Mr Darling - How about this for help for new business .

[oldeagleeye]

A lot of this is about the numbers and it is obvious from the majority of posts that if the threshold was increased more small business like cafes and hairdressers would expand and create the jobs that many youngsters need.

I think all that aside however a major point had been missed here. The one made by Adam and that is getting our message across to government. I think that he was being a bit negative in view of recent events.

We now have Obama - President elect for instance whose campaign was built around communicating with people via the Internet and the most important factor of all - because of that he won. All politicians must now take the Internet seriously where once all they had to do was run rings around a few stuffy old fa--s from the chamber of trade.

I think Elaine's e-campaign then is brilliant and Sift management should perhaps be a bit more proactive in supporting her and small businesses on a political level. After all - some 45,000 members is a powerful lobby - and I do mean powerful.

Just 500 or perhaps 1000 members can determine the outcome of many a constituency in the next general election. Can any politician then dare to ignore our demands if they are reasonable.

This then is an opportunity. The increase in the VAT threshold with an opt in is a simple solution that requires no legislation and will create new jobs. Lets all support that e-campaign then and then we could go on and use our power and not just with government. The banks too are still at it with outrageous fees. Has the cost of your credit card come down. No - yet interest rates are the lowest in 50 years and set to go lower.

Take note then Sift. You have the power to outshine even the FSB because this forum as a live forum can shout even louder than a business association however worthy - and of course we have Ling. Gawd bless her cotton socks. Actually there's an idea there. Send Ling to Downing Street to deliver the petition as well. She will frighten the life out of Mr Darling while Elaine plays good cop. Works every time.

Put me down for it then Elaine and should the petition not be up as a sticky when you got the paperwork done. This could be an important milestone for Sift and all of us. Rob

 

[elaine@cheapaccounting]

cheers Rob

Just an update on the petition - am waiting to hear about it. Apparently it can take up to 5 working days to go live on the site - so that is pretty quick for 10 Downing Street.

Obviously I would say this, but I think Rob made an excellent point about the support of the forum and Sift.

Whilst I understand that not everyone voted yes - if there is a significant majority for the yes vote would Sift help support this? (including promoting it through its other sites?) - one for Darren or Dan

BTW thank you for including this on the Pick of the Week Threads in your newsletter.

 

[Sphinx]

This is such a good idea and would really help my business out. I would totally back it.

 

[UKSBD]

Going a bit off-topic, but would it not be a lot fairer if the VAT threshold
was based on profit rather than turnover?

 

[elaine@cheapaccounting]

That may well be the case bit it would be almost impossible to enforce the registration deadlines then as profit is only declared once a year to varying time scales.

Good idea but I cannot imagine how it could be enforced.

 

[estwig]

OMG - Can't believe you just said that considering on your other post you put your fingers in your ears and went tra-la-la when someone suggested writing off your bad debts to avoid tax liability and then write it back on if you recover it

But you are right about growth planning etc. The reason I am hanging on at the moment is because of profit not because of turnover if that makes sense. We need a bit of a leg up so to speak to get over the initial VAT hurdle. That means finding a way to grow quite quickly but retain the same levels of profit. We have been putting it off and putting it off for over a year now trying to find a good time. Will prob do Q3 next year though as have plans for higher value work and marketing.

As someone else said with the fish & chip shop example we would need to work a lot harder to make profit after paying staff/subbies, materials etc so need to make a jump big enough to compensate for that. Perhaps I am talking out of my backside I don't know Maybe I am just operating from comfort zone but with cash as tight as it is I don't want to take a gamble without having the jobs line up in advance

Maybe you can give me some advice

As for your other work. Cant you just either Do it, Sub it or Sell it? but not walk away from it?

I don't get it??

You just add VAT to your prices, people shrug and they pay it.

If you are trying to compete with non VAT registered companies you are also trying to compete with the 'cash cowboys', you can't compete with dodgy old t*ssers who are willing to work for £100.00 a day out the back of an old Ford Escort.

Image is everything, rise above it.


I think a lot of business people forget that VAT is not a tax they have to pay, businesses do not need to find the additional 17.5%, it is a tax you collect from your clients and give to the VAT man.

 

[elaine@cheapaccounting]

I don't get it??

You just add VAT to your prices, people shrug and they pay it.

Is that really the case in all businesses and for all people?

IMO there are a lot of people who would compare price, service etc.

For example if you can get a cup of tea at £1 instead of nearly £1.20 with the same service, quality etc which would you choose.

If the higher price bought better service, quality etc then yes this is a different story which may be the case in your profession.

But I am sure that there are some businesses where 17.5% difference in price would make a customer go else where e.g. in product based businesses.

I don't think it is a one size fits all situation or any right or wrong answer - like most things in life.

