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Starting a sole tradership - VAT ?



 
 
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  #1  
Old May 29th 08, 10:16 AM posted to uk.finance
bornfree
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Posts: 9
Default Starting a sole tradership - VAT ?

I am planning on starting a sole tradership providing a taxable (I
think) service. I aim to turnover 22,000 in my first year. Do I have
to register for VAT? If so when am I supposed to do so? Should I be
charging 17.5% on all my jobs?

The inland revenue website says "If you are in business, you must
register for VAT if your turnover for the previous 12 months is above
67,000"

Since I do not plan to turnover 67,000 for a while, can I safely put
the idea of registering for VAT to bed? If not or if so, why?
Starting out is difficult enough.. the more paperwork I can avoid at
the beginning the better...

Thank you very very much to anyone who answers..
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  #2  
Old May 29th 08, 11:25 AM posted to uk.finance
bornfree
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Posts: 9
Default Starting a sole tradership - VAT ?

On 29 May, 11:16, bornfree wrote:

The inland revenue website says "If you are in business, you must
register for VAT if your turnover for the previous 12 months is above
67,000"


This only applies to Limited Companies.
  #3  
Old May 29th 08, 12:10 PM posted to uk.finance
Tim
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Posts: 4,199
Default Starting a sole tradership - VAT ?

bornfree wrote:
The inland revenue website says "If you are in
business, you must register for VAT if your turnover
for the previous 12 months is above 67,000"


"bornfree" wrote
This only applies to Limited Companies.


Eh? Why do you think that?


  #4  
Old May 29th 08, 02:01 PM posted to uk.finance
bornfree
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Posts: 9
Default Starting a sole tradership - VAT ?

If anyone can help me with these queries, I would be very grateful.
Thank you.
  #5  
Old May 29th 08, 02:24 PM posted to uk.finance
Ronald Raygun
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Posts: 5,228
Default Starting a sole tradership - VAT ?

bornfree wrote:

Since I do not plan to turnover 67,000 for a while, can I safely put
the idea of registering for VAT to bed? If not or if so, why?
Starting out is difficult enough.. the more paperwork I can avoid at
the beginning the better...


If you are turning over less than when registration is compulsory, you
need to decide whether it is in your interest to register voluntarily.

This is a serious business decision, not just a convenience issue.

Generally it depends on whether the majority of your trade is with
customers who are themselves registered or not. If not, then don't,
if so then do.

Why? If you are selling mainly to the general public, registering
would force you to charge VAT on everything you sell, making your
products more expensive, so you would be less competitive.

If you are selling to people or companies who are registered, then any
VAT you charge is "invisible" to them, since they simply reclaim it.
If you are not registered, your prices include the hidden VAT of your
raw materials (which you can't reclaim), and your customers can't reclaim
it either because you can't give tham VAT invoices. This would make you
less competitive.

  #6  
Old May 29th 08, 02:46 PM posted to uk.finance
Troy Steadman
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Posts: 685
Default Starting a sole tradership - VAT ?

On 29 May, 15:01, bornfree wrote:
If anyone can help me with these queries, I would be very grateful.
Thank you.


To illustrate how important it is to get this right (as Ronald has
pointed out.to you):

Supppose you are a hairdresser turning over 66,999 a year and are not
VAT Registered.
Sell one more pennyworth of shampoo and you pay the VAT man 9,979
reducing your income to 57,020.
In order to get back to the position you were already at, you have to
increase your sales to 78,725, pay the VAT man 11,725 and take
home...erm... 67,000...

Of course it may be that you sell to a mix of customers, some
registered for VAT, some not. There are often very good commercial
reasons for having two or more entirely separate businesses - *NOT*
to avoid paying VAT I hasten to add because that would be fraud, but
for entirely justifiable reasons that have nothing to do with VAT
whatsoever.


  #7  
Old May 29th 08, 03:46 PM posted to uk.finance
PeterSaxton
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Posts: 526
Default Starting a sole tradership - VAT ?

On 29 May, 15:46, Troy Steadman wrote:
On 29 May, 15:01, bornfree wrote:

If anyone can help me with these queries, I would be very grateful.
Thank you.


