how to pay/charge VAT?

[allain]

hi i am near to start a new business of cleaning, my turnover will be less threshold £77000, so i wont be paying VAT i think so, but my client is VAT registered and able to get refund of VAT, so i want to ask
do i need to charge him VAT for services?
do i need to charge him VAT for supplies/cleaning material?
this business is solo so how many types of tax i need to pay? my monthly turnover will be £5000
please help me with new business
thanks

 

[Paul_Rosser]

If you turnover will be less than £77k then you do not have to register for VAT and so unless you choose to register anyway, then you must not charge VAT to your clients.

Will you be trading through a limited company ? or as a sole trader ?

 

[allain]

i will be sole trader, and i will employe four people only, but if i buy supplies for him like washing liquid or chemicals or cleaning product, i will pay VAT on them but do i need to charge VAT to my client?
secondly can i get VAT refund even if i am not paying VAT?
because in the start i will but scrubber dryer which are expensive more £1500, please need some help
thanks milllion

 

[NordEco]

Not being stupid... but how are you a sole trader and then employing people?

That suggests you are a Company instead and then need to take into account the employees rights, NI, Tax, sick pay, pension... I would seriously review what you said and sub contract work to them as sole trader.

If you are a start up do you have the capital to instantly take on employees?

Secondly work out the VAT.... If you are not VAT registered then anything you get charge VAT on (equipment, etc) is not claimable as you yourself are not claiming VAT off the customer.

However if you do get VAT registered, look at it this way:

1) slightly more expensive for the client,did you quote prices inclusive of VAT but not tell the client, so if you become VAT registered it doesnt change? Thus the client is unofficially paying your VAT on all equipment, etc?
2) All equipment is can have the VAT reclaimed.
3) you can go on flat rate VAT scheme, this means you charge the client 20% VAT and you only pay HMRC something like 14% VAT, so you keep the extra 6%.

Talk to an accountant and get the free consultation and see what they say, it will save you a lot of money.

 

[Scalloway]

Not being stupid... but how are you a sole trader and then employing people?

That suggests you are a Company

A sole trader can employ people.

 

[Scalloway]

i will be sole trader, and i will employe four people only, but if i buy supplies for him like washing liquid or chemicals or cleaning product, i will pay VAT on them but do i need to charge VAT to my client?
secondly can i get VAT refund even if i am not paying VAT?
because in the start i will but scrubber dryer which are expensive more £1500, please need some help
thanks milllion

If you are not VAT registered you can't claim back VAT. You are in the same position as an ordinary comsumer. Either register or forget about VAT.

 

[Paul_Rosser]

Not being stupid... but how are you a sole trader and then employing people?

That suggests you are a Company instead and then need to take into account the employees rights, NI, Tax, sick pay, pension... I would seriously review what you said and sub contract work to them as sole trader.

If you are a start up do you have the capital to instantly take on employees?

Secondly work out the VAT.... If you are not VAT registered then anything you get charge VAT on (equipment, etc) is not claimable as you yourself are not claiming VAT off the customer.

However if you do get VAT registered, look at it this way:

1) slightly more expensive for the client,did you quote prices inclusive of VAT but not tell the client, so if you become VAT registered it doesnt change? Thus the client is unofficially paying your VAT on all equipment, etc?
2) All equipment is can have the VAT reclaimed.
3) you can go on flat rate VAT scheme, this means you charge the client 20% VAT and you only pay HMRC something like 14% VAT, so you keep the extra 6%.

Talk to an accountant and get the free consultation and see what they say, it will save you a lot of money.

If you go with option 3 you can't reclaim VAT on things you buy, but you do het to keep 6% of the VAT you charge (7% in year one)

 

[NordEco]

Paul_Rosser

Yes you can... if its above a certain limit according to my accountant/tax adviser... I should really have mentioned that but was early and was waiting for the caffeine intake to hit.

My IT equipment has to be above £2k before VAT for the VAT to be reclaimable.

As I run a few IT companies that has been a good one for me, however I have not looked at the other limitations as my companies have no real other expenditures that I need to buy in.

 

[Paul_Rosser]

Paul_Rosser

Yes you can... if its above a certain limit according to my accountant/tax adviser... I should really have mentioned that but was early and was waiting for the caffeine intake to hit.

My IT equipment has to be above £2k before VAT for the VAT to be reclaimable.

As I run a few IT companies that has been a good one for me, however I have not looked at the other limitations as my companies have no real other expenditures that I need to buy in.

Sorry yes, for some items provided the total invoice is over £2k then yes you can reclaim the VAT.

So you could buy 3 £600 laptops and provided they are all on the same invoice then you can reclaim the VAT.

But it has to be a capital purchase and you can't plan to re sell them.

 

[NordEco]

Sorry yes, for some items provided the total invoice is over £2k then yes you can reclaim the VAT.

So you could buy 3 £600 laptops and provided they are all on the same invoice then you can reclaim the VAT.

But it has to be a capital purchase and you can't plan to re sell them.

Doesnt even need to be the same invoice... just the same financial year.

Im awaiting the HD prices to drop a little more before I obtain a small server system for back ups of the development systems, with 5 new HDs (4 WD red for the small server) and one data drive for the Development PC.

This will shift the overall cost into £2k category and my accountant is fine that it can be combined and sifted through.

I make sure that my accountant does nothing that is too close to the grey area, as he is under explicit instructions that if either company is audited by HMRC due to his practices, he is not being paid for the audit, therefore Im happy to do the above practice under his advisement.

 

[Paul_Rosser]

Doesnt even need to be the same invoice... just the same financial year.

Im awaiting the HD prices to drop a little more before I obtain a small server system for back ups of the development systems, with 5 new HDs (4 WD red for the small server) and one data drive for the Development PC.

This will shift the overall cost into £2k category and my accountant is fine that it can be combined and sifted through.

I make sure that my accountant does nothing that is too close to the grey area, as he is under explicit instructions that if either company is audited by HMRC due to his practices, he is not being paid for the audit, therefore Im happy to do the above practice under his advisement.

This is what the HMRC website says, so think you may have an issue if the HMRC audit you as it states they must be purchased at the same time.


It must be a single purchase of capital goods with a VAT-inclusive price of £2,000 or more. That doesn't mean you are restricted to claiming back the VAT on a single item - for example, you could buy a pizza oven, fridge and dishwasher, as long as you buy them at the same time from the same supplier and the price is more than £2,000 including VAT.

 

[allain]

hi
Paul_Rosser, NordEco ,Scalloway thank you very very much for replies, i read all of them many times, i am still in process to open business, i am googling all the time, i think i will have to talk to accountant,
i have just 3 questions:
1: if i registered with VAT hmrc and not paying them VAT, will i be able to reclaim VAT on my office stuff like hoover scrubber etc, i think it looks weird cuz they will think i bought scrubber dryer for my own purpose ,
2: if i registered with VAT but my business if Zero, then i have to pay anything in shape of taxes?
3:if i registered with VAT, but my turnover is less then threshold, then ofcourse i will not pay VAT, but my client will be more happy with this or no? (he is able to reclaim VAT)
4: where can i get copies of contract forms and terms and condition form?
thanks a million in advance,
allain

 

[Scalloway]

1. If you are registered for VAT you must charge VAT on your sales and you can recover VAT on you costs

2. If you do not make any sales you do not pay VAT

3. If you are registered for VAT you must charge VAT on your sales, even if your turnover is less than the registration threshold