I think that most of us know that the only people who really pay vat are consumers.

 

[UKSBD]

But I am sure that there are some businesses where 17.5% difference in price would make a customer go else where e.g. in product based businesses.

Would it not make more sense to lower the threshold rather than raise it
then, or better still have a zero threshold. Everyone has a level playing
field then.

 

[Faith28]

It doesn't make much difference really.

I would only back it if I didn't have to pay VAT either!! But unless you're VAT registered you can't reclaim any VAT.

 

[maxine]

I don't get it??

You just add VAT to your prices, people shrug and they pay it.

If you are trying to compete with non VAT registered companies you are also trying to compete with the 'cash cowboys', you can't compete with dodgy old t*ssers who are willing to work for £100.00 a day out the back of an old Ford Escort.

Image is everything, rise above it.


I think a lot of business people forget that VAT is not a tax they have to pay, businesses do not need to find the additional 17.5%, it is a tax you collect from your clients and give to the VAT man.

You're probably right but at the moment things are very price competitive for small jobs (plumbing call outs, the odd ceiling skim etc) and the VAT element pushes the price to make it non competitive when there are other non-ford-escort, cash cowboy types who are also lowering their prices. At the moment I think that given a choice side by side people are taking a gamble on service to save a few quid here and there. We see that by people doing more DIY plumbing for example and I am having to haggle on prices quite often.

 

[themonk]

Some products are perceived by customers to be cheaper than they actually are.
Adding VAT either pushes the prices up or eats away the profits!
Yes! VAT on ALL products from day one could be one answer .... but I'd prefer to think that an increase in the VAT threshold would work for the better!
I also think we are taxed too much & on too many things in this country anyway!
Tax breaks will make the world of difference. Although it can't be done half-heartedly!
At the end of the day, I just want to make a living for me & mine!!!

 

[estwig]

You're probably right but at the moment things are very price competitive for small jobs (plumbing call outs, the odd ceiling skim etc) and the VAT element pushes the price to make it non competitive when there are other non-ford-escort, cash cowboy types who are also lowering their prices. At the moment I think that given a choice side by side people are taking a gamble on service to save a few quid here and there. We see that by people doing more DIY plumbing for example and I am having to haggle on prices quite often.

Fair enough, I don't know what I am doing then, cause 99% of the time we are the highest quote and we still win at least 1 in 3 jobs we quote for. Admittedly we are very particular about what we quote for.

But it is me they buy, the punters luv me!!!!!

 

[Matt1959]

But it is me they buy, the punters luv me!!!!!

lol, though it'll pain you to hear it - straight out of the "how to do business the Ling way" ie people buy people. Thing is you're right - if you quote inside peoples homes for products or services, come across well and as someone that the potential client clicks with, you'll likely get the work almost irrelevant of price - I learnt this a long time ago, its not rocket science

 

[David Griffiths]

- I learnt this a long time ago, its not rocket science

It is for Ling!

 

[Philip Hoyle]

I don't get it??

You just add VAT to your prices, people shrug and they pay it.

If you are trying to compete with non VAT registered companies you are also trying to compete with the 'cash cowboys', you can't compete with dodgy old t*ssers who are willing to work for £100.00 a day out the back of an old Ford Escort.

Image is everything, rise above it.


I think a lot of business people forget that VAT is not a tax they have to pay, businesses do not need to find the additional 17.5%, it is a tax you collect from your clients and give to the VAT man.

I think you are making a sweeping assumption that bigger businesses are better businesses and that small ones (i.e. t/o under £67k) are somehow inferior and don't have the ability to grow their businesses. This is simply wrong. Many good small businesses, particularly sole traders, simply make a conscious decision not to expand, not to employ additional staff, etc. The current £67k vat threshold is part of this decision making process.

 

[wormcity]

Hi
I havn't had time to read the whole thread...

however, I believe it should be looked at in a different way....

I think that vat should only be charged on sales OVER the £67k mark - so if a company does £70k they only pay vat on the £3k not the whole £70k

I think this would stop all businesses worrying about going over the threshhold.
this to me would be a far fairer system

 

[elaine@cheapaccounting]

That is how it works at the moment.

Any sales made before vat reg (assuming you register at the £67k threshold) do not have vat charged.

Any after reg. have vat charged.

It is a one off threshold and not a yearly allowance.

I think a yearly allowance could be a bit unfair to the customer.

Say you are in the queue at the fish and chip shop - the person ion from gets their cos and chips at the rate without vat but then that is it - £67k reached. So your supper is 17.5% more expensive.

Sorry

Also I did what to propose something that would be very very simple to implement.

 

[UKSBD]

Nobody really replied to my response about dropping the threshold.

