VAT what is the Cons for a sole trader?

Legacy_user

I'm starting out on my own as a trades man, In order for me to buy stock from a wholesaler they need a VAT number, my turn over will be much less than £64k as its only part time, but what are the cons of registering?

scbk

More paperwork and your price will increase for non-VAT customers

phill99

The downside is that5 you are less competitive to customers who can not reclaim vat. Not by 17.5% as a lot of people think, but only ny the vat on the labour element of your pricing. This is because you will already be passing on the vat on the non labour element anyway. You can always register for vat, get an account set upi with your wholesaler and then deregister.

The upside is that you can recover all of the vat on purchases.

It depends of you are planning on primarily selling to businesses or in the retail market.

wallacebob

As phill99 says, it depends who you sell to. If your clients are trade, e.g. developers, builders, then they can reclaim VAT so don't care. You will reclaim on purchases for business , so may win overall. BUT The public will not be able to reclaim, (except new-build) so are paying 17.5 extra in effect, this may rise your prices! The paperwork side isn't that bad if you go with a flat rate scheme, but you will have to file 4 returns before you can go on one I think.
Can't the wholesaler allow an account pending registration of you explain the situation? Or how about screwfix or warehouse direct, or other internet suppliers?

Pennywise

wallacebob wrote: »

The paperwork side isn't that bad if you go with a flat rate scheme, but you will have to file 4 returns before you can go on one I think.

No, you can apply for the flat rate scheme upon registration, there is no time limit.

Have you actually asked the wholesaler about it - did they tell you in person you needed a VAT number or is it just a question on their application form. I suspect that if you asked someone more senior than the receptionist, that they would accept other forms of proof that you are a trader, such as your business insurance certificate, yellow pages advert, invoices from other suppliers, etc.