I have a question

[gearsofsteel]

evening...

I am not a vat registered business as I'm not always going to take more then 77k, yet this year i will be looking to take up the option as i may just go over.

When I reach the £77,000 for this year (all positive thoughts) I will then need to start charging vat at 20%?? -

If i take sales of 100k, would I only have to pay 20% on £23,000 - the difference (77k -100k). ? or on every penny ??

and the following year, would i have to remain vat registered? - or can I continue to see if i will make more then 77k. (only this owuld have a massive impact on the following years profits)


all the best
cb

 

[kulture]

If you are VAT registered you get to collect VAT on EVERY sale. So you have to charge VAT on all £100,000 of your sales. Lucky you.
Likewise you cannot just jump in and out of registration. It is possible to de-register, but your turnover has to be a lot less than the £77,000.

Some businesses find it cheaper to take a couple of weeks holiday to keep their turnover below the £77,000

Also see this from HMRC

If you've gone over the threshold for registration temporarily

You can apply for exception from registration if:

• you have to register for VAT because the value of your taxable supplies in the previous 12 months has exceeded the registration threshold of £77,000 (including the value of supplies made by a VAT-registered business that you have taken over)
• you can demonstrate to HMRC that in the longer term you will only be trading below the de-registration threshold of £75,000

You can ask HMRC if they can make an exception, and allow you not to register for VAT, by filling in a VAT registration form, stating why you are applying for an exception.
If HMRC agrees to make an exception and allow you not to register this time, you must let them know of any relevant change in circumstances - for example, if your turnover goes over the threshold again.
If HMRC does not agree to make an exception, you will become registered for VAT from the day you should have been registered. You will need to account for VAT from that date.

 

[faradaykeynes]

you dont need to be vat register if below 77k but if you see your turnover will exceed 77k in a year for UK good/services only then you need to vat register, once you are vat registered every sale you make you have to charge vat at applicable rate. If you feel that you will go above 77k only once then you can inform HMRC about this that it will be one off and they can advice you accordingly, its basically case by case.

 

[gearsofsteel]

really?...but that means i will pay out 20k in vat? - if i make totals sales of 100k?
which means i will only get 3k for 3 months extra hard work ? 80k (less vat from 100k sales) - 77k = 3k for 3 months.

I might as well close up for three months?

 

[faradaykeynes]

no lets say you are 60k now and you expect to go over 77k say 80 k and register for vat then from date of registration you will charge vat to your customer and also recliam vat on your inputs as well so you really pay balance from output less input from date of vat registration, you wont be asked to pay vat on 60k before vat registration. Also you can reclaim vat on capital expenditure provided certain conditions met for items your bought before vat registration

 

[vvaannmmaann]

really?...but that means i will pay out 20k in vat? - if i make totals sales of 100k?
which means i will only get 3k for 3 months extra hard work ? 80k (less vat from 100k sales) - 77k = 3k for 3 months.

I might as well close up for three months?

Welcome to the real world!

 

[GraemeL]

really?...but that means i will pay out 20k in vat? - if i make totals sales of 100k?
which means i will only get 3k for 3 months extra hard work ? 80k (less vat from 100k sales) - 77k = 3k for 3 months.

I might as well close up for three months?

Dont forget that when VAT registered you can also reclaim VAT on purchases, which you are not doing now. So its not as simple as a loss of about 20% on sales. You need to do the maths.

You will have to increase your selling prices to include VAT at some point if/as you pass the threshold. So you need to make a decision very quickly about whether or not your business model is viable if your sell prices are 20% higher. If it is viable, then you can work out your plan to increase your prices asap by 20% - though you cannot say that this is VAT until you are registered.

G

 

[Moneyman]

a quick rule of thumb is you pay
VAT out = 20% on profit before wages
not perfect, but close.
To your business customers it makes no difference as they get it back. So dont worry there.

 

[Optegris]

As mentioned above, you get to claim VAT back on purchases. After a whil and a few VAT returns you will get a feel of how much VAT you are paying on a regular basis.

As an example, I would normally allocate 10-12% of my monthly turnover as "lost" to the VAT man which is what's left after I've reclaimed my purchases...