Vat Registered

[Neilb78]

Hi

We have come along in the couple of years, outgrown our spare room, had to shut up shop for a month to go under vat limit.

However we have now decided to expand, we are looking to move into a bricks and mortar shop, employ a member of staff.

Purchase some new machines increase output this will take us over the vat threshold, I have read that you can go normal way which is pay 20%
or you can go on a flat vat scheme which is a reduced percentage, however you cant claim any vat back on purchases.

Most of our sales are to the end user who cant claim vat back.

Just wondering if any members have made this decision with vat

Thanks in advance

[webtrekker]

You'll also need to offer your employee a workplace pesion, I think.

[Customprintwales]

I think it would depend on what the percentage is for the trade you are in and how much time you want to spend on bookkeeping.

To be honest with a package like Sage working out VAT payable is just a couple of clicks anyway. I believe that the industry percentage can be pretty accurate.

That said if you are opening up a bricks and mortar shop and buying in new equipment it may be worth going on the normal scheme to start as you can reclaim all you start up VAT which could even get you a VAT refund which you can not claim on a flat rate. After you've done all your start up expenditure you could look then at transferring over to flat-rate.

It has not impact on the end purchaser - you will still have to provide a VAT receipt if requested showing the break down of VAT.

[froggy]

From memory, I think the flat rate scheme rate payable ( to HMRC) is based on industry and trading classification. The turnover threshold is £150,000 then you have to go on the standard accounting method. It gives you some time to scale up to a level where you can be a fully fledged government tax collector.

IMO if you are going to expand into compulsory levels of VAT payable turnover dont mess about, you really need to scale up your business or you will be worse off. Dont worry too much about the staff costs, provided you have done your sums correctly, you will be fine. Your accountants should sort out all the statutory staff stuff, dont get bogged down managing your business, concentrate on growing it. I concentrated on growing my business so I could afford to pay professionals to take care of all the red tape stuff I didnt want to do. You can only do so much on your own, you need people to grow.

Wash and repeat, good luck.

[pw66]

You need to go well over the threshold to make it worthwhile. Much less than 100k per annum and you will be just standing still.

[logobear]

we paid 7% on flat rate.
you can claim back vat on 'big purchases' - maybe over 2k ? - read up.
flat rate upper threshold is 220k i think.
BIG advantage is that book keeping is much simpler/cheaper.

The factor that changed if for us was that our new landlord charged vat on rent (it's an option that they can select) - it tipped us over.

It's all on the HMR&C website and quite easy to understand

[Neilb78]

Hi, thanks for all your replies lots of valid points,

We are looking to lease the new equipment over 3 years, I am edging towards the flat vat rate scheme which for printing is 8.5% and first year you get a 1% discount.

We currently only really sell on one platform ebay, so now we are developing a website, will promote a lot more on social media and also any passing trade, I know the turnover needs to increase a lot to counter the extra costs we are going to incur, fell like now we are ready for this expansion, its going to be tough to start with.

[webtrekker]

Hi, thanks for all your replies lots of valid points,

We are looking to lease the new equipment over 3 years, I am edging towards the flat vat rate scheme which for printing is 8.5% and first year you get a 1% discount.

We currently only really sell on one platform ebay, so now we are developing a website, will promote a lot more on social media and also any passing trade, I know the turnover needs to increase a lot to counter the extra costs we are going to incur, fell like now we are ready for this expansion, its going to be tough to start with.

Hmm... I wouldn't place too much faith in websites and social media. It may work for some, but we invested a lot of time and effort in this and have now gone back to selling solely on ebay.

Good luck though. It's a popular, but highly competitive market.

[Customprintwales]

Hmm... I wouldn't place too much faith in websites and social media. It may work for some, but we invested a lot of time and effort in this and have now gone back to selling solely on ebay

Strangely enough I've just shut down our ebay site due to poor sales and a big increase in sales from our websites and social channels. Guess it depends on which niche you sell in.

You probably never know unless you experiment and try different channels.

Web sites and social can be more difficult but it is much more profitable as you are not chasing your way to the bottom on pricing which you have to do with ebay and amazon. You can also build regular customers from websites and social. I never had repeat customers from ebay though we do have quite a few repeat customers on Amazon otherwise I'd have shut Amazon down as well.

[Neilb78]

Yeah we have built up a good following on social media, only really promote over Christmas, however that will all change and we will promote regularly on there. Which then will link orders to the website, also because of working from home, we don't really want lots of people visiting to pick orders up, this will change having the shop. Looking at getting a load leaflets printed to put in with each order on ebay, directing them to the website with some discounts.