confused about VAT --- 2

[tonyonline]

Hi There,

After reading the 'confused about VAT' topic posts, I 'm still not quite sure what could be the advantage of not VAT registering a business that 's under £ 58K turnover per year ...

If the company is not VAT registered it means VAT is not added on invoices the company sends out but does it mean that VAT cannot be claimed on purchases aswell ?

If it is the case what is the advantage of not registering the company apart from simplicity of operations.

Thanks for your posts
T

[Ozzy]

Hi Tony,
Simplicity of transactions, and your prices will look cheaper to consumers (people who are not VAT registered).

[MikeH]

The main decision should be based on 'who are your customers'?

If they are other businesses that are registered for VAT then no problem. Your customers will be able to claim VAT back so registering will not affect sales.

If your customers are the mainly the general public or non VAT registered businsses then registering for VAT will effectively put your prices up and may affect your sales if you out price yourself.

It is a balance between claining back VAT and the affect on customers.

Mike.

[tonyonline]

Ok I think I 've got it ...

My customers being businesses I think I should register at one point or another. I was also told by a different source that whenever you register you can claim the VAT on you purchases you've made over the previous 6 month.

Thanks for your precious help.

T

[Alpha]

Tony

What you have been told is not strictly true.

You can claim vat back on servicesreceived in the previous six months providing they were not related to goods that have now been sold eg repairs to a machine which has since been sold. (Customs usually insist on you having available a working schedule to prove this)

You can claim vat back on capital goods purchased (eg computers) and stock items purchased in the last three years, again with conditions. In the case of stock items they must still be in stock at the date of registration(and a working schedule is required to be held to prove this). In the case of capital goods you must still have posession of them at the time of registration (and obviously charge vat on them if you subsequently sell them)