Setting up as a business

alright, sorry for resurrecting this thread but I've got another question.

I was just a bit overwhelmed by all this so have just been planning on registering as a sole trader, keeping track of how much I earn etc. and then paying everything I owe in one go when the time rolls round.

However, I've just done some work for a pretty big company (a really big publisher) and I'm just invoicing them now, there's issues with how much I'm charging already so I won't go into it but my sister who works there and got me the work with one of her colleagues is going on about charging VAT as if not I'm losing money.

What do I do? I haven't put VAT on anything I've charged for before but that's never been to a company this large before and if I put VAT on without having a VAT number am I risking some repercussions down the road?

I think I'm gonna buy that book.
 
Any VAT you charge you'll have to pay over to HMRC, less any VAT you incur on your purchases. It sometimes works out to save you money, depending on the nature of the services you are supplying and the purchases you are making.
 
You can't charge VAT without being VAT registered. However, you can build it into the price, just not make any reference to it.

As vonhelmet says, for services, it can save you money, but for retail its the opposite.
 
if I charge VAT without a VAT number isn't that going to suspicious?

And if I charge it and get it, I've got no issue with just putting that straight into savings, it's not like I want it to spend.

It's 600 quid for a few days work, vat on that is £120, my only issue is if I don't charge it, am I gonna end up owing 120 quid?

I'm still under the tax threshold by the way, should go over the mark in October, I've only been doing this a couple of months.
 
it sounds like you would benefit from some sound business advice, business link is a good first port of call so make an appointment to see an advisor at your local office.

I think what is being suggested is that you invoice them your base rate + 20% vat as they will be able to claim the vat back and you can make an additional 20% on your fee since you are not registered for vat. for them to claim this back it would need to be on your invoice to them.

I would not suggest doing this. you cannot charge vat if you are not registered for it and it is certainly not a good idea with an auditable paper trail. you could charge it if your intention is to register shortly and you will be paying it at the end of your financial year.

you may be able to increase the price without reference to it, but they may come back and request a VAT invoice.
 
anksta said:
What do I do? I haven't put VAT on anything I've charged for before but that's never been to a company this large before and if I put VAT on without having a VAT number am I risking some repercussions down the road?
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Charging VAT but not being VAT registered is illegal AFAIK.
 
anksta said:
alright, sorry for resurrecting this thread but I've got another question.

I was just a bit overwhelmed by all this so have just been planning on registering as a sole trader, keeping track of how much I earn etc. and then paying everything I owe in one go when the time rolls round.

However, I've just done some work for a pretty big company (a really big publisher) and I'm just invoicing them now, there's issues with how much I'm charging already so I won't go into it but my sister who works there and got me the work with one of her colleagues is going on about charging VAT as if not I'm losing money.

What do I do? I haven't put VAT on anything I've charged for before but that's never been to a company this large before and if I put VAT on without having a VAT number am I risking some repercussions down the road?

I think I'm gonna buy that book.
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If you are not registered for VAT you can not charge it. If you are registered for VAT you must charge it.

Being VAT registered effectively makes you a tax collector for the government - you are not VAT registered and by the sounds of it have absolutely no reason to be so you would be behaving improperly to charge it (effectively stealing)
 
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anksta said:
if I charge VAT without a VAT number isn't that going to suspicious?
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Yes

And if I charge it and get it, I've got no issue with just putting that straight into savings, it's not like I want it to spend.
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You cant and dont charge VAT unless you are VAT registered.

It's 600 quid for a few days work, vat on that is £120, my only issue is if I don't charge it, am I gonna end up owing 120 quid?
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No you wont

I'm still under the tax threshold by the way, should go over the mark in October, I've only been doing this a couple of months.
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Which Tax threshold are you on about?
 
na I'm not gonna charge it then.

And I freely admit I need business advice, I've got a mate who's been doing something sort of similar but on a much bigger scale for the past couple of years earning a lot more than I am and he knows it all back to front.

I talked to him for about 2 hours about it and it just goes over my head like this thread does.

It's all "well you can do this which mean that 9 months later you might have to pay a bill which won't be due for 12 months by which time you should have done this BUT if you didn't do that in the first place then this could happen"

and then someone else contradicts it completely without either of you being wrong.

So, just in terms of this invoice for £600, if I don't charge VAT and don't get VAT registered, will I owe £120 down the line? That's all I wanna know right now, this thing needs to get sent today.

EDIT: freakbro just answered the question. And the threshold that after which you get over you have to start paying tax, it's £6845 I think at the minute, any earnings under that are tax free.

i've proper just made that statement so boldly, no doubt 3 people will have 5 opinions about why that is definitely not the case
 
anksta said:
na I'm not gonna charge it then.

And I freely admit I need business advice, I've got a mate who's been doing something sort of similar but on a much bigger scale for the past couple of years earning a lot more than I am and he knows it all back to front.

I talked to him for about 2 hours about it and it just goes over my head like this thread does.

It's all "well you can do this which mean that 9 months later you might have to pay a bill which won't be due for 12 months by which time you should have done this BUT if you didn't do that in the first place then this could happen"

and then someone else contradicts it completely without either of you being wrong.

