VAT Registration

[baseage]

I am not sure if i should be registering or not for VAT. We are a new start up and havent hit the VAT threashold.

I was thinking that we should as our suppliers would charge us VAT and i wouldnt want 20% to be taken away from our profits (Unless they wouldn't charge us because we are not VAT registered)

What are peoples thoughts?

Michael

 

[cheaper accountant]

If your suppliers are VAT registered then they will charge you VAT at 20% regardless of whether or not you are VAT registered.

When registering for VAT you need to consider a number of factors and the correct answer could even be industry specific and depends on what you sell.

You may need to consider if your competitors charge VAT on top of their prices and if you will lose a competitive advantage or lose customers if you charge VAT.

 

[MyAccountantOnline]

I am not sure if i should be registering or not for VAT. We are a new start up and havent hit the VAT threashold.

I was thinking that we should as our suppliers would charge us VAT and i wouldnt want 20% to be taken away from our profits (Unless they wouldn't charge us because we are not VAT registered)

What are peoples thoughts?

Michael

Hi Michael

Can you tell us a bit about your business, what you do and who you sell to, and if and when you expect to reach the VAT threshold?

 

[cheaper accountant]

Another thought that's worth considering ..... can your customers reclaim the VAT that you charge them? If so, then they are more likely to accept paying VAT on top of your prices.

 

[baseage]

the business that we are in is reselling IT training courses to our B2B clients. In terms of our competitors, yes they charge VAT.

 

[lesvatadvice]

My rule-of-thumb is that B2B businesses should strongly consider VAT registration. VAT is recovered on costs, and customers can recover VAT charged; the net effect is a cash gain.

 

[cheaper accountant]

I would agree with the previous comment and on face value a VAT registration seems worthwhile.

 

[Deleted member 162294]

There is also the VAT flat rate scheme that varies depending on what your business does. As I understand it you are charge 20% VAT on all your sales but when it comes to paying the VAT back you pay less than 20% for example 11% if your business is advertising. But you cannot claim input tax on your supplies except under certain conditions.

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

There is also a threshold for when you cannot be on the flat rate scheme anymore.

 

[cheaper accountant]

Phishfood .... my favourite Ben and Jerry's ice-cream

Anyway back to topic .... the Flat Rate Scheme can benefit a number of businesses but it's not right for everyone.

However, if you do qualify for a Flat Rate scheme percentage as low as 11% then I would suggest that it may well be in your interests to register for the scheme.

Note also that HMRC offer a 1% reduction to the percentage in your first year of registration (see here: http://www.hmrc.gov.uk/manuals/frsmanual/frs7100.htm).