VAT threshold

[monkeyhanger]

Despite never supplying materials on decent jobs, I've been on the edge of the VAT threshold for 2 years. I'm always 'too' busy and it's preventing me from taking anyone on to work alongside, due to other trades warning me off going VAT registered!
My apprentices wage will go up later in the year and looking at last years turnover I'd have to do some serious dodging about to prevent going over the threshold.

My accountant says 'do it or take less on', and has advised that I should register for the new tax year coming up. Some builders say 'why aren't you already registered' (they are themselves vat registered), some say avoid at all costs as they have priced themselves out of work before and they have de-registered because of the hassle?

I calculated that after being able to claim back on overheads etc I would have to put my labour charge up about 10% (which as I understand would only affect non-vat clients who couldn't claim back). Currently I rarely price a job that I don't get. I've never looked into this too much before but I just can't see how its fair that someone with a bigger turnover HAS to legally increase their price to non-vat customers by adding VAT, forcing them to lose work to someone who isn't vat registered for whatever reason! (Obviously this scenario has worked in my favour up to this point).

Most of my existing regulars are non-vat unfortunately, but I know that I have lost out on work in the past by not being registered.

On big jobs for VAT clients they've opened their own accounts to be able to claim the VAT back on gear themselves, so I've never been able to make anything on supplying materials.

I can see there are pros and cons but surely the only winner is HMRC.

What are others experiences on this forum? I'm stuck as to what I should do

 

[Darkwood]

It depends on your client base, you usually cant do the big jobs unless you are registered, I went solo 6 yrs ago and went VAT registered straight away, I don't do domestic and all my customers are also VAT registered so its in my interest to be VAT registered or I wouldn't appeal to them as they couldn't claim back on my work or materials.

 

[Octopus]

Be careful with this. HMRC can decide "which 12 months" they assess you for VAT eligibility! Its not the 12 months of you tax year if it suits them...

 

[monkeyhanger]

Cheers!
Current client base is a mix. I'm not TOO concerned about losing some of the domestic stuff (like private landlords), theres too many lads on a race to the bottom.

I'm aware of the 12 months rolling period. I haven't invoiced anything for a week as I'm currently £303 off, just to keep things right!
Later in the year I know my choice is going to go from when to invoice to downing tools. Down tools and lose regular clients or go vat registered and lose some work but maybe gain some? I don't know

 

[Octopus]

£82K isn't bad for 1 plus an apprentice!

 

[Darkwood]

Its the catch 22 tbh but only you can really answer it as you know your potential customer base weighed up against your potential loss, like you say though, landlords, domestic etc is too much competition thus not great returns - if you can get sweet with the bigger companies then you could potentially stop being a small/micro company and break into the larger market thus that holiday to Butlins could be on the cards

 

[123]

I think you have answered your own question...to hold back invoices to dodge VAT is no good. Go VAT and push ahead imo!

 

[Risteard]

Be careful with this. HMRC can decide "which 12 months" they assess you for VAT eligibility! Its not the 12 months of you tax year if it suits them...

I don't think it's that they "choose which 12 month" period to assess you for - it is that if you go over the threshold in ANY 12 month period then registration is mandatory. (Nothing to do with HMRC deciding.)

 

[amlu]

grab some capital investment during the tax year, new van, tools, tester etc...

 

[marc8]

had an idea a few years ago just before going VAT myself, get a quote from the wholesaler for materials with a percentage on top for yourself that you take as a credit in the wholesalers, Explain to customer that you are close to the VAT threshold & would they mind writing a cheque for the materials direct to the wholesaler.
benefit they have paid for materials up front, free's up cash flow, turnover down.
to many new build projects for my company.

 

[Welchyboy1]

Going vat was a really good thing for me, wish i would of done it years ago, gets rid of the cheap customers too


if you avoid being registered, you are effectively stunting your growth

If you consider yourself a professional outfit you should be vat

 

[weevilward]

I have to agree - holding back invoices is no good. You are turning over too much, you'll quickly reach the point where you can hold back any more.
Anyway that was over a year ago - did you go vat?

 

[Rpa07]

Nicely revived @weevilward, it will be interesting to find out if @monkeyhanger did go VAT registered. Take a vote I say 'yes'