What would the disadvantage be of having a £20,000 threshold, assuming
it is announced 12 months in advance so everyone has time to prepare?

This would then still allow for personal sales, but virtually all businesses
would be on a level playing field.

 

[elaine@cheapaccounting]

I would hate it as a consumer!

 

[UKSBD]

I would rather pay a tax on something I buy, rather than something I
don't buy.

 

[elaine@cheapaccounting]

Then that is an discussion about where you want direct or indirect tax changes.

Please do bear in mind that this is just one simple proposal.

I am not addressing all areas of tax changes - just this one which IMO may help small businesses.

 

[UKSBD]

Sorry, not really discussing any other tax issues, but is there any
dissadvantage to it being lowered rather than raised?

 

[rubberdubber]

That is how it works at the moment.

Any sales made before vat reg (assuming you register at the £67k threshold) do not have vat charged.

Any after reg. have vat charged.

It is a one off threshold and not a yearly allowance.

I think a yearly allowance could be a bit unfair to the customer.

Say you are in the queue at the fish and chip shop - the person ion from gets their cos and chips at the rate without vat but then that is it - £67k reached. So your supper is 17.5% more expensive.

Sorry

no - once you hit the 67000 threshold vat is then charged on ALL sales

so if you are in the chippy, the guy in front gets his chips, the guy behind, gets a sorry mate gotta close, because if i take your money, we will be over the vat threshold.

 

[David Griffiths]

Nobody really replied to my response about dropping the threshold.

What would the disadvantage be of having a £20,000 threshold, assuming
it is announced 12 months in advance so everyone has time to prepare?

This would then still allow for personal sales, but virtually all businesses
would be on a level playing field.

I agree. If the VAT threshold is seen as an impediment to growth, then set it at a level where it isn't an impediment to the same degree.

People will complain that they'll have to put their prices up. I see that as the wrong approach. Using the drink example given earlier, my view is that if it's worth £1.20 to the customer, that's the price that should be charged from the word go. The same applies to any other business. If you cut your prices, you'll attract price cut customers.

The disadvantage would be a big increase in work for HMRC for very little yield which is why I suspect that it will never happen. And loss of votes for the government, if they get any from small businesses these days.

 

[estwig]

Nobody really replied to my response about dropping the threshold.

What would the disadvantage be of having a £20,000 threshold, assuming
it is announced 12 months in advance so everyone has time to prepare?

This would then still allow for personal sales, but virtually all businesses
would be on a level playing field.

Good call, the extra income the government would generate could allow them to reduce the rate, maybe to 12% and like you say everyone is on a level playing field. Would be great for my line of work as it would make it a lot harder for the cowboys.

 

[elaine@cheapaccounting]

Sorry, not really discussing any other tax issues, but is there any
dissadvantage to it being lowered rather than raised?

yes to small businesses where the end customer is a consumer. That is why I am proposing that it should be increased to aid small businesses.

Philip explained it well here:

I have several small business clients who would love an increase in the VAT threshold, particularly small cafes, fish & chip shops, small garages, etc.

At the moment, they are struggling to keep below the registration threshold - often they can only do so by opening fewer hours than they could. By opening fewer hours, they need staff for shorter hours, thus affecting the economy.

When I do the calculations, such businesses often need to raise their turnover from £65k to around £80k p.a. just to keep the same net profit. When more staff are needed for the extra hours, you can easily increase this point to £90k. So, for say a cafe that wants to increase its profits, it has to make a quantum leap from £65k turnover to around £90k turnover, otherwise it makes less profit. That is a massive disincentive to grow your business.

I even have one fish & chip shop client who regularly closes down completely for 3/4 weeks at least once a year, when he realises his turnover is getting too close to the threshold.

I'd love to see an increase in the threshold to £100k and agree with Elaine that it would be incredibly simple to introduce and make enormous benefits to the economy.

 

[David Griffiths]

no - once you hit the 67000 threshold vat is then charged on ALL sales

so if you are in the chippy, the guy in front gets his chips, the guy behind, gets a sorry mate gotta close, because if i take your money, we will be over the vat threshold.

Real time accounting! I can see that happening.

"What's it to be, guv?"

"Cod and chips please."

"Let me check. Nah, sorry mate, I'd have to close and re-set the tills if you wanted to spend that much. Then the price would go up from £4 to £4.70. I could do you a sausage in batter and chips for £1.80?"

 

[elaine@cheapaccounting]

Good call, the extra income the government would generate could allow them to reduce the rate, maybe to 12% and like you say everyone is on a level playing field. Would be great for my line of work as it would make it a lot harder for the cowboys.

Would this stop the cowboys or increase them. I should have thought that this could potentially mean more 'cash in hand businesses'.

