Vat Registration

[minerals]

Should i become VAT registered?

I will be starting up my business in the next few weeks, a retail store selling sports supplements/alternative medicine & some sports clothing.

Some items i buy and sell will be vat exempt but the majority i will have to pay VAT on

Im unsure at this stage wether i will need to be VAT registered bafore i start buying stock or before i open. I dont want to be bogged down in paperwork, if i did register for vat i would almost certainly instruct an accountant

Ive briefly spoke with an accountant, but im unsure if i will need one, i can do the day to day accounts myself (i hope) this is my first business venture so any advice on this will be greatly appreciated

 

[artystitches]

To determind whether to register for VAT there is a threshold of £67,000 if your annual turnover exceeds this then you will need to register for VAT you can get the relevant forms .

You can register for VAT voluntarily if you want to be able to claim back VAT on business purchases.

 

[borobabe]

The way it was explained to me was to look at how much you anticipate selling and who you are selling to. In my case well under the £67,000 at least for this year and to customers who aren't able to reclaim the VAT. Also your prices will have to account for the VAT which could mean you are 17.5% more expensive.

Hope that helps.

 

[dragonfly]

Also bear in mind at the moment you could wait a long time for your VAT number. So if you do decide to register do it early.

 

[dp0848]

Also bear in mind at the moment you could wait a long time for your VAT number. So if you do decide to register do it early.

They appear to be getting faster. I put in an application for a client on 12th June and the registration certificate turned up yesterday.

 

[dragonfly]

We've been waiting for the one for Dragonfly since March the 1st, however one for a sister company came through a couple of weeks ago. Both were applied for the same day.

 

[Project man]

I registered voluntarily. Mine came through quickly as well. Have a look at the flat rate scheme. It is easier.

 

[dp0848]

The flat rate scheme is easy to use but there are a few pit falls for the unaware such as the fact that it is calculated on gross sales not net sales (i.e. sales inclusive of VAT). I have a friend who is a VAT inspector (just doing my bit for charity) who tells me that about 25% of business using the flat rate scheme operate it incorrectly. Another thing to watch out for is that the flat rate must be applied even to exempt supplies (and interest earned on a bank balance is classed as an exempt supply).

It is also worth doing the sums to see if the flat rate scheme really does leave you better off. You might be financially better of accounting for VAT in the traditional manner.

Regards.

David.

 

[Zeno]

You mention that you think some of your turnover is exempt. Are you sure about this? None of the items that you mentioned are. Are you confusing zero rated?

You should make sure you are getting this right when doing your vat sums.

 

[dp0848]

Zano,

I did not say that some of my turnover is exempt. I did not mention anything about the turnover of my own business.

Interest received on money deposited is consideration for an exempt supply i.e. when you deposit money in a bank account you are in effect lending money to the bank. Have a read of VAT Notice 401/49 paragraph 4.1.

Under the flat rate scheme turnover includes all standard rate, reduced rate, zero rate and exempt supplies; the only supplies not included are those which are outside the scope of VAT.

You should make sure you are getting this right when doing your vat sums!

Regards.

David.

 

[Zeno]

Zano,

I did not say that some of my turnover is exempt. I did not mention anything about the turnover of my own business.

Interest received on money deposited is consideration for an exempt supply i.e. when you deposit money in a bank account you are in effect lending money to the bank. Have a read of VAT Notice 401/49 paragraph 4.1.

Under the flat rate scheme turnover includes all standard rate, reduced rate, zero rate and exempt supplies; the only supplies not included are those which are outside the scope of VAT.

You should make sure you are getting this right when doing your vat sums!

Regards.

David.

Sorry, I meant the original poster. Still, that's me told.

 

[dp0848]

Apologies Zeno. I thought your reply was a response to my post which appeared immediately above yours. Glad you consider yourself told though.

 

[DIY Accounting]

The key to vat registration is the vat threshold of £67,000 at which taxable supplies are subject to vat whether vat is added to the selling price or not.
If trade is mainly business to business then since vat output is not a problem then usually it is better to voluntarily regsiter for vat.
If trade is business to general public then it is often better to delay registration until the threshold has been reached as after registration the final selling price goes up 17.5% for standard rated goods which might affect future sales volume.

If adding 17.5% doesn't affect sales volume then the business decision should be to increase prices and make more money.

One tip to bear in mind is if the gross sales exceed the vat threshold of £67,000 and the excess is due to exceptional sales then registration can be delayed provided HMRC are advised that the vat threshold has been exceeded with an explanation that the excess sales are not expected to be repeated.
HMRC need to be told just in case they inspect but by notifying them vat registration can be delayed if that is the most profitable route for the business to protect sales volume.