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Nick

Can I be VAT registered?

Our small holding, which used to be a couple of fields round the house could, potentially, generate a wee bit of income (grazing, stock sales, hay/silage, etc).

This means we're spending on it, too, and in all probability, making a loss on it! However, if I could claim the VAT back, it would tip the balance. I've spoken to the VAT man about how much I can claim, and how far back I can claim, but I forgot to ask one question.

Do i need to set it up as a formal, registered company to apply for a VAT number, or can I have one anyway? Anyone know? (They keep you on hold for EVER, else I'd ring them again)...
OP

I am pretty anyone can be be VAT registered if you are operating as a "sole trader" or limited company.
vegplot

I#m registered for VAT, mer personally and not the company. If you're a sole trader and your income passes a certain threshold you have to register. It's voluntary other than that.
Nick

That much I know, but do I have to formally set up a Ltd company, sole trader wossname to do so. Can I just apply for a VAT number if I'm selling 6 piglets a year?
Nick

vegplot wrote:
I#m registered for VAT, mer personally and not the company. If you're a sole trader and your income passes a certain threshold you have to register. It's voluntary other than that.


Am I a sole trader then? (what about my wife?) or do I have to register this somewhere, somehow?
Nick

Right, all sorted, finally got through on the phone again. Answer is, I can simply register for VAT, no formal business needs to be set up.

Thanks all.
Mary-Jane

Nick wrote:
vegplot wrote:
I#m registered for VAT, mer personally and not the company. If you're a sole trader and your income passes a certain threshold you have to register. It's voluntary other than that.


Am I a sole trader then? (what about my wife?) or do I have to register this somewhere, somehow?


Yes you're a sole trader. If you want Louise to be in a partnership with you, you could register yourselves as an LLP (Limited Liability Partnership) at Companies House if you wanted to and the smallholding (and anything else even vaguely related could also fall within the business (we have done that with Horgan & Webb).

I'll get Gervase to respond when he comes home tonight as he's done all this side of the business for us.

But you can register for VAT anyway - you don't need a formal arrangement to enter voluntary VAT.
OP

One of the great things about the UK is that you can start up your business selling 6 pigs a year simply by notifying your tax office. You are then a sole trader. You'll pay tax in arrears on your sales and have to submit accounts to the HRMC - although in your case that will be just a few lines of figures. You can voluntarily become VAT registered (compulsory if your sales are greater than something like 60K).

I don't think you can be VAT registered until you are officially a sole trader.

I looked at doing something similar in France - it's a nightmare of bureaucracy, and explains why the UK is still one of the best places to start a small business.
Treacodactyl

Another thing to think about is is it worth the paperwork to claim back the VAT if it's only a small amount; collecting the receipts and asking for a VAT receipt from places that don't issue them normally, filling out the returns an working out what's VATable etc. Things like animal feed don't seem to be VATable.
vegplot

orangepippin wrote:
I looked at doing something similar in France - it's a nightmare of bureaucracy, and explains why the UK is still one of the best places to start a small business.


My sister says it's a nightmare. I can't recall the details but you pay a minimum amount, something like 1,400 beanies a year then 50% of your income (before expenses) with concessions for low income businesses (figures could be wrong). It's not a good environment for small business compared to the UK. We also have dividends but GB has is eye on those.
Nick

Animal feed has VAT, but at 0% (See, I've been reading!).

However, the vehicle we need for the business came with a lot of VAT at 17.5%. And drinks a lot of fuel with the same rate.

I'm used to doing my expenses for work, so always get a VAT receipt anyway. This will be an extra 3% workload.
Treacodactyl

Nick wrote:
However, the vehicle we need for the business came with a lot of VAT at 17.5%. And drinks a lot of fuel with the same rate.


That explains it! It would be worth doing just for that I expect. I think you would have to charge VAT when the vehicle is sold on though?
Nick

Dunno. Have to look into that.
vegplot

Treacodactyl wrote:
Nick wrote:
However, the vehicle we need for the business came with a lot of VAT at 17.5%. And drinks a lot of fuel with the same rate.


That explains it! It would be worth doing just for that I expect. I think you would have to charge VAT when the vehicle is sold on though?


