Help working just to pay the VAT!!!!!

[Faulty Towers]

High all

Are there any BUSINESS minded accountants out there?

Problem:

Hair and Beauty business (LTD. company), had to register for VAT cannot put up our prices ( they are in line with the competition) so have had to absorb the 17.5% VAT. We are now just working to pay the biggest bill the VAT!! Trying to get more customers through the door but very slow. We nearly doubled the turnover since buying the business 2.5 years ago.
When we bought the business from the previous owner her advice was " whatever you do do not get involved with VAT" how right she was!!

Our Accountants solution:

Put your prices up!!

Daughter runs her beauty business from our premises, the only solution I can think of is to move a hairdresser, who is also a Beautician over to the Beauty side, to reduce our turnover to de-register for VAT. If she does a bit of Hair cutting now and then who knows!!

Our accountant seems only interested in doing the accounts and sending us a bill.

Any advice?

Dave

 

[Optegris]

I'm afraid your accountant is right, if you don't want to absorb the extra 17.5% then you can only increase your prices. Once over the threshold you have no choice when it comes to VAT.

Just make sure that you are claiming back the vat for every item you can. Keep it legal just ensure you don't miss a thing...

 

[Faulty Towers]

Dear openminded,

The trouble is Hairdressing is labour intensive and there is only a small amount on products that we can reclaim. If we put our prices up by 17.5% we will lose a lot of customers and we are back to square one again!!
Thanks.

 

[Optegris]

I completely sympathise with that and it's a complete PITA but what choice do you have?

You can't forget about the VAT without HMCE stringing you up, you daren't put your prices up for fear of losing custom, etc...

How about offering additional services to distance yourself from your competitors? Sunbeds, nail treatments, etc.

Also don't think about putting up your prices by the full 17.5% straight away, slowly increase prices and services at the same time. That way your clients won't mind so much as they can see something in return for the increase.

 

[Faulty Towers]

My daughter who is self employed offers sun beds spray tan nails etc. within our premises.
My thoughts where to move a hairdresser/ beautician to work for her thus reducing our turnover.

 

[An Oasis]

I have always assumed that HD renting out seats is the way they get around this problem. E.g. you as the shop owner charge for the seat(s) , they as the hirer take home all the associated tax problems.

Sounds like a simple solution to me. You get paid for doing nothing very nice.

 

[Faulty Towers]

Richard

Unfortunately the lease will not allow this! Stuffed!!

 

[An Oasis]

Oh bad luck.

How about taking the same idea and sub it out to a mobile hairdresser(s)?

 

[multilingual]

The easiest way would be to split the business up into separate divisions based on the services you offer.

Each business would be under the VAT threshold individually, allowing you to push the whole 'group' forward.

You could expand to double your current size and still avoid VAT.

OK, it may be a hassle with the books, but you would benefit in the long term.

IMHO.

Hope it helps

JB

 

[Faulty Towers]

Hi multilingual

Yes that is what I had in mind. We are a limited company. My Daughter has her own seperate business (sole trader).

If my daughter took over employment of one of our hairdressers as a beauty therapist would that not work, if she should do a bit of hairdressing who will know, a lot ao hairdressers do beauty as well.

If we kept everything seperate switch machines etc.

Keep those ideas comming!

 

[multilingual]

Hi multilingual

Yes that is what I had in mind. We are a limited company. My Daughter has her own seperate business (sole trader).

If she should do a bit of hairdressing who will know, a lot of hairdressers do beauty as well.

You don't have to be sneaky about it, they can be two separate companies doing exactly the same thing if you want, you just need to get the right systems in place to deal with it.

An accountant should be able to point you in the right direction.

If you want a good one let me know.

JB

 

[Kent Accountant]

The easiest way would be to split the business up into separate divisions based on the services you offer.

Each business would be under the VAT threshold individually, allowing you to push the whole 'group' forward.

You could expand to double your current size and still avoid VAT.

OK, it may be a hassle with the books, but you would benefit in the long term.