So, just in terms of this invoice for £600, if I don't charge VAT and don't get VAT registered, will I owe £120 down the line? That's all I wanna know right now, this thing needs to get sent today.

EDIT: freakbro just answered the question. And the threshold that after which you get over you have to start paying tax, it's £6845 I think at the minute, any earnings under that are tax free.

i've proper just made that statement so boldly, no doubt 3 people will have 5 opinions about why that is definitely not the case
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read this - don't charge VAT because you are not VAT registered - you will not owe the VAT because you are not VAT registered (and have no need to be at your current rate of earnings - doesn't sound like you are likely to turnover more than £73k this year)!
 
To try and answer simply.

If your total turnover (income not profit) within 1 year of trading is going to be over £73,000 then you have to register for VAT.

If it is going to be less than that you do not have to register for VAT - but can do voluntarily if you so wish.

So going on the assumption your turnover is going to be less than £73,000 and you do not wish to register for VAT voluntarily, then you are fine to issue that invoice for £600 only. Do not charge VAT, do not pass go, and you will not end up owing £120 later.

Hope that helps :)
 
anksta said:
EDIT: freakbro just answered the question. And the threshold that after which you get over you have to start paying tax, it's £6845 I think at the minute, any earnings under that are tax free.
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that's irrelevant - you are self employed you will still need to track your earnings and complete a self assessment and presume you intend to earn more than that during an entire year (from any work you do together, not just this)
 
anksta said:
So, just in terms of this invoice for £600, if I don't charge VAT and don't get VAT registered, will I owe £120 down the line? That's all I wanna know right now, this thing needs to get sent today.

EDIT: freakbro just answered the question. And the threshold that after which you get over you have to start paying tax, it's £6845 I think at the minute, any earnings under that are tax free.

i've proper just made that statement so boldly, no doubt 3 people will have 5 opinions about why that is definitely not the case
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nope, you won't need to pay the vat, even if you register for vat later in the year, you would only need to pay vat on the invoices you have charged it on, principally from the point of vat registration.

keep your paper trail clean and clear cut... for the sake of not earning a few extra quid here an there, it is a lot less hassle and ultimately cost than ending up on the wrong side of HMRC or the law.

have you got any sort of indemnity / liability insurance covering your work and consequential losses etc
 
Freakbro said:
To try and answer simply.

If your total turnover (income not profit) within 1 year of trading is going to be over £73,000 then you have to register for VAT.

If it is going to be less than that you do not have to register for VAT - but can do voluntarily if you so wish.

So going on the assumption your turnover is going to be less than £73,000 and you do not wish to register for VAT voluntarily, then you are fine to issue that invoice for £600 only. Do not charge VAT, do not pass go, and you will not end up owing £120 later.

Hope that helps :)
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yeah cheers mate

Skidder said:
that's irrelevant - you are self employed you will still need to track your earnings and complete a self assessment and presume you intend to earn more than that during an entire year (from any work you do together, not just this)
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Yeha I do keep track I've got spreadsheets and stuff of what was charged when and when i got paid and whatnot. It's just that I don't have to pay tax on it do I.

I mean what's I get over 7000, say my total is at £7200 I'll only owe tax on that 200 won't I, by which point I'll take out the percentage of that 200 and stash it, then just keep doing that to April.

How wrong am I?
 
anksta said:
How wrong am I?
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pop along to business link, they will also advise you which software may assist you in your accounts and payroll eg sage or the HMRC own.

it isn't complicated as a sole trader but it can be made easier.

alternatively just spend a day reading the advisory notes on their website plus HMRCs/Direct.gov.uk then go see them.

you may also benefit from an hour or two with an accountant
 
anksta said:
Yeha I do keep track I've got spreadsheets and stuff of what was charged when and when i got paid and whatnot. It's just that I don't have to pay tax on it do I.

I mean what's I get over 7000, say my total is at £7200 I'll only owe tax on that 200 won't I, by which point I'll take out the percentage of that 200 and stash it, then just keep doing that to April.

How wrong am I?
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Not wrong, but quite simplistic (no offense intended).

Remember to keep receipts/paperwork for all expenses incurred that are relevant to your business, as this comes off your income to then determine your profit.

It sounds like it wouldn;t hurt when you get to the end of the tax year to have a bookkeeper/accountant type look over your records as they may be able to point out more expenses you can claim that you didnt know about.
 
anksta said:
yeah cheers mate



Yeha I do keep track I've got spreadsheets and stuff of what was charged when and when i got paid and whatnot. It's just that I don't have to pay tax on it do I.

I mean what's I get over 7000, say my total is at £7200 I'll only owe tax on that 200 won't I, by which point I'll take out the percentage of that 200 and stash it, then just keep doing that to April.

How wrong am I?
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You're not wrong but you are likely to have fewer surprises if you have a tax account setup alongside your bank account and put say one third of everything you earn in there. Unless you don't expect to make much. What is your targeted revenue amount for 12 months (very roughly)?

Keep in mind your first self assessment will trigger not only the payment of an entire year's worth of tax but also a payment on account for the next period so will be larger than future 6 monthly payments that you make.
 
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