To illustrate how important it is to get this right (as Ronald has
pointed out.to you):

Supppose you are a hairdresser turning over 66,999 a year and are not
VAT Registered.
Sell one more pennyworth of shampoo and you pay the VAT man 9,979
reducing your income to 57,020.
In order to get back to the position you were already at, you have to
increase your sales to 78,725, pay the VAT man 11,725 and take
home...erm... 67,000...

Of course it may be that you sell to a mix of customers, some
registered for VAT, some not. There are often very good commercial
reasons for having *two or more entirely separate businesses - *NOT*
to avoid paying VAT I hasten to add because that would be fraud, but
for entirely justifiable reasons that have nothing to do with VAT
whatsoever.



pennyworth? why not poundworth?
  #8  
Old May 29th 08, 09:34 PM posted to uk.finance
Troy Steadman
external usenet poster
 
Posts: 685
Default Starting a sole tradership - VAT ?

On 29 May, 16:46, PeterSaxton wrote:
On 29 May, 15:46, Troy Steadman wrote:





On 29 May, 15:01, bornfree wrote:


If anyone can help me with these queries, I would be very grateful.
Thank you.


To illustrate how important it is to get this right (as Ronald has
pointed out.to you):


Supppose you are a hairdresser turning over 66,999 a year and are not
VAT Registered.
Sell one more pennyworth of shampoo and you pay the VAT man 9,979
reducing your income to 57,020.
In order to get back to the position you were already at, you have to
increase your sales to 78,725, pay the VAT man 11,725 and take
home...erm... 67,000...


Of course it may be that you sell to a mix of customers, some
registered for VAT, some not. There are often very good commercial
reasons for having *two or more entirely separate businesses - *NOT*
to avoid paying VAT I hasten to add because that would be fraud, but
for entirely justifiable reasons that have nothing to do with VAT
whatsoever.




pennyworth? why not poundworth?


On 66,999 and eleven three?
  #9  
Old May 29th 08, 09:46 PM posted to uk.finance
bornfree
external usenet poster
 
Posts: 9
Default Starting a sole tradership - VAT ?

On 29 May, 15:24, Ronald Raygun wrote:
bornfree wrote:
Since I do not plan to turnover 67,000 for a while, can I safely put
the idea of registering for VAT to bed? If not or if so, why?
Starting out is difficult enough.. the more paperwork I can avoid at
the beginning the better...


If you are turning over less than when registration is compulsory, you
need to decide whether it is in your interest to register voluntarily.

This is a serious business decision, not just a convenience issue.

Generally it depends on whether the majority of your trade is with
customers who are themselves registered or not. If not, then don't,
if so then do.

Why? If you are selling mainly to the general public, registering
would force you to charge VAT on everything you sell, making your
products more expensive, so you would be less competitive.

If you are selling to people or companies who are registered, then any
VAT you charge is "invisible" to them, since they simply reclaim it.
If you are not registered, your prices include the hidden VAT of your
raw materials (which you can't reclaim), and your customers can't reclaim
it either because you can't give tham VAT invoices. This would make you
less competitive.


Ok. Thank you.

What about income tax? It's not the same thing as VAT is it? Would I
have to pay it?
  #10  
Old May 29th 08, 11:36 PM posted to uk.finance
Ronald Raygun
external usenet poster
 
Posts: 5,228
Default Starting a sole tradership - VAT ?

bornfree wrote:

On 29 May, 15:24, Ronald Raygun wrote:
bornfree wrote:
Since I do not plan to turnover 67,000 for a while, can I safely put
the idea of registering for VAT to bed? If not or if so, why?
Starting out is difficult enough.. the more paperwork I can avoid at
the beginning the better...


If you are turning over less than when registration is compulsory, you
need to decide whether it is in your interest to register voluntarily.

This is a serious business decision, not just a convenience issue.

Generally it depends on whether the majority of your trade is with
customers who are themselves registered or not. If not, then don't,
if so then do.

Why? If you are selling mainly to the general public, registering
would force you to charge VAT on everything you sell, making your
products more expensive, so you would be less competitive.

If you are selling to people or companies who are registered, then any
VAT you charge is "invisible" to them, since they simply reclaim it.
If you are not registered, your prices include the hidden VAT of your
raw materials (which you can't reclaim), and your customers can't reclaim
it either because you can't give tham VAT invoices. This would make you
less competitive.


Ok. Thank you.

What about income tax? It's not the same thing as VAT is it?


No.

Would I have to pay it?


Only if you make a profit.
And don't forget National Insurance.

 




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