Downsides of being VAT registered

[mark_hadfield]

All,

What are the downsides of being VAT registered and having a business bank account.

At the moment I am spending little bits of money from my personal account for my business. It is a registered LTD company.

The reason I do this is I basically don't have a clue about business finance. I'm under the impression that as soon as I have a business bank account and become VAT registered I'll need an accountant to help me keep stock of my books etc.

So:

1) What are the downsides to being VAT registered? Does it impact on my day to day salary? NI? My credit rating etc?
2) Can anyone recommend a good, cheap accountant that can help make sure I don't break any rules? Their job would be minimal so I don't want to pay a lot.
3) A good business bank account for me? There'll be very little funds going in/ out for the next few months - but hopefully this will change. If I decide that my business isn't viable and wind it up - I want an account which doesn't charge for this.

Thanks all.

 

[DuaneJackson]

1) What are the downsides to being VAT registered? Does it impact on my day to day salary? NI? My credit rating etc?
2) Can anyone recommend a good, cheap accountant that can help make sure I don't break any rules? Their job would be minimal so I don't want to pay a lot.
3) A good business bank account for me? There'll be very little funds going in/ out for the next few months - but hopefully this will change. If I decide that my business isn't viable and wind it up - I want an account which doesn't charge for this.

Thanks all.

1) If you're customers aren't VAT registered then your prices are 17.5% higher as they can't reclaim the VAT. Either that or the 17.%% has to eat into your profits.

2) I'd reccomend Alan @ AlphaLimited.co.uk

3) If your LTD you should have a seperate account. Abbey are supposed to be good.

 

[autolycus]

All,

What are the downsides of being VAT registered and having a business bank account.

At the moment I am spending little bits of money from my personal account for my business. It is a registered LTD company.

If you are doing that you should be keeping all receipts so that you can claim back these expenses from your Ltd company as and when it has some money.

If the Ltd company already has money then it should have its own separate bank account. Remember, you are the company are two separate legal entities (the company is like another person) so you can;t share a bank a/c like this.

The reason I do this is I basically don't have a clue about business finance. I'm under the impression that as soon as I have a business bank account and become VAT registered I'll need an accountant to help me keep stock of my books etc.

It's not having a business bank account that triggers this. A small Ltd company doesn't have to have an accountant but it is stringly recommended. The Ltd co will have to submit accounts to Companies House once a year (regardless of whether it has a bank account and/or is VAT registered). You'll almost certainly struggle to fulfill this requirement without the help of an accountant.

So:

1) What are the downsides to being VAT registered? Does it impact on my day to day salary? NI? My credit rating etc?
2) Can anyone recommend a good, cheap accountant that can help make sure I don't break any rules? Their job would be minimal so I don't want to pay a lot.
3) A good business bank account for me? There'll be very little funds going in/ out for the next few months - but hopefully this will change. If I decide that my business isn't viable and wind it up - I want an account which doesn't charge for this.

Thanks all.

1. A bit more paperwork. Higher prices for customers who are not regsitered themselves (they pay an extra 17.5% on your goods/services and can't reclaim it). No impact on salary or NI. Won't affect your credit rating. Remember it is the company that is registered, not you - hence personal things like salary, credit ratings are unaffected.

2. No such thing as a good cheap accountant. But for a good accountant who offers excellent value for money, try Alan Moore (Alpha on these forums).

3. For free banking for life look at Abbey or Alliance & Leicester. If you want access to a branch and/or business banking advice try one of the hgih street banks - they all offer 12-18 months free banking for nbew businesses.

 

[Joyous]

What are the downsides of being VAT registered and having a business bank account.

Regarding VAT registration you have to add VAT on to all of your invoices which might lose you business if your customers aren't VAT registered. If you chose not to add VAT Customs will assume that your prices are VAT inclusive and you'll have to suffer the VAT yourself. However you can reclaim the VAT on your business purchases so it's not all bad.

There's also the additional accounting and paperwork involved with completing your VAT returns.

Regarding the business bank account the only real downside is bank charges. However the big four do offer free banking for new customes and banks such as Abbey and Alliance and Leicester offer free banking for life subject to certain conditions.

