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Limited by VAT Threshold

Discussion in 'General Business Forum' started by Brum26, Mar 5, 2018.

  1. Brum26

    Brum26 UKBF Contributor Free Member

    39 3
    Afternoon all,

    I am here looking to vent a little bit and to see if anyone else has been in a similar situation to myself. I currently run a business which relies heavily on the freelancers that I use, therefore isn't hugely profitable. The business takes in a decent amount of money but also pays out a lot. My products are sold directly to the public and adding an extra 20% to the prices if I was to become VAT registered would almost certainly put a lot of people off.

    So, I am in a situation where I am sitting just below the VAT threshold and I am checking on a constant basis that I am not going to go over it. If I was to go over the VAT threshold and become registered I would have to increase my turnover quite significantly to remain profitable and due to various factors this would be very difficult to achieve.

    Has anyone else been in this position? Any advice?
     
    Posted: Mar 5, 2018 By: Brum26 Member since: May 20, 2014
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

    13,679 2,942
    This comes up here quite often. One solution is to close down for a month.
     
    Posted: Mar 5, 2018 By: Scalloway Member since: Jun 6, 2010
    #2
  3. Brum26

    Brum26 UKBF Contributor Free Member

    39 3
    I actually did that in January. It's just so frustrating as I really want to try and grow the business but unless something drastic changes it doesn't make sense to grow it.
     
    Posted: Mar 5, 2018 By: Brum26 Member since: May 20, 2014
    #3
  4. SteLacca

    SteLacca UKBF Enthusiast Free Member

    942 179
    If that's the case, and what you are paying out has VAT added, then you will be able to reclaim that VAT. This has the potential to significantly reduce the overall difference between registered and non-registered.

    Have you actually done the maths to work out what it would cost?
     
    Posted: Mar 5, 2018 By: SteLacca Member since: Jun 16, 2016
    #4
  5. Scalloway

    Scalloway UKBF Legend Free Member

    13,679 2,942
    Another option is to move the business to another entity. eg if you are a sole trader form a limited company. This only works if you have not yet reached the VAT threshold as the company will inherit the VAT status of the business of the business it is taking over.
     
    Posted: Mar 5, 2018 By: Scalloway Member since: Jun 6, 2010
    #5
  6. mjclob

    mjclob UKBF Contributor Free Member

    47 8
    You could also look at the flat vat rate scheme. You would need to work out if it would be beneficial depending on your business type and purchases you make.
     
    Posted: Mar 5, 2018 By: mjclob Member since: Apr 3, 2016
    #6
  7. Brum26

    Brum26 UKBF Contributor Free Member

    39 3
    Yes, the problem I have got is that almost all of the people I pay are not VAT registered themselves. I had a lot of issues last year when my "accountant" advised me to group my businesses together in to one Ltd company and become VAT registered. 3 months of that almost killed the business and I later found out that I had been given some very duff advice. Needless to say, she is no longer acting as my accountant.
     
    Posted: Mar 5, 2018 By: Brum26 Member since: May 20, 2014
    #7
  8. Brum26

    Brum26 UKBF Contributor Free Member

    39 3
    The business is actually already a Ltd company. I have a couple of much smaller businesses that I run as a sole trader.
     
    Posted: Mar 5, 2018 By: Brum26 Member since: May 20, 2014
    #8
  9. DontAsk

    DontAsk UKBF Enthusiast Free Member

    902 118
    The problem is that you did not plan for growth above the threshold when you set up the business.
     
    Posted: Mar 5, 2018 By: DontAsk Member since: Jan 7, 2015
    #9
  10. Brum26

    Brum26 UKBF Contributor Free Member

    39 3
    Wow, slightly harsh. When I setup the business I had no idea that it was going to grow to this level, especially within 2 years. I am sorry that I am not a more seasoned entrepreneur.
     
    Posted: Mar 5, 2018 By: Brum26 Member since: May 20, 2014
    #10
  11. Brum26

    Brum26 UKBF Contributor Free Member

    39 3
    Oh, I'm sorry. I didn't realise. I've just checked your recent postings and can see that you are the forum troll. As you were.
     
