Legal VAT play or Fraud?

[JRupal]

Hey everyone I don't post much here but I plan to as I'm trying to get my limited company off the ground!!

So I want run a health business - but one that is not registered to any statutory register... I know right?! - NUTS.. but I'm willing to give it a go!

My question relating to VAT is ...

Is it possible for a limited company to register for VAT in the first year (knowing there will be very few sales) for the purpose of claiming back VAT on business expenses only to deregister the following year and proceed up to the turnover mark without charging VAT?

Also if I choose to go the unregistered route from the very beginning, can I get by doing my own business accounts for the first few years using FreeAgent which came with the Natwest business acc. for free?

I hope this isn't a silly question and hope you're all staying toasty.

 

[Scalloway]

Is it possible for a limited company to register for VAT in the first year (knowing there will be very few sales) for the purpose of claiming back VAT on business expenses only to deregister the following year and proceed up to the turnover mark without charging VAT?

The company can, but you should bear in mind that if the VAT payable on stock and other assets at the date of registration exceeds £1,000 you will have to repay the VAT.

an I get by doing my own business accounts for the first few years using FreeAgent which came with the Natwest business acc. for free?

Possible, but not very advisable. I was an accountant for over 40 years and I kept clear of limited company accounts as they are very complicated.

 

[MyAccountantOnline]

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Is it possible for a limited company to register for VAT in the first year (knowing there will be very few sales) for the purpose of claiming back VAT on business expenses only to deregister the following year and proceed up to the turnover mark without charging VAT?

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You could voluntarily register and consider deregistering later. Have a read here VAT registration: Cancel registration - GOV.UK (www.gov.uk)

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...if I choose to go the unregistered route from the very beginning, can I get by doing my own business accounts for the first few years using FreeAgent which came with the Natwest business acc. for free?

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You should be able to cobble together some accounts and a tax return using FreeAgent. However whether they are correct, and whether you claim everything possible, pay the correct tax and no more than is legally due is, with respect, doubtful.

Accountants take a long time to gain the necessary knowledge, skills and experience to do what we do. Its very easy to make a costly mistake trying to DIY.

I've been an accountant for a long time and have seen so many people pay avoidable and unecessary taxes and penalties where they have tried to DIY especially when starting in business.

 

[UK Contractor Accountant]

Is it possible for a limited company to register for VAT in the first year (knowing there will be very few sales) for the purpose of claiming back VAT on business expenses only to deregister the following year and proceed up to the turnover mark without charging VAT?

the answer is yes and no!

If the vat office look at it and decide your activities are not tantamount or in furtherance of a business then input tax will be denied and claims made having to be repaid.

 

[lesvatadvice]

What do you mean by a health business?
If you are providing health services, that is usually exempt, so you cannot register.
If you are providing goods, then those are taxable. You could register, as you would be entitled to do so. But HMRC would not be obliged to allow you to deregister, which would reduce the ‘savings’ you are anticipating.

 

[JRupal]

@MyAccountantOnline Hmm yes but then there's the other side of the coin - Lazy accountants who have no incentive to provide advice or go the extra mile for a startup company - especially with a sole operator. Then there's the horror stories involving skimming. Who knows how true they are, though.

I just wanted to buy a few things such as laptops and video recording equipment and certain medical diagnostic tools. I have sufficient investment capital to buy everything I need in the first year - which is why I figured if I could get back 20% of the total it could be reinvested.

Getting started with all this is so intimidating - even for me.
I feel like there are sharks lurking sniffing out my blood.
Especially with how some of these suppliers communicate on Alibaba!

 

[JRupal]

@MyAccountantOnline I guess I still have a little time to make the decision on whether to hire an accountant.

If I do, I'll most likely have a look around on Fiverr to see what services are being offered and if they are recommended. I'll try to keep things as simple as I can.

Maybe as the company grows I could hire a more professional service provider.

 

[The Byre]

@MyAccountantOnline I guess I still have a little time to make the decision on whether to hire an accountant.

Only a complete fool tries to start a business without going to an accountant FIRST! The UK has the most complex and baffling tax laws on Planet Earth, so you need an accountancy practice with several specialists for the various areas of tax.

If I do, I'll most likely have a look around on Fiverr to see what services are being offered and if they are recommended.

That's one way to make sure everything ends in tears and disaster!

Maybe as the company grows I could hire a more professional service provider.

You will not get that far and there will be no company to grow! At least, not if you do not hire an accountant BEFORE you kick the ball into play!