Becoming VAT registered- Advice?

[Puzzled]

Plus if you do go flat rate you'll need to come off it if you hit 150k in your first year or 230k after.

 

[unwashed potato!]

having a thought with the flat rate.

for instance where at the moment i charge £100, i'd have to also charge 20% vat but then only pay back 12% to vat man so i've actually gained that 8%. for customers who can claim the vat back this isn't an issue that they are charged vat, but for customers who can't claim vat back it's best to keep prices as low as possible so reduce my prices so that the increase is only what i'd pay, so where on £100 i'd pay £12 vat, i "reduce my price to £93, charge 20% vat bringing total to £112, and then i'd pay £12 vat still, however as i've gained 8% with the customers who claim vat back, i can use some of that extra money to help reduce the increase, so perhaps the customers who can't claim the vat back are now only paying a 7% increase for instance.

Would this be correct?


Also for those who charge vat, do you find it best to price to customers who don't claim vat back, the price + vat, or the price inc vat?

 

[Freakbro]

having a thought with the flat rate.

for instance where at the moment i charge £100, i'd have to also charge 20% vat but then only pay back 12% to vat man so i've actually gained that 8%. for customers who can claim the vat back this isn't an issue that they are charged vat, but for customers who can't claim vat back it's best to keep prices as low as possible so reduce my prices so that the increase is only what i'd pay, so where on £100 i'd pay £12 vat, i "reduce my price to £93, charge 20% vat bringing total to £112, and then i'd pay £12 vat still, however as i've gained 8% with the customers who claim vat back, i can use some of that extra money to help reduce the increase, so perhaps the customers who can't claim the vat back are now only paying a 7% increase for instance.

Would this be correct?

Not quite

£100 + VAT = £120. For flat rate you multiply the £120 x 12% = £14.40 VAT to pay and you keep £105.60

or

£100 + VAT = £120. For normal VAT you pay £20 less any recoverable purchase VAT = X You have to see what X is

So to reduce your charge to say £93 that works out at :

£93 + VAT = £111.60 x 12% = £13.39 VAT to pay and you keep £98.21

Also for those who charge vat, do you find it best to price to customers who don't claim vat back, the price + vat, or the price inc vat?

Q. Well, you are a customer, which price do you want to see?

A. The total price inc VAT

Only quote Net price + VAT to businesses imo

 

[andicole0]

Would it be possible to split your business into three parts, cleaning, removals and gardening, none requiring VAT registration.
Andi.

 

[unwashed potato!]

Would it be possible to split your business into three parts, cleaning, removals and gardening, none requiring VAT registration.
Andi.

Unfortunately not.

We already split the domestic and commercial cleaning as they clearly are 2 different businesses. The removals, gardening and domestic cleaning all share the same staff, supplies, office, vans etc. Even if we split, almost all the turnover is from the cleaning. the gardening and light removals is only a small amount of the turnover, and although we see them increasing, the cleaning alone will bring us over the threshold this summer.

 

[Freakbro]

Unfortunately not.

We already split the domestic and commercial cleaning as they clearly are 2
different businesses.

I'm guessing you have taken advice on that because to me I would disagree, I would say they are the same business (cleaning) for VAT registration purposes

HMRC guidline

Situations that HMRC may consider a single taxable person for VAT purposes include:

Separate entities selling to registered and unregistered customers. The VAT-registered entity sells only to VAT-registered customers, and the entity not registered for VAT sells to customers who are not registered for VAT.

Whereas...

The removals, gardening and domestic cleaning all share the same staff, supplies, office, vans etc. Even if we split, almost all the turnover is from the cleaning. the gardening and light removals is only a small amount of the turnover, and although we see them increasing, the cleaning alone will bring us over the threshold this summer.

The removals and gardening are separate type of trading businesses, though I'm not 100% sure on how the shared assets would muddy the waters

Is it the same directors for all the companies?

 

[weringo]

How do you figure that out?

If turnover is £83k and your not VAT registered, a 30% profit margin is £25k.

If gross turnover is £190k and you are VAT registered, you have 70% wages to pay (as non-VAT registered customers will be inflexible to the cost of VAT, so your wages costs are as a percentage of the gross revenue, rather than net), being £133k, and VAT of £31,667, leaving you with net profit of £25k.

 

[b0rn2sk8]

I would suggest speaking to a professional rather than those posting here regarding separation of business, its not as straight forward as people have made out and we do not know all the facts.

 

[unwashed potato!]

I would suggest speaking to a professional rather than those posting here regarding separation of business, its not as straight forward as people have made out and we do not know all the facts.

don't worry i'm not discussing the separation, just explaining why we can't.

I'm guessing you have taken advice on that because to me I would disagree, I would say they are the same business (cleaning) for VAT registration purposes

yes we took advice before the split.

commercial cleaning is totally different to domestic cleaning. the domestic cleaning company is actually a "home care" business which atm does mostly cleaning but also gardening, removals, and one day maybe we can do other home care services. the domestic cleaning we do is deep one off cleaning so ovens, carpets, one off spring cleans etc. there is absolutely nothing similar between the 2 businesses.