Vat Help

smallbizowner

Please could somebody help me. This is my first message. I own a small business and have just passed the vat threshold by a small (about 1500) amount. I can't afford to pay vat as my business is labour intensive so I couldn't claim much vat back, plus as its my first year I've got huge startup loans to pay off. I panicked and got rid of staff so now my turnover should decrease. Should I still tell HMRC? What should I doooooooo??? Please help, I'm so nervous.

anniecave

Do you have an accountant? I would speak to them regarding it. If you don't have an accountant, I would get one ASAP.

anniecave

this thread may help you http://forums.moneysavingexpert.com/showthread.html?t=342561

smallbizowner

Thanks, I do have an accountant but I'm even too scared to mention it to him. Although, I will ring him next week (he's on hols). I did chat to him before, he told me to get rid of staff - which I did. He also said that its a rolling total so for this September, I take off last September's takings to get the total. I know its probably inevitable that I pay vat but it makes me so mad because if it means I can't afford it (cos of our start up loan repayments) then we'll have to close (am I being too dramatic?), I will also be bitter as hell and will end up squirreling away as much cash as poss and then I'll become one of those people that rant about "taxpayers money". Oh God, I'm going to bed... p.s. this is totally confidential isn't it?????

lostfarmer

I didn't realise you could charge VAT on invoices if you were not registered for VAT? If you haven't you've nothing to worry about, if you have then what can you also claim VAT back on? Rent, Water, Capital Expenses, Electricity, Client Entertainment, IT Equipment, Telephone bill, Marketing etc etc?

Having VAT issues of my own at the moment- we're registered (therefore charge VAT) so I know I have to pay it over but it's just so comforting in our bank account!! Understand your worries...

Debt_Free_Chick

smallbizowner wrote: »

Thanks, I do have an accountant but I'm even too scared to mention it to him. Although, I will ring him next week (he's on hols). I did chat to him before, he told me to get rid of staff - which I did.

Bizarre advice. Surely the answer is that you simply start charging VAT on your services

PasturesNew

Yes, start charging VAT. And if that makes you lose customers then all this does is limits your turnover again... so no change yet you're legal and able to grow from there.

Maybe he runs massage services ...... *coughs*

JasonLVC

Smallbizowner,

A very common occurance to be honest, a small business just grows big enough to go over the limit.

If you've gone over the limit due to a one-off job that isn't likely to be repeated (designing a website for a large corporate or a big building contract with Barrts for instance), then you can write to HMRC asking for exemption from registration - but you need to give them reasonably good grounds as suggested above. They will then write back to confirm or reject your request. But you'll need to be constantly watching your turnover each month over a rolling 12 months and if you go over, then you'll have to write to them again!. Do this more than a few times and I suspect they'll refuse you eventually and force you to register for VAT.

If you don't intend to recover much VAT and you need to register for VAT becuase of your turnover, then suggest you go for the Flat Rate Scheme. This is a simply system, you charge VAT @ 17.5% to your customers but you pay over to HMRC a smaller % (based upon your trade/industry). So you charge £17.50 VAT to customer and pay over 10% to HMRC, keeping 7.5% for yourself. There's a bit more to it than that, but you get the gist!. You cannot recover any input tax except on capital spends over £2,000 but the % you keep usually more than compensates you.

Strange advice to start laying off staff?. VAT is based upon your TURNOVER not your expenditure/salaries. If your income exceeds £64k then you should register for VAT, simple as that.

Ultimately, it all depends upon what your trade is and how you get your money into the business.

Debt_Free_Chick

I also hope that if the "staff" were employed, that he complied with the raft of employment regulations - so they were fairly dismissed, not UNfairly! :eek:

Bean_Counter

smallbizowner wrote: »

I know its probably inevitable that I pay vat but it makes me so mad because if it means I can't afford it

Technically you are not paying the VAT. You are adding it on to the amount that you would normally charge your customers, so you are getting more money it when they pay and then pay it out VAT. Net cost to you is nil and when you recover some VAT on your purchases, then you are better off. You are acting as an unpaid tax collector for the government.

Of course the big question is who your customers are. Are they private individuals who would have to suffer the VAT charge or are they businesses who can probably reclaim any VAT you charge themselves?

JasonLVC had some good advice and your accountant (if they are any good, which seems in doubt at present) should be advising you on the VAT Flat Rate Scheme and any other options you have. As previously said, advising you to lay off staff as their first reaction does not seem great long term advice.

VeryTrying_2

Bean_Counter wrote: »

JasonLVC had some good advice and your accountant (if they are any good, which seems in doubt at present) should be advising you on the VAT Flat Rate Scheme and any other options you have. As previously said, advising you to lay off staff as their first reaction does seem great long term advice.

Smallbizowner, everything Bean Counter says is good advice - especially the doubts expressed about your current accountant. Perhaps it's time to look around for a new one?

But ..... I should point out that his/her last sentence was supposed to be funny! Since you have no doubt lost your sense of humour after having to deal with the VAT people, remember that what Bean Counter meant was "advising you to lay off staff ... does seem great long term advice - NOT".