k and I am at the VAT limit. I want to order more stock to make more profit but don't want to register for VAT (not got the time to make it worthwhile, lots of extra bookkeeping). I have thought about seperating my business into 2, for example one popular product to have a business of its own, and all the other products to remain another business. Is this illegal though:( HELP

If your sales are £75k since April then you have almost certainly already exceeded the VAT threshold. VAT does NOT run from April to April - it is based on your rolling 12 month turnover. So what have your sales been since last October?!!

You need to get on to them quick and register!! VAT officers are not known for being very lenient!!

(*EDIT* Having just re-read, I can see there is the possibility that the OP's business didn't start until April which if this is the case then please ignore what I have written above)

And no its not legal to split your business to avoid tax. They would throw the book at you for that.

JasonLVC

lovinituk wrote: »

If your sales are £75k since April then you have almost certainly already exceeded the VAT threshold. VAT does NOT run from April to April - it is based on your rolling 12 month turnover. So what have your sales been since last October?!!

You need to get on to them quick and register!! VAT officers are not known for being very lenient!!

And no its not legal to split your business to avoid tax. They would throw the book at you for that.

It is not illegal to split a business, there is no law preventing you from splitting a business into two or three....but where the basis for the split is to avoid VAT registration and HMRC can prove this (by how the two trades interact with each other, as per my earlier link), then HMRC have the power to rejoin up the two/three trades and then assess for unpaid VAT on the sales of the two/three previously unregistered trades.

So not illegal but if you do it then HMRC have ways and means of stopping it and getting back the VAT that was dodged, so is a high risk strategy for anyone considering it and so most folsk decide its not worth the hassle.

lovinituk

JasonLVC wrote: »

It is not illegal to split a business, there is no law preventing you from splitting a business into two or three....but where the basis for the split is to avoid VAT registration and HMRC can prove this (by how the two trades interact with each other, as per my earlier link), then HMRC have the power to rejoin up the two/three trades and then assess for unpaid VAT on the sales of the two/three previously unregistered trades.

So not illegal but if you do it then HMRC have ways and means of stopping it and getting back the VAT that was dodged, so is a high risk strategy for anyone considering it and so most folsk decide its not worth the hassle.

Apologies, I didn't go in to as much detail as that but yes you are correct. It would be hard to split an existing business in two and explain it for any other reason than trying to avoid VAT.

*edit* and to be fair I did state its illegal to 'split a business to avoid tax' rather than its 'illegal to split a business'!!

FWDiane

also remember that when you operate under the Flat rate vat scheme you can't recover input tax (ie claim back the VAT you have spent). The fact that you pay VAT across at a lower rtae should compensate but only if you have few vatable expenses. I dont know exactly what you do but the fact that you hold stock would in my opinion mean that the flat rate vat scheme wouldnt suit you. Get some good accountancy advice before deciding which VAT scheme to register for.

trailingspouse

Just do it - you have a successful business, of course you need to register for VAT. It's a pain, but lots of us manage to do the paperwork without making too much of a song and dance about it. The only people who have major issues with doing their VAT are the ones who have major issues with doing their books in general. It takes me 1/2 a day once a quarter, and I love that the government gives me all that lovely VAT back.

JasonLVC

lovinituk wrote: »

Apologies, I didn't go in to as much detail as that but yes you are correct. It would be hard to split an existing business in two and explain it for any other reason than trying to avoid VAT.

*edit* and to be fair I did state its illegal to 'split a business to avoid tax' rather than its 'illegal to split a business'!!

No worries loveituk, I'm not a forum pedant or typo police, your post was valid, just the splitting thing is a quirky technicality which is odd as you'd think it would be illegal to not split but it isn't, but still leaves you open to penalties and liabilities. Weird.

System

thank you all for the replies, I really appreciate it.

I currently post my items at the post office, £2.70 each. Can I claim VAT back on this or is this postage exempt from VAT?

inmypocketnottheirs

No VAT on postage.