Self employed sole trader to partnership VAT

Earlsfield

Hi

I was hoping someone might be able to point me in the right direction. I am a sole trader decorator and now need to become VAT registered because we broke the threshold.

If we become VAT registered we will not earn enough to keep the business going. If we don't become VAT registered we break the law. Clearly we have to change the business structure but it seems odd that a small growing enterprise can go under because of this reason.

Does anyone know if the law is this black and white? We are taking proper advice next week but we are unclear on our options.

paddyrg

That's pretty much the playing field we all play on, so I don't think you'll find many easy ways out.

I'm curious though - £82,000 is quite a lot of money for a sole trader, so are you sure you're in such dire straits? Don't forget VAT registration also means you reclaim VAT on supplies.

agrinnall

Earlsfield wrote: »

If we become VAT registered we will not earn enough to keep the business going.

Why do you think this? Would increasing your prices by 20% mean that you'd lose your existing customers? How do you think bigger businesses than yours manage to keep trading while charging VAT?

antonic

If you have to be VAT registered because your now trading over the threshold limit consider forming a Ltd Co.

It costs more to set up & run, but if you run into financial difficulties any debts to HMRC stay with the Co and not you as either a sole prop or partnership.

If you form a partnership you become joint & severally liable for each others debs - google the meaning.