To VAT or not to VAT?

[smartile]

Heres a question. Some of us are below the threshold for VAT which is great for the private domestic customers as added charges are not applied to their bill but on purchases where we all pay VAT we cant claim this back. Also It limits our chances of working for larger contractors as they cant claim back and therefore makes working for them difficult or impossible. How do you guys deal with this? Does it make sense to go for the bigger fish and risk the little ones or leave alone?

[TilingLogistics]

This is difficult for a fixer. Most fixers have a lot of competition in pricing so to then hit the client with an additional 17.5% is not easy. However, there are obviously advantages regarding bigger customers as mostare VAT Reg'd anyway. I think it comes down to who your main clientele are at the end of the day.

Kev

[grumpygrouter]

Heres a question. Some of us are below the threshold for VAT which is great for the private domestic customers as added charges are not applied to their bill but on purchases where we all pay VAT we cant claim this back. Also It limits our chances of working for larger contractors as they cant claim back and therefore makes working for them difficult or impossible. How do you guys deal with this? Does it make sense to go for the bigger fish and risk the little ones or leave alone?

Being VAT registered or not should have no effect on working for a contractor. If you are not applying VAT to an invoice there is no VAT for the contractor to pay and therfore claim back from HMRC.

As for purchases, even though you are not claiming back VAT paid, you are in effect claiming the additional VAT cost against your profits and thereby reducing your tax bill.

There is nothing wrong with being VAT registered even though you are below the threshold. Only drawback is the necessity to keep andequate books to allow you to calculate the amount you would need to pay, and knowledge of the regulations etc.

[smartile]

I see wot you mean Grumpy as no VAT is added to the labour costs but if I was supplying materials aswell to which I have paid VAT I hav to pass that on at full cost without adding VAT which the contractor can not then reclaim. Makes it awkward for them to do business esecially when its a large scale job involving alot of costly materials

[grumpygrouter]

Materials aren't a huge part of your cost I would imagine.

If contracting is the major part of your business then register for VAT. If domestic is your major part then stay unregistered. Unfortunately business is never simple and straightforward and you have to make decisions based on the information available to you at the time.

For me, working on sites is not what I want to do so I set up my business so that I don't charge VAT.

As it is, I am fully conversant with VAT regulations and can operate it without any problems via my accounting package and my experience with my accounting business so it would be easy for me to change and become registered.

For people that have not dealt with VAT before it is not something to be taken on lightly. Many rules and regs to abide by not least the cash you have to pay out every 3 months! Complicate this further by having CIS deductions made for the net amount of vatable invoices, excluding materials and your book keeping takes on a whole new dimension.

Domestic customers for me for now!

[davy_G]

I see wot you mean Grumpy as no VAT is added to the labour costs but if I was supplying materials aswell to which I have paid VAT I hav to pass that on at full cost without adding VAT which the contractor can not then reclaim. Makes it awkward for them to do business esecially when its a large scale job involving alot of costly materials

Explain the situation to the contractor& get the contractor to get the materials you want from your shop. If you dont normally pass on all your discount to the customer (I do) the get the shop manager to charge accordingly and credit your account with the balance.
You dont loose on an anything you make on materials, your not out the cost of the materials and the contractor gets the VAT back. Win win

[garythetiler]

if you are doing new build i dont think vat is an issue

[smartile]

Thanx 4 the advice guys. I think I'll stick to wot I know best and as grumpy said the complications cud b a headache and yeah hadnt thought about the CIS deductions!. I much prefer domestic work just not much of it around at the mo! Keep life simple I guess

[enduro]

I was vat registered for 10 years and deregistered about two years ago, i got fed up having to pay £3,000 every three months to customs and excise, i was very good at putting vat money every month into a building society account, because if you don't and you cant pay your vat customs and excise wont be messed around with money owed. So unless you are supplying loads and loads of materials its really not worth it, all you will be doing is being a unpaid tax collector plus the added cost of accountant doing your vat every three months....And don't think you can register for vat and buy a new van and claim vat back and then de register....It wont work.

[365drills]

I'm VAT registered and recently it worked in my favour with a camera i bought through my company,

Its this Nikon D40 from Amazon.co.uk


£272.16 & this item Delivered FREE in the UK

Thats the price including VAT but because I use it for my company it cost £231.62

And also Nikon are doing a £30 cash back promo so its cost me £201.62

What a result for an SLR camera !! My mate got me the cheapest price quotes and found Amazon to be the best.

VAT or not to VAT. All depends...

[Dan]

'I knew a guy once' that was VAT registered and did only domestic work. The way he used it in his marketing to get jobs was to say to the customer, and that's the price + VAT but if you pay CASH CASH CASH you'll save the 17.5%. Making the customer assume they're getting a cheap cash job. He'd then still pay the VAT but he never ever lost a customer as they thought they were getting a cracking deal.

He used to up his prices a bit to start with but was still competitive, then in theory he'd be slightly less than competitive (average is probably a better word) when he "knocked the vat off" for the customer.

He got a lot of work this way from the type of customer that would search the yellow pages for the cheapest. The type that is after a deal.