At the moment I am spending little bits of money from my personal account for my business. It is a registered LTD company.

Anything that you buy for your limited company out of your own pocket should be put through the director's loan account as the company owes you for it.

The reason I do this is I basically don't have a clue about business finance.

A very dangerous situation to be in if your the owner of a limited company as mistakes can be expensive to rectify and can be a criminal offence.

I'm under the impression that as soon as I have a business bank account and become VAT registered I'll need an accountant to help me keep stock of my books etc.

Not so - but it's advisable to have one as the owner of a limited company who doesn't have a clue about business finance.

1) What are the downsides to being VAT registered? Does it impact on my day to day salary? NI? My credit rating etc?

It has nothing to do with them at all. VAT is a consumption tax on your business income and expenditure.

2) Can anyone recommend a good, cheap accountant that can help make sure I don't break any rules? Their job would be minimal so I don't want to pay a lot.

I can recommend myself as a good accountant but my fees are reasonable rather then cheap. If you find a cheap accountant then they're cheap for a reason.

3) A good business bank account for me? There'll be very little funds going in/ out for the next few months - but hopefully this will change.

Pick any of the big four as they all offer free banking for the first 12/18 months. Then move if you want to to one of the free banks.

If I decide that my business isn't viable and wind it up - I want an account which doesn't charge for this.

Winding up a company properly can be a complex business, especially if you want a tax efficient exit strategy. Expecting an accountant to do this for free is unrealistic.

If you pick up your local yellow pages you'll see that a number of accountants will offer a free consultation. It's worth taking one of them up on it to ensure that your on the straight and narrow with regards to your company.

Regards

Joy

 

[autolycus]

If I decide that my business isn't viable and wind it up - I want an account which doesn't charge for this.

Winding up a company properly can be a complex business, especially if you want a tax efficient exit strategy. Expecting an accountant to do this for free is unrealistic.

I think Mark was talking about a bank account that let you close it without charges rather than an accountant who would wind up a company for free. :wink:

 

[Joyous]

I think Mark was talking about a bank account that let you close it without charges rather than an accountant who would wind up a company for free. :wink:

Oh yeah! See what happens when you speed read. :roll:

 

[mark_hadfield]

lol,

Many thanks all. I was referring to closing the account - not the accountancy fees!

At the moment I'm stuck inbetween 2 posts. One is to take it easy and see how it goes, and the other is to go for it. I know as soon as I open up bank accounts, become VAT registered etc etc then I dramatically increase my paperwork - something which I struggle with anyway - so it's a difficult decision.

thanks all.

 

[Joyous]

Hi Mark

I'd definately say 'go for it'. You have to be in it to win it as they say and you never know what will happen if you don't try.

Opening a bank account is not going to generate more paperwork unless you consider filing your monthly bank statement a major chore. Plus if you're in business it's always best to keep your private and business banking separate.

With regards VAT there is no obligation to register until your turnover in any 12 month period reaches £60,000. So you may well find that you can trade happily for a while before you even need to think about VAT.

Regards

Joy

 

[mark_hadfield]

Many thanks Joy,

I suppose what I'm scared of are all the usual cliches: forgetting about something and having my house reposessed etc!

 

[Joyous]

I suppose what I'm scared of are all the usual cliches: forgetting about something and having my house reposessed etc!

So where's this entrepreneurial attitude that you mention in your signature then? :wink:

 

[mark_hadfield]

I suppose what I'm scared of are all the usual cliches: forgetting about something and having my house reposessed etc!

So where's this entrepreneurial attitude that you mention in your signature then? :wink:

Well yeah - I understand your point. Unfortunately, getting married in 6 months sort of inhibits taking the risk!

I need to speak to some kind of mentor. Whilst I'm certain my product(s) can be successful - the whole 'business side' of it is what worries me - but is what I want to learn about.

 

[Joyous]

It's always scary starting out but when another day passes and you realise you haven't died yet it gets less and less so.

Anyway I hope it all works out for you.

Best wishes

Joy