If you claim VAT on something you later sell then you have to charge VAT, if you're still VAT registered.
Nick

Is that something I have to make a big deal about, or could I just sell the car privately to you, for example, for 10,000, and then I'd owe the VAT man 17.5% of that? I guess I'd have to issue a VAT invoice, but that's no big deal.
judith

Reclaiming VAT on fuel purchases is also complicated as a sole trader. Better look into that as well!
Treacodactyl

Nick wrote:
Is that something I have to make a big deal about, or could I just sell the car privately to you, for example, for 10,000, and then I'd owe the VAT man 17.5% of that? I guess I'd have to issue a VAT invoice, but that's no big deal.


That's my understanding, you charge VAT on what you sell it for. You often see old Landrovers for sale at, say, 5000 + VAT and I assume the previous owners have all been VAT registered.

I didn't know that you can get round it by stopping being VAT registered though.
vegplot

Treacodactyl wrote:
I didn't know that you can get round it by stopping being VAT registered though.


That needs clarification I think.
Mary-Jane

judith wrote:
Reclaiming VAT on fuel purchases is also complicated as a sole trader. Better look into that as well!


Gervase claims mileage rather than fuel. It's apparently a better deal under some circumstances.
vegplot

Mary-Jane wrote:
judith wrote:
Reclaiming VAT on fuel purchases is also complicated as a sole trader. Better look into that as well!


Gervase claims mileage rather than fuel. It's apparently a better deal under some circumstances.


That makes sense as there are well define mileage rates for taxation and the rates are better than claiming back the VAT on fuel for a business vehicle.
RichardW

vegplot wrote:
Mary-Jane wrote:
judith wrote:
Reclaiming VAT on fuel purchases is also complicated as a sole trader. Better look into that as well!


Gervase claims mileage rather than fuel. It's apparently a better deal under some circumstances.


That makes sense as there are well define mileage rates for taxation and the rates are better than claiming back the VAT on fuel for a business vehicle.


I know that used to be the case but with the high fuel costs does it still work out better to claim mileage & not fuel?

justme
Nick

Especially as I'll be doing lots of small journies, and possibly leaving the engine idling, but not driving around the place, I'm thinking fuel, rather than mileage could be best for me.
vegplot

Justme wrote:
vegplot wrote:
Mary-Jane wrote:
judith wrote:
Reclaiming VAT on fuel purchases is also complicated as a sole trader. Better look into that as well!


Gervase claims mileage rather than fuel. It's apparently a better deal under some circumstances.


That makes sense as there are well define mileage rates for taxation and the rates are better than claiming back the VAT on fuel for a business vehicle.


I know that used to be the case but with the high fuel costs does it still work out better to claim mileage & not fuel?

justme


For the first 10k miles you can claim 40p per mile then its 25p.

http://www.hmrc.gov.uk/RATES/travel.htm

Assume you do 15k business miles a year that's:

4,000 + 1,250 = 5,250

Assume your vehicle does 35mpg (7.7 miles per litre) and fuel cost's 120p per litre thats 1,948 litres or 2,337 vat at 17.5% = 409 you could claim back.

Quids in on the mileage by a factor of 10.

Are my sums correct?
RichardW

As long as you can justify the amount of fuel by your records its no problem. The records dont have to be journey logs. With my last VAT inspection I used appointments, sales shows I attended, stock I collected ect to show roughly how many miles I did weekly, divided by the MPG.

With VAT you can claim for anything as the return you send them is just numbers & does not show what it is for. Its only when you have an inspection that you have to justify your claims if challenged.

I thought mileages claims were better for contractors as then some of your earnings can be side tracked into expensies (or thats what we used to do in IT) & become tax free too? Could still have claimed the VAT too of the fuel.

Justme
Gervase

If the stuff or service you sell is generally rated at below 17.5 percent (and foodstuffs are zero-rated), then it's nearly always worth being VAT registered. You can claim retrospectively for up to three years before you start as a sole trader or company, which is extremely useful - all you stock fencing, feeders, food bins, waterers and other paraphernalia will have incurred VAT at 17.5 percent, so you first quarter's return will result in a large amount of money coming into your account. Subsequent quarters will also garner you the VAT back on anything you've bought for the business, assuming that your VATable sales don't exceed what you've shelled out.
If you submit returns online it means no more than a couple of hours every three months; it really is very simple.
As for travel, unless you've stumped up for an expensive vehicle exclusively for business use it's nearly always more lucrative and less hassle to claim mileage. I get back twice what my truck is worth on a year's mileage!
VSS

Gervase wrote:

If you submit returns online it means no more than a couple of hours every three months; it really is very simple.
!

