VAT help

fordie

Free Member
Feb 21, 2008
41
0
hi everyone i'm new here. I'm looking for some advice on VAT. I am currently looking into starting up my own shop (clothes and accessories). I've done quite a lot of research into it, but i'm stuck on VAT. The property i've seen (to rent) is registered for VAT so therefore VAt will be charged on my rent. Obviously if i was VAT registered, i could claim this back, but I wasn't planning to be VAt registed as I do not think my turnover wil be above the threshold (£64k i think??). However, is it in my best interest to become VAT registered even though its not compulsory? I am eligible for the flat rate 6% VAT rate which is designed for the small businesses (less paperwork, less hardwork etc), which is a plus, however you can't claim vat back when you're on this scheme as its incorporated into the flat rate. So therefore if I was going to become VAt registered, I'd have to use the normal 17.5% scheme and all the paperwork & hardwork, etc. and i'm really wondering if its worth it, when its not actually compulsory?? the VAT on the property is just short of 2k, which i could really do without paying, but is all the VAt paperwork, records and sorting out worth it to save that much, and plus my prices would have to go up to incorporate the VAT. I'm expecting my turnover to be roughly around £50-55k per year if that.
help!!

thanks :)

p.s. the estate agents information pack says vat would be payable on rent and other outgoings. what are the other outgoings? i know there are rates, bills and insurance, so maybe the landlord pays these and i pay him back plus vat?? i'm confused, i'll have to ask. thanks again!
 

Alpha

Free Member
Feb 16, 2004
3,192
474
64
West Midlands
Toon gives it you in a nutshell.

Where the general public are you customers they cannot claim vat back so your prices inevitably go up (Not neccesarily by 17.5%).

You could use the fixed rate vat scheme but to keep your prices competitive you would basically end up reducing your net selling price to compensate so simply giving you the hassle of keeping records for vat purposes(admittedly less on the fixed rate vat scheme ) for no gain to yourself:)
 
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fordie

Free Member
Feb 21, 2008
41
0
thanks, i don't really want to register, but as i haven't started trading yet i don't really know what my turnover would be - although i think it will be around the 50k mark. i know thats not exactly 64k, but its not far off and i don't want to get told off my hmrc because they say i knew all along it was going to be that amount and i should have registered and i didn't.
 
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Alpha

Free Member
Feb 16, 2004
3,192
474
64
West Midlands
thanks, i don't really want to register, but as i haven't started trading yet i don't really know what my turnover would be - although i think it will be around the 50k mark. i know thats not exactly 64k, but its not far off and i don't want to get told off my hmrc because they say i knew all along it was going to be that amount and i should have registered and i didn't.

Just so long as you keep reasonable records and monitor your turnover on a rolling 12 month basis then you have done all that is necessary.
 
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Kent Accountant

Free Member
May 30, 2006
1,957
160
Have you done some projections for your business?

Turnover £50K
Purchases (incl VAT) £25K
Gross Profit £25K
Rent (incl VAT £13k
Profit after rent £12K

Out of the £12K you will have to pay:
rates
light and heat
insurance
service charges
wages
telephone etc
printing
advertising
repairs
etc etc

Obviously I don't know what your gross profit percentage will be, but with the rent at that level, the figures look a bit tight
 
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