Planning my journey from sole trader to LTD

marcus2772

Pennywise said:

marcus2772 said:

Grumpy_chap said:

marcus2772 said:

DoctorStrange said:

One thing you may wish to ask the accountant is whether you are able to / it's feasible to operate as both self employed and as a Ltd?

Just thinking of the VAT threshold and trying to stay below that, otherwise the 20% increase to your fees might have an impact on your profitability?

That's a good idea but sadly not because I offer digital services, I must charge VAT to EU+UK and probably some other countries. Brexit is great!

Not sure that I understand the reference to Brexit in the context of the VAT-threshold.  Which rules were varied that affect this?

I am getting confused.

I'm not sure if I charge VAT due to hitting £85k threshold or if I have to because I am supplying digital services regardless of threshold?

After looking at my customer base, 15% are UK customers and roughly 5% are EU (VAT MOS).

The remaining are USA, Canada, Asia etc.

It's my understanding that I charge UK VAT to UK customers (15%) and Non-Union VAT MOSS to EU customers (5%).

My question is when do I charge VAT?

And if/when I do charge VAT, does that mean I can only reclaim 20% of my VAT as only 20% of my sales have VAT added?

Of course i'll be hiring an accountant but i'd like to get a laymen understanding of how it works.

Thanks.

Your UK sales will continue to be subject to the £85k registration threshold where you have to register if UK sales are over £85k but can register voluntarily if your UK sales are under £85k.

Re EU sales, you have to register under the EU OSS scheme (for which I understand there's no threshold under which you don't have to register).

For non UK, non EU sales, you don't charge VAT whether you're registered for VAT or not.

As for recovery of input VAT on expenses, if you're registered for VAT in the UK you can reclaim all UK input VAT charged on expenses.  There'd only be a restriction if any of your sales were exempt from VAT.  Exports aren't exempt, they're usually zero rated, so you can reclaim input VAT.  NB you can't reclaim any non UK input VAT on UK VAT returns.

Thanks for the information!

It took me a few reads but now I fully understand - time to find an accountant and get this thing moving forward.