Claim VAT back on startup?

[ghostworld86]

Hello,

I am interested in finding out if I can claim back VAT on initial business start up costs.

My situation: currently employed earning more than £6500 threshold.

I plan to set up as a freelance photographer & as profits initially will not be enough to live on, so I will carry on full time employment for the first year.

My question: Can I claim back VAT on my initial business start up costs (camera, computer, software, business cards, website etc)?

I would like to know what the situation is, whether I need to be registered as a sole trader before I make the investment in equipment or not.

Any help/advice would be much appreciated.

Thanks

 

[DeanCo]

You can claim VAT for start up costs if you are registered for VAT.

You should register as sole trader ASAP, according to HMRC.

 

[David Richards]

I am interested in finding out if I can claim back VAT on initial business start up costs.

You'll only be able to claim back VAT if you become VAT registered - and that may not be to your advantage at this stage. The VAT registration threshold is £73,000. Although you can register voluntarily before then; in general, a business supplying services to the general public (i.e. consumers rather than other VAT-registered businesses) won't find it beneficial to do so.

However, all is not lost. Should your business grow and you register for VAT later on, you might still be able to reclaim VAT on the things you've bought - up to four years before the date of registration.

 

[David Griffiths]

You can claim VAT for start up costs if you are registered for VAT.

You should register as sole trader ASAP, according to HMRC.

I think that needs to be clarified to explain that it is registration as a sole trader that needs to be done asap, not registration for VAT!

VAT registration is not compulsory until turnover hits £73,000 but you can register voluntarily if you are below that. You have to weigh up the benefits of reclaiming VAT paid on costs against the cost of having to charge VAT to your customers. Rule of thumb is that if your customers are VAT registered businesses then voluntary registration is usually worthwhile. If your customers are the general public, then it isn't, but each case is different and you should take advice on your own circumstances

 

[ghostworld86]

Thanks for your replies.

So if my turnover is much less than the £73,000 threshold, there will be little benefit in VAT registering my business? therefore I can't claim back VAT off start up costs

-

If your customers are the general public

I will mostly be photographing models, weddings & bands etc.

So if I am not VAT registered, then I cannot claim VAT back on start up costs? There is no way to reduce start up costs?

Thanks

 

[MASSEY]

Thanks for your replies.

So if my turnover is much less than the £73,000 threshold, there will be little benefit in VAT registering my business? therefore I can't claim back VAT off start up costs

-

I will mostly be photographing models, weddings & bands etc.

So if I am not VAT registered, then I cannot claim VAT back on start up costs? There is no way to reduce start up costs?

Thanks

If you have spent a good few grand starting up a lot of it you will be tax deductable. Irrelevant of VAT.

Being vat registered will help you claim more back but your prices are going to increase , will you be able to offer a competitve price? that is the most important thing to consider.

 

[ghostworld86]

If you have spent a good few grand starting up a lot of it you will be tax deductable. Irrelevant of VAT.

Being vat registered will help you claim more back but your prices are going to increase , will you be able to offer a competitve price? that is the most important thing to consider.

Yeah start up costs will be around £4,000 to £5,000 - so can this be added to tax threshold allowance?

 

[Scalloway]

It is claimed on your tax return as Capital Allowances. It reduces your taxable profit.

 

[ghostworld86]

It is claimed on your tax return as Capital Allowances. It reduces your taxable profit.

But am I right in believing that I cannot claim 100% on capital allowances like these costs?

 

[MyAccountantOnline]

Yeah start up costs will be around £4,000 to £5,000 - so can this be added to tax threshold allowance?

It'll depend on the nature of the costs as to what tax relief can be claimed. The very best thing you can do is to keep a full record of the costs with invoices and receipts and make sure you give it all to your accountant.

 

[MyAccountantOnline]

This might be of interest - HMRC website/expenses

 

[danny m]

hi i need some help I'm starting up a online dj store and i was wondering about the future when I'm vat registered.when i buy an item from my wholesaler and get charged vat and then resell it on to my customer at the same price i would sell it before i came vat registered without upping price to my customer.will the vat i claim back cancel out most of the i would owe for selling the item on.so in general keeping my prices the same or have i got myself a bit lost

 

[Scalloway]

If you are VAT registered when you buy something with VAT on the price you can reclaim the VAT. You must add VAT to your selling price. Your selling price is based on what you paid plus your mark up (if any) plus VAT. The difference is paid over to HMRC quarterly when you do your VAT Return

If you just resell the item at cost plus VAT the VAT payable will be zero.

 

[BobBuilder]

hi i need some help I'm starting up a online dj store and i was wondering about the future when I'm vat registered.when i buy an item from my wholesaler and get charged vat and then resell it on to my customer at the same price (that) i would sell it before i (be)came vat registered without upping price to my customer.will the vat i claim back cancel out most of the i would owe for selling the item on.so in general keeping my prices the same or have i got myself a bit lost

If, after registering for VAT, you charge the same prices as you currently do, you will make less money on each item than you currently do.

If the people that you are selling to are able to reclaim the VAT, they will be happy to pay you 20% extra as it costs them nothing to do so. Only in that circumstance would you then make more money per item.