    Posted: Mar 5, 2018 By: Brum26 Member since: May 20, 2014
    #11
  12. Mr D

    Mr D UKBF Legend Free Member

    9,050 915

    Its easier to factor the future VAT collection into your pricing before you get to the threshold.

    Now, your competitors - they are below the threshold?
    Your clients - the people that pay you money - they are below the threshold? If they are VAT registered then overall makes no difference with you charging 20% extra.

    The one thing you don't want to do is go just above the threshold and sit there.
    Either blow past it and head upwards or else stay below the threshold for now.
    You have maybe a year. It is quite possible for the chancellor to reduce the VAT threshold at some point soon. In which case you and your competitors may all find yourselves registering.
     
    Posted: Mar 5, 2018 By: Mr D Member since: Feb 12, 2017
    #12
  13. Brum26

    Brum26 UKBF Contributor Free Member

    39 3
    It's a really tricky one. I don't really have any direct competitors. My customers are the general public so they are not VAT registered. There is one very big client that I have not yet been able to get. If I manage to get it then it won't be so much of an issue as the turnover would increase by a lot but without it it would be very difficult to blow past the threshold. For now I think I have no choice but to sit below it and see what happens.
     
    Posted: Mar 5, 2018 By: Brum26 Member since: May 20, 2014
    #13
  14. Mr D

    Mr D UKBF Legend Free Member

    9,050 915
    Without direct competitors then should not be a problem adding on VAT. The public pay the VAT....

    Have a look at the options on offer and talk to an accountant. Adding 20% to your price is not the only way to be VAT registered though after a certain higher turnover you would have to.
    The flat rate scheme may suit you better until you reach that high.

    https://www.gov.uk/topic/business-tax/vat
     
    Posted: Mar 5, 2018 By: Mr D Member since: Feb 12, 2017
    #14
  15. DontAsk

    DontAsk UKBF Enthusiast Free Member

    902 118
    ROTFLMAO
     
    Posted: Mar 6, 2018 By: DontAsk Member since: Jan 7, 2015
    #15
  16. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,041 542
    To be fair DontAsk has a valid point

    Lots of members on here like to shout about how business plans are rubbish, or a waste of time but this is precisely the type of issue that even a rudimentary plan can help you to anticipate and address in advance

    So, like many, many businesses you just got on with it. Now is a great opportunity to start planning to anticipate future issues with growth.
     
    Posted: Mar 7, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #16
  17. DontAsk

    DontAsk UKBF Enthusiast Free Member

    902 118
    Fail to plan, plan to fail :)
     
    Posted: Mar 7, 2018 By: DontAsk Member since: Jan 7, 2015
    #17
  18. Mr Shafted by uk gov

    Mr Shafted by uk gov UKBF Newcomer Free Member

    3 0
    I think it's a ridiculous idea £26000??? What drugs are the government taking now ? The problem with this is that if this vat threshold was implicated it would close my small business instantly as I would need to charge vat on top which many customers will not pay , this government make it harder all the time for small businesses like mine to actually do well , I really hope someone from the working class will one day be elected and that understands how hard it is down here , this will close many small businesses across rip off Britain !
     
    Posted: Mar 7, 2018 By: Mr Shafted by uk gov Member since: Mar 7, 2018
    #18
  19. Mr Shafted by uk gov

    Mr Shafted by uk gov UKBF Newcomer Free Member

    3 0
    ME , I'm in exactly same position and I completely agree with everything you wrote, I couldn't believe my ears when someone told me today , this is an absolute joke , this will put most of my customers off , it's ok for people posting on here saying it won't affect them as there turnover is tiny but for businesses like ours it's a nightmare , I'm outraged by this.
     
    Posted: Mar 7, 2018 By: Mr Shafted by uk gov Member since: Mar 7, 2018
    #19
  20. Mr Shafted by uk gov

    Mr Shafted by uk gov UKBF Newcomer Free Member

    3 0
    1 month? Yes if the turnover is 20 pence per year aaaaaaaaggggggghhhhhhh
     
    Posted: Mar 7, 2018 By: Mr Shafted by uk gov Member since: Mar 7, 2018
    #20