Registering for VAT for existing business

[adejones]

Good morning
I have been providing services to primary care (GP surgeries) for 7-8 years and was only ever intended to be a small business so never registered for VAT however my reach has grown and I am quickly approaching the threshold for VAT registration.
I am conscious that majority of GP surgeries themselves are not VAT registered due to healthcare exemptions and this would therefore feel like a 20% price increase to them, so I foresee some looking for alternative providers and I really don't want to lose any customers due to this.
How am I best handling this situation? Would it be fair to offer longer-standing customers a slight price reduction + VAT so they'd be paying 10% more but i'd take a 10% hit although i'd retain their business?
Please could I get some advice?
Thanks.

 

[Paul Kelly ICHYB]

NO. Stand your ground.

You are not adding 20% to the bill, you are adding VAT which is a legal obligation. If you are doing a good job, they will want to keep you.

What do your competitors do?

What services do you offer? Is it actually VATable?

BTW, do you know which/how many of your clients are VAT registered?

 

[adejones]

Hi Paul, thanks for getting back to me.
That's exactly my worry, i'm obligated to add 20% which majority wont be able to claim back so they'd see it as in increase to them.
To answer your questions:
- Competitors all charge VAT but may have done from day 1 and they're much bigger than I.
- It is web services that I provide to primary care on an annual subscription type model.
- It will only be the minority who are registered as primary care are generally exempt unless they are dispensing practices because those additional services they provide are VATable, but i'd be happy to have a conversation with them individually if needed.

 

[Newchodge]

Hi Paul, thanks for getting back to me.
That's exactly my worry, i'm obligated to add 20% which majority wont be able to claim back so they'd see it as in increase to them.
To answer your questions:
- Competitors all charge VAT but may have done from day 1 and they're much bigger than I.
- It is web services that I provide to primary care on an annual subscription type model.
- It will only be the minority who are registered as primary care are generally exempt unless they are dispensing practices because those additional services they provide are VATable, but i'd be happy to have a conversation with them individually if needed.

You may have to add 20% to your invoices, but you will be able to reclaim VAT you have paid out, so you could reduce your invoice prices pre VAT to take into account this income.

 

[adejones]

This is still playing on my mind and has been worrying me no end for the last week or 2, but has to be done.
I have just asked ChatGPT to write me a professional but empathetic email based on the circumstances of my business and this is what it produced which I think is great - thoughts please?

Subject: Important Update Regarding VAT Changes

Dear [Customer's Name],

I hope this email finds you well.

First and foremost, I want to take a moment to thank you for your incredible support and loyalty over the years. When I started [Business Name] [7/8] years ago, it was a small venture designed to serve a local area. However, thanks to the incredible demand and the support of customers from far and wide—like yourself—this business has flourished beyond anything I could have imagined.

As a result of this growth, I have now reached the UK VAT threshold of £90,000 annual turnover. This means I am legally obligated to register for VAT, and from [date], VAT at the standard rate of 20% will need to be added to our invoices.

I understand this might feel like a significant change, especially since many of my customers are not VAT-registered themselves. Please know that this decision was not made lightly—it’s simply a legal requirement for businesses of this size in the UK.

I also want to take this opportunity to explain why VAT wasn’t applied from the beginning. When I launched [Business Name], the focus was on delivering quality [products/services] to a small, local customer base, with no expectation of growing to the point of reaching this threshold. Thanks to the incredible trust and loyalty of customers like you, we’ve achieved that milestone—something I’m deeply grateful for.

I am committed to ensuring that the quality and value of our [products/services] remain as high as ever. I hope you will continue to see us as a trusted partner despite this unavoidable change.

If you have any questions about this or would like to discuss how this affects you, please don’t hesitate to get in touch. I’d be more than happy to have a conversation and find the best way to continue supporting your needs.

Thank you once again for being part of our journey. Your continued support means the world to me, and I hope to keep serving you for many years to come.

Warm regards,
[Your Full Name]
[Your Position]
[Business Name]
[Contact Information]

 

[Mark T Jones]

This is still playing on my mind and has been worrying me no end for the last week or 2, but has to be done.
I have just asked ChatGPT to write me a professional but empathetic email based on the circumstances of my business and this is what it produced which I think is great - thoughts please?

Subject: Important Update Regarding VAT Changes

Dear [Customer's Name],

I hope this email finds you well.

First and foremost, I want to take a moment to thank you for your incredible support and loyalty over the years. When I started [Business Name] [7/8] years ago, it was a small venture designed to serve a local area. However, thanks to the incredible demand and the support of customers from far and wide—like yourself—this business has flourished beyond anything I could have imagined.

