VAT Registered?

Giggs_11

Hi guys not sure if this is the right section,

I'm in the process of thinking about starting an online business as a sole trader and if I turnover around £70k a year I would have to be VAT registered. That obviously won't happen in my first year but I can volunteer to register for it in advance.

If I register for this, will I need to charge my customers 20% VAT? Because I was thinking surely that would be a hindrance as the price would be knocked up, but on the other hand I guess I would get VAT back on items that I buy for the business? (I.E Stock, office furniture etc)

Or is it possible to not register for it until its over that £70k mark, say it happens within 3 years, would I then be able to back-date VAT on items?

Any help would be appreciated

InsideInsurance

You have to take the rough with the smooth.

Unless you sell 0% rated items and/ or sell almost exclusively to other VAT registered businesses then you should put off registration as long as you legally can.

Unless you are selling things at a loss then the VAT you recover will be less than the VAT you have to charge your customers and so it will either force up your prices or reduce your profit.

Remember that VAT is based on a rolling projection not just when you actually hit the threashold.

Giggs_11

Thank you for your reply, I will be selling to the general public, not to other businesses. The items will be things like Clothes/bags etc, does this mean I would need to register right away or does it not matter what the product is, as long as my turnover is less than 70k?

Suarez

You don't need to register until your turnover is projected to exceed £79,000. There is the flat rate scheme where you pay vat on a percentage of your turnover (Depending on you sector).

martindow

The threshold is 79000 for 2013/14 and it normally goes up slightly each year. It sounds as if you should start trading and only register for VAT when you have to. You need to keep on top of your books as you should register as soon as your turnover approaches the threshold - not wait until the end of your accounting year or tax year.

InsideInsurance

Giggs_11 wrote: »

Thank you for your reply, I will be selling to the general public, not to other businesses. The items will be things like Clothes/bags etc, does this mean I would need to register right away or does it not matter what the product is, as long as my turnover is less than 70k?

It does matter what the products are as some are reduced, zero or exempt from VAT. The vast majority of items are simple standard rated products and certainly adult bags and clothes are standard rated.

So based on the assumption it is adults not childrens (which are 0% rated) then your best off waiting until your projections are that you'll hit £79k in a rolling year.

Unless you are going to market with a very large budget then you wont need to register straight away but once you are getting closer or once your average monthly figures are showing you will get that level of revenue but effectively you want to do it as late as legally possible.

Giggs_11

Thank you for the replies guys it seems like I won't register yet.

Brassedoff

I take the opposite view. When I do a website for a client I always register them for VAT. Apart from what your selling that require VAT charing for, you will incur around £25K in charges, so that's £5K you lose by not being registered.

VAT is swings and roundabouts, but if you go over £50K, you really need to register. Business is, after all about profits

System

Brassedoff wrote: »

I take the opposite view. When I do a website for a client I always register them for VAT. Apart from what your selling that require VAT charing for, you will incur around £25K in charges, so that's £5K you lose by not being registered.

VAT is swings and roundabouts, but if you go over £50K, you really need to register. Business is, after all about profits

Sorry? Why should a website designer register people for VAT just because they design the website? More to the point, what authority does the client give you to do this and why is it not them or their accountant, who are well aware of the finances, do it if found necessary?

And what is this £25k figure?

Pennywise

InsideInsurance wrote: »

Remember that VAT is based on a rolling projection not just when you actually hit the threashold.

No it isn't. You have to register for VAT if:-

a. Your turnover for the last 12 months breaches the limit,

or

b. "You expect to go over that limit in the next 30 days alone"

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#2

There is no requirement to register if you expect your turnover to breach the threshold in, say, the next 3, 6 or 12 months. The longest you need to look forward is one month.

Pennywise

Brassedoff wrote: »

I take the opposite view. When I do a website for a client I always register them for VAT. Apart from what your selling that require VAT charing for, you will incur around £25K in charges, so that's £5K you lose by not being registered.

VAT is swings and roundabouts, but if you go over £50K, you really need to register. Business is, after all about profits

Two quite sweeping comments that are probably wrong in as many cases as they are right. Each case needs to be looked at on its own circumstances. Such generalities are meaningless.

If you're dealing with VAT registered customers who can reclaim the VAT you charge them, then probably best to register at the start, but if you're dealing with domestic or non vat registered business, then probably best to wait until you breach the threshold.

If you're incurring very large up front costs, i.e. to buy equipment or an expensive website, then, yes, it "may" be right to VAT register sooner for cash flow ease, but the benefit should soon be swept away by losing 1/6th of your sales revenue to VAT if you can't pass it on to VAT registered business customers.