JB

If only it were that easy It can be done, but it has to be done properly. Have a look at this link about disaggregation and whether there really are two discrete and separate businesses
http://www.taxationweb.co.uk/articles/article.php?id=88

 

[JohnAccountant]

Depending on the level of your VATable expenses, the Flat Rate scheme may help you - hairdressing pays 12% VAT under the FRS and you would have also benefitted from a 1% discount for the first year to 11% if you elected for the FRS from the date of registration.

 

[multilingual]

If only it were that easy It can be done, but it has to be done properly. Have a look at this link about disaggregation and whether there really are two discrete and separate businesses
http://www.taxationweb.co.uk/articles/article.php?id=88

You make things too compicated.

Just set up two different companies, one for beauty treatment, one for hairdressing. Have different directors and different names. Each one pays a proportion of the shop rent, etc.

Then just get on with it

JB

 

[Kent Accountant]

You make things too compicated.

Just set up two different companies, one for beauty treatment, one for hairdressing. Have different directors and different names. Each one pays a proportion of the shop rent, etc.

Then just get on with it

JB

I bow to your superior knowledge

Unfortunately David is asking for advice at the wrong time and I am sorry he didn't get it from his present accountant. It is always more difficult to split a business retrospectively as he is currently registered for VAT and will have to deregister. HMRC will look at the reasons for deregistration and the problem will arise in the unlikely event that they decide to look at the business in the future.

There should have been no problem in arranging the separate businesses prior to registration. There may well be a way around the problem but we would need more information about the way that businesses run and the turnover levels.

 

[multilingual]

I bow to your superior knowledge

Not really, I just know that these things can be done.

How they are done - that's your department.

JB

 

[Deleted member 9840]

Just becareful you don't loose any of your newfound turnover to light fingered employees, what with all that CASH floating around.
Best only accept credit cards and cheques to be sure.

 

[JamieM]

Stay VAT registered and keep on growing the business. Sell products, add services. Open another salon!

Think BIG, go for it!

 

[TaxesClear Ltd]

put an offer for the competitor, buy it and control the price!

 

[fastfences]

Dave,

Being realistic here, you're not really 17.5% down, are you? Because you'll be claiming VAT back on supplies etc (and I acknowledge that's only a small proportion of the t/o) perhaps it's 'only' about 10% that you're paying out - in real terms?

Sure, it knocks us about at first; I think we just have to become more disciplined and 'adventurous' bookkeepers.

cheers, Nigel

 

[bitsnstuff]

Is there a way to squeeze more income from each bum on seat?

From my point of view, if I were able to find someone to look after my kids long enough to get my hair done, then I would probably choose a place where I could may be get my nails done at the same time. Saves me time, I get more, and you get added income.

Could you maybe double up, so hair and a pedicure, hair and a manicure and market at the time poor. This would not necessarily appeal to those with plenty of 'me time' or pampering time. I know it would definitely appeal to harrassed working mums like me.

What about offering lunch time packages where office workers could get a range of treatment (doubled up if poss) and it would all be guaranteed to fit in a lunch hour? Then market it around local offices.

What about packages like - exclusive use for a girl's night - all the girls get hair, nails whatever, wine and nibbles, etc. for a set fee.

Just thinking out loud - ignore me if this is a stupid suggestion!

Kate

 

[Faulty Towers]

Thanks for all your replies and info-great response!!

My daughter runs her beauty and nail business from a room she rents from us.

We do have a large room which we could use as a retail outlet, probably Ladies accessories, trouble is getting good stock.

This seems an opportunity as our salon is situated in a large private housing estate, all detached! probably all paying huge mortgages though!

There are local goverment offices nearby I think I might enquire there about offering them lunch time pampering!

Thanks everyone!

 

[stugster]

What about Men? I know that my hairdresser only gets a lot of business because they are unisex! The amount of hairdressers we see popping up and closing down in a street in Edinburgh is funny, why? Because only 50% of the potential customers can actually go to get their hair done!