As an example, do you want to see the cost of taxis fares ( increase by 17.5% or if the rate is deceased across the board the 12% suggested (how many taxi drivers are vat registered now?).

I will try to look out some stats on how many businesses are currently not registered for vat and what types of business.

 

[UKSBD]

Yes, but in Philips example the only reason they are struggling to keep
under the threshold is because their prices will increase if they go over
but their competitors who are under the threshold wont.
Drop the threshold and the problem doesn't occur.

 

[elaine@cheapaccounting]

Lets’ get backed to some basics - I proposed the increase of the vat registration threshold to £100,000 to aid small businesses.

The vat registration threshold has been in place since vat existed (I think?? – I am not old enough to remember!).

I think it was introduce to allow small business a chance to set up and expand without the vat burden both in terms of paper work but also in their prices particularly for business who deal with the end consumer who is effectively the one who pays vat.

The government did not and does not want vat to be a barrier to a small business staring up.

Let’s take an example:

A lady starting a home based business selling jewellery.

She can sell her items at a good price and maybe make a small profit. By adding vat to her price (which she cannot pass onto the end consumer as this could price her out of the market, so has to absorb herself) it could mean that she cannot be profitable and therefore would not start the business in the first place.

There are large numbers of small businesses who operate this way below the vat threshold.

They may only be making a small profit but if that is enough for them to live off / second income then good on them.

If this keeps them employed rather than unemployed and adding to the benefit burden – then good on them.

[FONT=&quot]Like everything it is not one size fits all and I understand that there are arguments for and against. So the majority is the one people look towards.




[/FONT]

 

[UKSBD]

Lets use your example but expand it a bit.

A small jewellery business with a turnover of £120k is just managing to
compete against a local woman who runs a small home based jewelery
business from home, fortunately the VAT threshold means she can't
expand and completely takeover their customers.

The threshold is increased, the local woman sells even more, the local
small business loses even more customers and eventually goes bust,
making 4 members of staff redundant.

It is all a very similar scenario to the price fixing thread, the combining
factor being all businesses should have a level playing field.

I have no idea of the figures, but it would be interesting to know the
effect it would have on small businesses with a turnover of £100,000+
if the threshold was increased, would it lead to lots of businesses
downsizes to get under £100k

Would it not be better if every business had a level playing field?

 

[elaine@cheapaccounting]

[FONT=&quot]Like everything it is not one size fits all and I understand that there are arguments for and against. So the majority is the one people look towards.

[/FONT]

 

[David Griffiths]

[FONT=&quot]Like everything it is not one size fits all and I understand that there are arguments for and against. So the majority is the one people look towards.

[/FONT]

A majority of whom? Almost everybody votes the way that would suit them personally. I wonder if anybody who has voted and who is approaching the current level has voted for it to be reduced, to give a level playing field? I'm ready to be proved wrong, but I seriously doubt it.

I can't see that a "majority" counts for anything. (And that's not because I'm losing! ) Self interest rules.

 

[elaine@cheapaccounting]

A majority of whom? Almost everybody votes the way that would suit them personally.

I am also not looking to change the way that our political system works

Not up for that fight - will leave that one to you David

 

[elaine@cheapaccounting]

Voting Summary so far:

Total votes 53

Yes 36 being 68%
No 17 being 32%

 

[estwig]

I will try to look out some stats on how many businesses are currently not registered for vat and what types of business.

That would be interesting to know elainec, if it is not too much trouble.

 

[elaine@cheapaccounting]

That would be interesting to know elainec, if it is not too much trouble.

will try to find something - these things are not always easy to find. I have stats for vat registered businesses but it seems that non vat registered businesses aren't so easy to find - no central system for them.

Any suggestions anyone?

 

[Deleted member 23846]

I have two hairdressing salons and am way over the £100k mark due to driving and marketing my salons, I personally would like to see the rate reduced to that of other EU countrys such as Cyprus where the rate for Hairdressing salons is 8% due to it being a labour intensive business.
Once I reached the VAT limit and registered I could not automatically increase my prices by 15% as this would have turned my whole clientele away regardless of service levels, the increase would have been too much in an already competative market. I also have to contend with competition who run cash only businesses, I think reducing the rate is the way to go.

 

[adam]

Good point Alan however the way to look at this is ALL businesses have to collect VAT and hence add 17.5% to their prices.

There is then an exemption for those turning over less than £67k or whatever the figure is this year.

So my point is, if you are expecting to grow beyond the threshold, assume it is there from day one and make hay while the sun shines in the early days as you get to keep all that lovely VAT money.

 

[themonk]

The suggestion on the News that the VAT rate may be cut to 15%!
Not what was expected, but most welcome all the same!