Do I VAT register or not? Advice please.

[ginantonic]

A question on behalf of my son -
He recently began a business as a sole trader providing design, promotion and related stuff (www.phoenix-holdings.com) and has been getting quite a lot of work. One supplier he uses has told him they need him to be VAT registered or they can't deal with him. He needs to deal with them, as they operate a sort of dropshipping service for my son.
On enquiring at the Tax Office, he was told to go voluntary VAT reg, but that it would cost him £800.
The other option was to go Ltd, which would also cost £800. Which he hasn't got at this moment in time.
Now, I am not sure what's right here, so please can anyone advise?
Thanks.

 

[Cromulent]

A question on behalf of my son -
He recently began a business as a sole trader providing design, promotion and related stuff (www.phoenix-holdings.com) and has been getting quite a lot of work. One supplier he uses has told him they need him to be VAT registered or they can't deal with him. He needs to deal with them, as they operate a sort of dropshipping service for my son.
On enquiring at the Tax Office, he was told to go voluntary VAT reg, but that it would cost him £800.
The other option was to go Ltd, which would also cost £800. Which he hasn't got at this moment in time.
Now, I am not sure what's right here, so please can anyone advise?
Thanks.

Eh? Why in hell should it cost £800?

Pretty simple to register as a Ltd company but it won't make a difference regarding his suppliers request for him to be VAT registered. Cost me £33 or so to register my Ltd company. VAT registration is just a case of filling in some forms on the HMRC website and maybe paying an administration fee.

The hard part is complying with the legal requirements that both place on you.

 

[CassioAcc]

A question on behalf of my son -
On enquiring at the Tax Office, he was told to go voluntary VAT reg, but that it would cost him £800.
The other option was to go Ltd, which would also cost £800. Which he hasn't got at this moment in time.
Thanks.

Why would it cost £800 to register for VAT?

If this client will not deal with your son until he is registered and this contract is worth it then register. Obviously this will make the cost to non registered clients more expensive but he will also be able to claim back any VAt on expenses.

If he would like to have a quick chat on this then send me a PM.

 

[MyAccountantOnline]

A question on behalf of my son -
He recently began a business as a sole trader providing design, promotion and related stuff (www.phoenix-holdings.com) and has been getting quite a lot of work. One supplier he uses has told him they need him to be VAT registered or they can't deal with him. He needs to deal with them, as they operate a sort of dropshipping service for my son.
On enquiring at the Tax Office, he was told to go voluntary VAT reg, but that it would cost him £800.
The other option was to go Ltd, which would also cost £800. Which he hasn't got at this moment in time.
Now, I am not sure what's right here, so please can anyone advise?
Thanks.

I can most definately reassure you the tax office dont charge £800 to 'allow' someone to register for VAT - I dont even know any accountants who'd charge that to do it either!!

Its a relatively easy thing to do - if its the right option for your son. He needs to consider whether the majority of his clients are VAT registered and the effect it will have on his pricing/profits etc.

Setting up and trading via a limited company is a completely seperate issue and may or may not be worthwhile for him depending on many factors. Again it doesnt cost £800 and an accountant will do it for a lot less!

 

[faststaff]

Even my outrageously expensive accountant only charges £50 plus VAT for VAT registration!

 

[Cromulent]

Even my outrageously expensive accountant only charges £50 plus VAT for VAT registration!

Except you can claim the VAT back when he is done .

 

[CassioAcc]

Even my outrageously expensive accountant only charges £50 plus VAT for VAT registration!

I wouldn't even charge this to a client on a fixed fee contract.

 

[nasirs]

I have never heard of anyone charging £800 to register volunatrily. Are you sure he spoke to the revenue or an individual?

If he will be buying VATable supplies then this would help him as whatever VAT he will pay, he could claim.

Going LTD options is alway the easy case for most of the people as they just do it for the sake of it but it has its circumstances which he should consider or discuss it with an accountant.

He should consider the following:

1) Most importantly he should consider if his turnover will exceed the threshhold of £67,000 in the next 12 months. If it will then he should be VAT registered as sooner or later he will have to anyway. This way he could start charging VAT from the begining of his trade, as soon as he is VAT registered.

2) Another important factor is if the turnover will not exceed the threshold then he should consider how much VAT he will be paying to his suppliers as this could be good for his cashflow to be registered and claim the VAT.

3) If he know his potential market and if the turnover will be under threshold and he is no going to pay alot of VAT, also most of his clients are not VAT registered then he should consider it with the client prospective. As they might think his services are expensive because he is not VAT registered.

There are number of other situations to be considered and he should consult an accountant as this could be a crucial decision and paying an accountant might save him decent amount of money in the future.

 

[MyAccountantOnline]

There are number of other situations to be considered and he should consult an accountant as this could be a crucial decision and paying an accountant might save him decent amount of money in the future.

Excellent advice!