Is this legal?

InsideInsurance

Mistral001 wrote: »

On a purely financial note, if the business did become popular, and your turnover rose above the VAT limit, you would have to charge VAT which the end user could not recover and since the business is fee-based the Op would not be able to recover much VAT either.

So whilst they are under £150,000 turnover then they would enter the flat rate VAT scheme. The VAT "profit" they make could be used to partially offset the required gross price increase/ net price reduction (depending on how the OP played it)

Mistral001

InsideInsurance wrote: »

So whilst they are under £150,000 turnover then they would enter the flat rate VAT scheme. The VAT "profit" they make could be used to partially offset the required gross price increase/ net price reduction (depending on how the OP played it)

With the flat rate scheme you still have to charge VAT and pay a proportion of that VAT to HMRC. It will raise your costs and also make you less competitive against your non-VAT registered competitors. It might work out cheaper than having to pay full VAT by the normal scheme and recovering whatever VAT you can on your expenses, but it is still going to make you less competitive.


This VAT trap is often experienced by people who have tried to set up a handyman business where they are merely sub-contracting work out to self-employed handymen. They have to charge VAT whereas the handyman working directly for the customer does not have to do charge it as their turnover is usually below the VAT limit (£81k for the normal scheme).

InsideInsurance

Mistral001 wrote: »

With the flat rate scheme you still have to charge VAT and pay a proportion of that VAT to HMRC. It will raise your costs and also make you less competitive against your non-VAT registered competitors. It might work out cheaper than having to pay full VAT by the normal scheme and recovering whatever VAT you can on your expenses, but it is still going to make you less competitive.

Agree hence the very reason of saying you use the flat rate scheme to partially mitigate it until you go over the £150k

These are however challenges that people/ companies manage to work around/ overcome otherwise we wouldnt see any companies (outside of zero rated goods) charging VAT because they'd all fail at that point/ lose all business to a new starter able to undercut their prices due to being below the VAT threashold.

Profit per sale goes down but your capacity is larger than a single person so you make more sales and thus more total profit or you find some form of USP that your scale/ setup creates and get people to pay more for your services for that USP. There will inevitably be those that come up with creative accounting or clever corporate structures etc but we wont go there.

paddyrg

Here is an option with a similar result but much easier and cheaper and less risky - have an agreement with boarders that you will introduce clients in exchange for the first 3 (say) days fees (about £30 from your previous post). That will represent several weeks worth of profit, especially once you factored in contracts, taxes, the misery of employees, insurances, liabilities, etc. You get the money upfront without having to get in the middle of a client agency contractor relationship. If they get future work from the same client, good luck to 'em - it's really hard to monitor and calculate anyway.

In short, take an introduction fee and butt out. Cheaper, easier, less ambiguous.

Savvy_Sue

^^ I agree!

Mistral001

paddyrg wrote: »

Here is an option with a similar result but much easier and cheaper and less risky - have an agreement with boarders that you will introduce clients in exchange for the first 3 (say) days fees (about £30 from your previous post). That will represent several weeks worth of profit, especially once you factored in contracts, taxes, the misery of employees, insurances, liabilities, etc. You get the money upfront without having to get in the middle of a client agency contractor relationship. If they get future work from the same client, good luck to 'em - it's really hard to monitor and calculate anyway.

In short, take an introduction fee and butt out. Cheaper, easier, less ambiguous.

In principle this is a good idea, but haven't "introduction fees" a certain reputation? You might find that only a few boarding homes would accept doing business that way. I know it goes on in the cut-throat financial services industry, but do nice friendly dog-loving boarding home owners really want to get their clients that way?

InsideInsurance

Mistral001 wrote: »

In principle this is a good idea, but haven't "introduction fees" a certain reputation?

Looking at Quidco & TCB plenty of other companies outside of FS seem to be happily paying introducer fees. The key is that they are paid only on results.

paddyrg

All affiliate deals (including all the ones from this site that made Martin Lewis a multizillionaire) are effectively introduction fees as either a flat fee or percentage of a successful sale. OP has clients who want boarding, knows boarders who want clients, everyone wins.

PlutoinCapricorn

https://mydogbuddy.co.uk/terms/

Carer

If these people are self employed contractors but are only allowed to work for you, then by HMRC definition they are employees.