VAT registration - should I set it up myself

chappers

Danwednesday you must charge VAT on your invoices, this in effect you are collecting from your customers on behalf of HMRC, you then offset against that VAT on your purchases.

On my purchases I don't pay VAT - which for things like rent, computer equipment etc I save 17.5%

You will pay VAT on everything you purchase at the appropriate rate.but you can offset this against the VAT you have charged.

That's interesting - out of curiosity, why? If you could save £1000 per year (which is around what I would save) would you consider it? If not, why?

If you weren't VAT registered you could still charge £117.50 to your customers and not have to pay the 17.50 to HMRC

say you are VAT registered you charge your customer £117.50 of which £17.50 is VAT it cost you £11.75 to provide that service £1.75 of which is VAT . You get to keep £117.50-£17.50(less £1.75)minus your £10 costs =£91.75

If you are not VAT registered you charge £117.50 you keep £117.50 -£11.75 (costs)=£105.75
Alternatively you could be more attractive to your customers by only charging them £100 but couldn't claim back the £1.75 VAT on your expenses.
you will as you say be slightly better off but you won't have the cash flow problems of basically being a tax collector for HMRC.

Flat rate schemes are not for everyone some will be better off some won't the figure you pay on your turnover depends on which sector of commerce your company is in. For example a consultant with few outgoings would be on a higher rate than say a builder who has to buy loads of materials.I think HMRC have a calculator to work out if you are better off on flat rate

danwednesday

Thanks Chappers - there's definitely a saving to be made, it's just a case of how much and whether I go the flat rate route. I've worked out that I could save around £2000 if I am standard VAT registered, but that comes with lots of admin. If I'm flat rate registered it would save about £1500 - but with much less aggro. A tricky decision!

Thanks for the help though everyone, I think I understand it a bit better now.

emmajo99

Don't be fooled into thinking the flat rate is less aggro.

At the end of the day you will have to keep a record of purchases for the inland rev, so keeping the purchase records for the VAT man is no extra hassle.

As long as you have a running total of your sales and your paurchases VAT is simple. The VAT return is very easy unlike SE return.

9 boxes to complete. As long as you have your net purchases, net sales, VAT on sales and VAT on purchases all recorded seperate the vat return is a peice of cake.