Rent and business rates and VAT claims

Bartoni79

I’m thinking of starting a business as a ltd company.

If I rent of a premises at 50k ex vat, rateable value is 10k with 49.9p UBR in the £, and I make 100k in revenue what do I pay annually?

Is it £50k+£10k VAT plus £10Kx49.9% = £64999

Can I claim the 10k VAT back? / VAT back on all purchases made?

Thanks 

MattMattMattUK

Bartoni79 said:

I’m thinking of starting a business as a ltd company.

If I rent of a premises at 50k ex vat,

There is no VAT on rent, so it is always ex. (Though there can be a slight oddity with serviced offices, not not applicable here as you talk about rates).

Bartoni79 said:

rateable value is 10k with 49.9p UBR in the £, and I make 100k in revenue what do I pay annually?

Is it £50k+£10k VAT plus £10Kx49.9% = £64999

Income £100,000 (however you would need to register for VAT, so you would need how you account for that in your pricing)
Less costs of:
Rates: £4,990 (although you will have costs greater than that, other bills, expenses, cost of product, service etc.)

Net profit £45,010
Tax: £8,551.90 (Small profits rate 19%)
Distributable funds £36,458.10, which you could then distribute as dividend and would personally pay dividend tax on.

Bartoni79 said:

Can I claim the 10k VAT back? / VAT back on all purchases made?

There is no £10,000 VAT. You can claim VAT back on some purchases, not all. Any purchases are also going to eat into the profit figure as you have not accounted for anything other than rent and rates as costs. 

DullGreyGuy

Why wouldn't you get small business exemption to business rates?

Are you sure the rental is attracting VAT? They can if the landlord opts to but wouldn't normally be.

Are you going to sell enough to have to be VAT registered? Presumably you are going to be profitable and therefore in most cases it wouldn't be "claiming the VAT back" but simply offsetting it from the VAT you have to collect from your customers. 

Tucosalamanca

£50k rent and only £10k rateable value would be very unusual.

If the property is rated at less than £12k there are no business rates to pay.

There is tapered SBRR until £15k, but being honest, as soon as you go above £12k rateable value, business rates increase quickly.
If you were already in the property, you might have benefitted from transitional relief but as you will be a new tenant, you won't be eligible.

It would be worth further reading on the VAT situation as it varies considerably.
There's huge demand for non-vatable properties from smaller non-registered SME and even private individuals.
Personally, I haven't owned or rented a non-vatable property for many years (I currently rent and own).
In my area they're simply not available in sufficient numbers to meet the demand.

It sounds like you have very limited knowledge of how taxation works and the implications it has for your business (and ultimately your earnings).
There's some great and some not-so-great advise on MSE.

Lots of firms do blogs, short videos etc these will help a lot in giving you a basic understanding, along with the .gov website.
If you're serious, I would dedicate a lot of time to researching these and getting 'match ready'. Good luck with it...

daveyjp

MattMattMattUK said:

Bartoni79 said:

I’m thinking of starting a business as a ltd company.

If I rent of a premises at 50k ex vat,

There is no VAT on rent, so it is always ex. (Though there can be a slight oddity with serviced offices, not not applicable here as you talk about rates).

Not quite correct.  Landlords can opt to tax on rents, often done by larger property holding landlords and quite often local authorities (as their VAT situation is a specialist area).

There will therefore be VAT on property rentals if the landlord has opted to tax the property.

lincroft1710

Tucosalamanca said:

£50k rent and only £10k rateable value would be very unusual.

I agree.

Either your rent is far too high, or your RV is far too low

daveyjp

I saw that discrepancy too, but without property details and basis of valuation its impossible to know if this is to be expected.

Grumpy_chap

Bartoni79 said:

I’m thinking of starting a business as a ltd company.

If I rent of a premises at 50k ex vat, rateable value is 10k with 49.9p UBR in the £, and I make 100k in revenue what do I pay annually?

Is it £50k+£10k VAT plus £10Kx49.9% = £64999

Can I claim the 10k VAT back? / VAT back on all purchases made?

Thanks 

Have you prepared a full business plan and cash flow forecast?  Covering the first year, first three years, first five years.
It is just a business with revenue of £100k and requiring premises of £50k rent plus all the other operating costs - business rates (as noted), building insurance, heating, lighting, water, phone, broadband, computers.  Given the business requires a premises, presumably some costs of materials or similar to do whatever the business will do.  It seems as though the OP won't be left with a great deal as personal remuneration.

Once the business plan and cash flow forecast is in place, the OP would be well advised to seek the advice of an Accountant to take them through the way taxes will work in the operation of the business.  VAT (input and output).  Corporation Tax.  Dividend Tax.  Income Tax.  NI (employers' plus employees).  Business Rates.

Bartoni79

daveyjp said:

I saw that discrepancy too, but without property details and basis of valuation its impossible to know if this is to be expected.

Hi, it’s just a large yard..

Tucosalamanca

Bartoni79 said:

daveyjp said:

I saw that discrepancy too, but without property details and basis of valuation its impossible to know if this is to be expected.

Hi, it’s just a large yard..

Does it have planning permission for your intended use?

Rateable value is also linked to usage, a change might trigger a revaluation.
It would be reasonable to expect some degree of involvement from the Valuation Office.
This might not happen immediately but it will happen. VO report to the local council, who will back-bill if they think that money is owed. Get it right from the start to avoid a horrible bill later down the line...

Your local authority will have details of all properties in the area.
You can view planning consent types, see the size of units, assigned use, rateable values and rates actually charged. From memory (it's been a while since I looked) you can also see what reliefs and discounts that other properties are benefitting from.
I've found it a useful tool when looking for properties (as sometimes the devil is in the detail).

Bartoni79

Tucosalamanca said:

Bartoni79 said:

daveyjp said:

I saw that discrepancy too, but without property details and basis of valuation its impossible to know if this is to be expected.

Hi, it’s just a large yard..

Does it have planning permission for your intended use?

Rateable value is also linked to usage, a change might trigger a revaluation.
It would be reasonable to expect some degree of involvement from the Valuation Office.
This might not happen immediately but it will happen. VO report to the local council, who will back-bill if they think that money is owed. Get it right from the start to avoid a horrible bill later down the line...

Your local authority will have details of all properties in the area.
You can view planning consent types, see the size of units, assigned use, rateable values and rates actually charged. From memory (it's been a while since I looked) you can also see what reliefs and discounts that other properties are benefitting from.
I've found it a useful tool when looking for properties (as sometimes the devil is in the detail).

It’s still within the class use it’s been allocated..