As a result of this growth, I have now reached the UK VAT threshold of £90,000 annual turnover. This means I am legally obligated to register for VAT, and from [date], VAT at the standard rate of 20% will need to be added to our invoices.

I understand this might feel like a significant change, especially since many of my customers are not VAT-registered themselves. Please know that this decision was not made lightly—it’s simply a legal requirement for businesses of this size in the UK.

I also want to take this opportunity to explain why VAT wasn’t applied from the beginning. When I launched [Business Name], the focus was on delivering quality [products/services] to a small, local customer base, with no expectation of growing to the point of reaching this threshold. Thanks to the incredible trust and loyalty of customers like you, we’ve achieved that milestone—something I’m deeply grateful for.

I am committed to ensuring that the quality and value of our [products/services] remain as high as ever. I hope you will continue to see us as a trusted partner despite this unavoidable change.

If you have any questions about this or would like to discuss how this affects you, please don’t hesitate to get in touch. I’d be more than happy to have a conversation and find the best way to continue supporting your needs.

Thank you once again for being part of our journey. Your continued support means the world to me, and I hope to keep serving you for many years to come.

Warm regards,
[Your Full Name]
[Your Position]
[Business Name]
[Contact Information]

It's dreadful

You might take some cues from it, but I'd suggest a brief, concise and personal approach.

Only slightly related, but my wife needed to hike prices (because she hadn't done so for 7 years)

Sent a newsletter to customers past and present explaining the increase and outlining some other changes

Didn't lose any customers, got compliments on the newsletter (because I wrote it) and won some old customers back.

 

[Paul Kelly ICHYB]

KISS

Hello,

our business has now reached a stage where we need to charge VAT, therefore, from x-date we will be adding VAT to our invoices.

Thanks you for your ongoing support.

Signed.

If you were going to swallow some of the VAT increase, mention this on line 2 (if needed).

 

[UK Contractor Accountant]

and I am quickly approaching the threshold for VAT registration.

incorporate - the clock starts back at £0 again for turnover.

something to consider!

 

[Newchodge]

This is still playing on my mind and has been worrying me no end for the last week or 2, but has to be done.
I have just asked ChatGPT to write me a professional but empathetic email based on the circumstances of my business and this is what it produced which I think is great - thoughts please?

Subject: Important Update Regarding VAT Changes

Dear [Customer's Name],

I hope this email finds you well.

First and foremost, I want to take a moment to thank you for your incredible support and loyalty over the years. When I started [Business Name] [7/8] years ago, it was a small venture designed to serve a local area. However, thanks to the incredible demand and the support of customers from far and wide—like yourself—this business has flourished beyond anything I could have imagined.

As a result of this growth, I have now reached the UK VAT threshold of £90,000 annual turnover. This means I am legally obligated to register for VAT, and from [date], VAT at the standard rate of 20% will need to be added to our invoices.

I understand this might feel like a significant change, especially since many of my customers are not VAT-registered themselves. Please know that this decision was not made lightly—it’s simply a legal requirement for businesses of this size in the UK.

I also want to take this opportunity to explain why VAT wasn’t applied from the beginning. When I launched [Business Name], the focus was on delivering quality [products/services] to a small, local customer base, with no expectation of growing to the point of reaching this threshold. Thanks to the incredible trust and loyalty of customers like you, we’ve achieved that milestone—something I’m deeply grateful for.

I am committed to ensuring that the quality and value of our [products/services] remain as high as ever. I hope you will continue to see us as a trusted partner despite this unavoidable change.

If you have any questions about this or would like to discuss how this affects you, please don’t hesitate to get in touch. I’d be more than happy to have a conversation and find the best way to continue supporting your needs.

Thank you once again for being part of our journey. Your continued support means the world to me, and I hope to keep serving you for many years to come.

Warm regards,
[Your Full Name]
[Your Position]
[Business Name]
[Contact Information]

I feel sick. I am sorry but the language in that document is awful. Starting with "I hope this email finds you well.". FFS this is a business communication. Keep it short, factual and to the point. Take out all the awful guph about the clients' incredible loyalty.

 

[Bobbo]

As others have said, that Chat GPT drafted email is horrible.

But a couple of points spring to mind:
- you say you fear customers going elsewhere but why would they? You say competitors are all VAT registered so unless your 'net' price is more than that of the competitors you will still be cheaper. If adding VAT makes you more expensive than competitors then why are you better?

- if the business is on annual subscriptions, what do the contracts say about VAT? If your contracts simply say the price is say £12,000 annually and doesn't mention VAT then if I were your customer I'd expect that to not change because you've become VAT registered. So what was £12,000 to you would now be £10,000+VAT.