Opt for "cash accounting", and set up a simple spreadsheet, and you'll be looking at only 5 minutes every 3 months. That's how long it takes me to do the VAT return.
Penny Outskirts

We just had a VAT inspection today. Very nice man.... but we have lots of transactions so it's very complicated. Luckily big sister (our bookkeeper) was there to talk to him, bless her Very Happy

The fuel thing is much better done as a personal claim, rather than using scale charging, never understood all that Embarassed
RichardW

Gervase wrote:
You can claim retrospectively for up to three years


Sure its up to 6 years for some things.


Justme
Faithmead

We've been looking at whether we should register for VAT - not cos we make a profit (!!!) but cos we've shelled out such a lot of dosh on our set up. Plus, we are just about to buy a Tractor, (only a small one) and so presumably we could save quite a bit of money by registering.

Do we need an accountant or can I just "do the books" and submit whatever to the jolly old IR?

Thanks all
Mandy
vegplot

You don't need an accountant to become VAT registered, it's an easy process as long as you keep good records. You need an accountant if you form a registered company.
RichardW

You dont need to be a "registered" company to be VAT registered. A sole trader can be VAT'ed.

Richard
Penny Outskirts

Legally, you don't have to have an accountant as a limited company either
Aedin

Legally, you do have to send in audited accounts every year, though. As far as I know, those have to be done by an auditor and most of those are accountants, aren't they?

(found this topic really, really helpful -- does anyone know where you can register online for VAt etc?)
Penny Outskirts

Yep - go to http://www.hmrc.gov.uk/index.htm

We don't have audited accounts
Penny Outskirts

What business are you starting ? Very Happy
Jonnyboy

Daft question time. Why don't people become sole traders, then register for vat, and simply don't sell anything/much but use it as a vehicle for saving on vat?
Penny Outskirts

Becuase they ask you a lot of searching questions when you register, likw when are you going to make your first sales, etc. You might get away with it for a quarter, but not after that.
sean

Don't you have to turn over more than a certain amount as well?
Gervase

Because HMRC would roast their livers over a slow fire for taking the Michael. My accountant advised me that, even as a business, it's not a good idea to show a loss in trading for more than three years as they will send in the investigators armed with rubber gloves and nasty implements.
Aedin

I meant that if you are a limited company, I think you have to submit audited accounts as part of your returns every year. Or am I imagining that?

I'm starting my own small consultancy business. I stop being a wage slave on Nov 1st. A bit scary, but it's the only way out of the rat race...
Penny Outskirts

Aedin wrote:
I meant that if you are a limited company, I think you have to submit audited accounts as part of your returns every year. Or am I imagining that?

I'm starting my own small consultancy business. I stop being a wage slave on Nov 1st. A bit scary, but it's the only way out of the rat race...


If the ltd company has a big turnover - 1m comes to mind, you must have audited accounts, otherwise not. Good luck with your new venture Very Happy
snozzer

vegplot wrote:


For the first 10k miles you can claim 40p per mile then its 25p.

http://www.hmrc.gov.uk/RATES/travel.htm

Assume you do 15k business miles a year that's:

4,000 + 1,250 = 5,250

Assume your vehicle does 35mpg (7.7 miles per litre) and fuel cost's 120p per litre thats 1,948 litres or 2,337 vat at 17.5% = 409 you could claim back.

Quids in on the mileage by a factor of 10.

Are my sums correct?


They are, BUT the difference between the tax free allowance and claiming the VAT back is that HMRC will actually give you 409 of VAT back (nice fat cheque) whereas if you claim 5,250 of mileage you have to pay that mileage yourself from the business, it is not given back to you by anyone else but you (no big fat cheque). What you do get though is 5,250 of money from your business free of tax, but you still had to pay 2,400 to pay for the fuel to achieve that so you get 2,850 of your own money tax free saving about 600
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