De registering my cafe for VAT

[philip22]

I have a cafe that has been trading for 10 months now in a garrison town. It appears in our first year we are going to hit below the VAT level because the regiments are constantly away on buildup exercises. This is a new trend and the forecast for next year is the same, troops away a lot of the time.

When we first opened we registered for VAT not realising 50% of our customer base would suddenly up sticks and disappear over night for weeks on end.

My questions to the forum are:

1. If our turnover hits below the VAT level can we de-register for VAT?
2. Can we claim back any VAT we've paid in the 10 months to date?

Many thanks
Phil..........PS: (Some will read this and ask the question why would you want to open a cafe in a garrison town because soldiers go to war etc; my answer is; you're correct...bad move on our part.)

 

[S2K]

VAT notice 700/11 explains the deregistration process as well as how to claim VAT after deregistration.

 

[Cobby]

We've always paid quarterly, and I would have expected you to do the same but if you're trying to claim for the past 10 months then perhaps not? If you do it quarterly then you'll have already claimed your VAT for those quarters and if not I think you can backdate those items to claim in the next quarter.
Usually if you want to claim back VAT you do it on your return, and you can only file that return if you're registered, and if you're registered then you'll be expected to pay the VAT you've generated. You can deregister for VAT although we've not done it so can't help with what it entails.

With small cafés it's usually worth trying to stay under the threshold as most of what you'll sell will be subject to VAT but most of what you buy in (ingredients, tea, coffee beans etc) will not be subject to VAT, so you'll be creating VAT out of nothing and (generally speaking) adding 20% onto your prices to recoup (or just giving 20% of your takings away). We used to adjust our opening hours to reduce income if we thought we might hit the threshold as it really wasn't worth registering for us.

 

[Dean Logan FCA]

You can apply to HMRC to deregister for VAT if your turnover in the next 12 months is expected to be less than £83000. This cannot be backdated. It is active from when they receive and accept it. They might ask for more evidence if your turnover has been close to threshold so far.
All the VAT you've collected from your customers so far belongs to HMRC. No question if getting it back.
One other problem. You presumably claimed back VAT on initial equipment? If when you deregister equipment nb now second hand) is worth more than £6000 you have to pay HMRC VAT on its value (1/6th).
Please take advice from your accountant or call me.

 

[Paul Kelly ICHYB]

Why haven't you already declared the VAT for the past 10 months?

 

[philip22]

Hi thanks to everyone for the advice, we will talk to our accountant.

 

[philip22]

We've been paying VAT quarterly since we started 10 months ago but will only turn over about £75000. We're charging the maximum amount per items on our menu to remain competitive with other local cafe's in our area. For eg: a 'full English' is £5.95 and to add 20% VAT on top would be too expensive so the VAT is factored into that cost. However, after paying staff, suppliers rent, rates, utilities etc we are barely breaking even. Then we have to pay the VAT man 20% which is putting us deeper and deeper in to debt. In a nutshell we're not turning over enough money and that's why we need to de-register.

Anyone that says you're only collecting VAT on behalf of the HMRC really needs to try and run a cafe or restaurant. It's a nice little catch phrase but the saying is null and void. Unless you're turning over £40,000 a month forget it.

 

[Paul Kelly ICHYB]

We've been paying VAT quarterly

and to add 20% VAT on top would be too expensive

Were you charging VAT on the 5.95 or not?

Yes, running a cafe is tough, so is running lots of other businesses!

e're charging the maximum amount per items on our menu to remain competitive with other local cafe's in our area

So, you're no better than the other cafes? Make your self different and charge more. I have a local cafe that is about 20% more than others and you get less on your plate, however, the quality of the food is unbelievable.

Then we have to pay the VAT man 20% which is putting us deeper and deeper in to debt

The VATman isn't putting you into debt, you are!