Unregistering fo VAT

[armyash]

Hi guys,

I was on my unvented a week ago and and there were a couple guys who were discussing how being a sole trader can be a nightmare with all the overheads involved. One of them said that he has become unregistered for VAT so he can now charge customers 20% less than some competitors. How does this work? what are the disadvantages to this? Must be more to it because surely everone would do it.

Can anyone explain?

 

[armyash]

Keys on my keyboard keep sticking so apologies for the error in the title.

 

[Roger Welton]

Only have to VAT register if turnover is over a certain threshold (£76k iirc)

 

[armyash]

Only have to VAT register if turnover is over a certain threshold (£76k iirc)

Thanks for the reply, how does that enable someone to charge their customer less then?

Does it mean that you can claim back VAT paid for on materials etc therefore can sell the goods on to a customer minus VAT also?

 

[Roger Welton]

if you're not vat registered you pay vat when you purchase materials, you cant claim this back.

If you are you can claim vat back on outgoings but have to put it on the final invoice including you're labor and any markup you put on materials.

VAT returns done quarterly.

I really don't want to vat register myself don't want to become a unpaid tax collector

 

[tamz]

Being vat registered will make you more expensive for private customers than someone who is not. However, if you do contract work or new build it can be in your favour as they can claim it back and new build is zero rated (no vat charged but still claimed back on purchases).
Basically, you claim the vat back on everything you buy and charge it on everything you sell and forward the difference to HMRC every quarter. It has its swings and roundabouts depending on what you do.

For a private customer
If you buy a boiler at £1000 + vat and want £1000 to fit it
If you are registered the cost would be £2000 + vat = £2400
If you are not registered the cost would be £1000 + vat for the boiler + £1000 for you = £2200

If the same work was for another registered business
Registered, your invoice would be £2000 + vat, Still £2400 but the other company would reclaim the vat so it cost them £2000
Unregistered, your invoice would be £2200. The other company can't reclaim the vat as you are not registered so it costs them £2200

 

[armyash]

Thanks, it's not relevant to me working for a company but I was curious after hearing these guys talking. Might be hand to know one day.

 

[Centralheatking]

Un-registering 4 vat is a very hard route.
Never mess with the revenue.

I have seen grown businessmen cry after not even trying to dupe Hmrc over vat
& others who got battered because they tried - then got hauled out of their beds at 6.00am
after 1x phone call

centralheatking

 

[armyash]

Thanks. I'm no in a position to even think about VAT, I was just curious. The blokes that were talking about it made it sound too straight forward. Which hardl anthing ever is.

 

[Guest123]

The VAT people are worse than the Borg. They can walk on to your premises unannounced and demand to do an audit and you have to comply. Resistance is futile.

 

[hammers4spanner]

why do you lot always talk like your trying to hide something lol

one way of looking at being vat registered is that its a good way to save money

 

[armyash]

why do you lot always talk like your trying to hide something lol

one way of looking at being vat registered is that its a good way to save money

might sound like that from the way i have started this thread but hiding nothing. A long wa off from being self employed.

 

[mike_s]

I have recently become VAT registered due to having no choice as I went over the threshold and put everything through the books which I won't change as I'm proud of being honest. Anyway when you are quoting for big jobs say 7 grand plus and you arn't vat registered then either you arn't doing them very often or you arn't putting it through the books. So I think it adds to our credibility, we have priced and done that many big jobs this year that it got to the point when I was embarrassed not to be vat registered.

 

[mike_s]

Also we are still getting most quotes we give as we are very thorough and experienced which gives the customers confidence in yourselves.