VAT Registration

[Alan Drury]

I registered for VAT voluntarily in 1988 and it has proved to be the best way to go for me. Do make sure your bookkeeping is in order and keep control of your cash flow so the money is there when the VAT is due to be paid. It cost nothing and my accountant wrote the Vat people a letter but I see no reason why you can’t do this your self. If the majority of your customers are also VAT registered it will only make things better for you.
Alan D

[Martin Cole]

Mark, as Alan says really.

I too registered voluntarily, if you deal with businesses it’s definitely the way to go.

check out http://www.businesslink.gov.uk should show you how to register.

Out of interest does anyone put their vat money in a separate account or do you use it to ease cash flow?

[Nicola McIntosh]

quote Martin Cole:

Out of interest does anyone put their vat money in a separate account or do you use it to ease cash flow?

i have a seperate vat account…so when i put cheques in i take off the vat amount and put it into that account, so i know its always there, peace of mind…. 😀

nik

[Martin Cole]

quote Nicola McIntosh:

i have a seperate vat account…so when i put cheques in i take off the vat amount and put it into that account, so i know its always there, peace of mind…. 😀

nik

Definite the best way Nik, even though I don’t do it.

I Used to but have got out of the habit of transferring the money over.

I’ve spoken to a few people about this recently and they all use it to aid cash flow which is fine as long as its there when writing that dreaded cheque out.

[Lynn Normington]

I have always meant to put the VAT in a seperate account but never have

Lynn

[John Simpson]

Quite agree with Lynn, always meant to but never have.

Sometimes wish i was as clever as Nik 😳

LJ

[Kevin Flowers]

same here always meant to but never got around to it

Kev

[Carrie Brown]

Vat registered, have been since we first set up. Make sure you have a good accountant to go over things and do the year end stuff etc and who makes sure you are on the right track with everything.

I too have meant to set up a seperate vat account …. but still havent …. Nik is a smart bunny!! 😉

[Lee Ballard]

Not VAT registered yet but will be soon, have good accountant already so should be easy.

[Alan Drury]

I don’t use another account but I do keep careful tabs on the cash flow, do make a point of doing your bookkeeping properly though and I find having something like Quickbooks useful here as it tracks your VAT liability which can be viewed at any time, providing you do your invoicing with it or at least enter the figures and enter your bills into it VAT end is a doddle.
Alan D

[Martin Forsyth]

I would always recommend getting vat registered – especially if you are ever starting up a new business. The first couple of quarters they could even pay you some money back if you invested heavily to start up 😀

Plus a lot of businesses, will only deal with you if you are vat registered.

[Dave & Rob Lowery]

I always know when the VAT is due, I’ve got some money in the bank 🙁

[John Robinson]

I too am voluntarily VAT registered.

If you do go down this road I would recommend the cash accounting method whereby you are not liable for paying any VAT you charge to your customers until you have received the money from them. This helps the cash flow, especially when starting up and money is tight.
The other thing I would consider is the flat rate scheme, which allows you to pay VAT as a percentage of your turnover instead of having to work out the VAT on all your sales and purchases. This makes life much easier when it comes to working out your VAT return. Also, in your first year of registration you can take 1% off the flat rate you use (normally 7.5% for the sign industry). The details can be found on the HMRC website.

[Phill Fenton]

We looked into changing over to the flat rate scheme when it was first being introduced a few years ago. Back then we calculated there was no advantage in changing over (12.5% of turnover is the figure I seem to recall) – but if the flate rate of 7.5% really does apply to the sign industry then we would certainly be better off on this scheme.

[John Robinson]

Phill,

Unfortunately there is no one category that encompasses sign making for the VAT flat rate scheme
According to the HMRC website, there could be five possible categories that can apply to the sign industry when looking at this scheme.

They are

1) Retailing not listed elsewhere – 6%

2) Printing – 7.5%

3) Manufacturing not listed elsewhere – 8.5%

4) Advertising – 9.5%

5) Any other activity that is not listed elsewhere – 10%

I think it all depends on what your major source of income is, as to which category is best for you. Most of my work involves the printing and engraving of fairly small signs and labels so the category I use is 2) above. I checked with the VAT people before I registered for this category and they were quite happy about this and confirmed it in writing at my request. People who produce larger signage and the associated construction and fitting may come under 3) and those with a sign shop may well come under 1). Signwriters could well be in category 5)!
It is well worth investigating further with your local VAT office as in many cases significant savings can be made

The only categories with a rate of 12.5% are architects, civil engineers and management consultancies so unless the figures have changed over the last few years you may have been mis-informed.

Any VAT registered business can apply so long as their turnover including VAT is less than £187,500 and their turnover excluding VAT is less than £150,000

[Phill Fenton]

Thanks John

After a quick check I have discovered that over the last 3 years I have been paying between 9.8 and 11.1 % of my turnover to the VAT man so I think I will investigate this further again.

Any others out there that are on the flat rate scheme? If so what rate are you paying?

[Lynn Normington]

It’s late it’s Saturday but when I was first made aware of this flat rate VAT thing I did check it out and found disadvantages outweighed advantages unless I’m on the wrong track entirely, which I have to say has been the case before 🙄

Lynn

[Neil Churchman]

Well worth going VAT registered if you deal with other businesses and
will be a godsend if you buy a new vehicle for your company.

Quickbooks is an easy way of manging your bookkeeping and
you can print out a VAT 100 form with all the correct figures so you
can do you return in 5 minutes.

[Ryan]

Hi all, we are VAT registered and just keep the cash in a high interest account until period end when we transfer it back, this helps to get some interest back if nothing else!

Unsure if anybody else knows of this but you can offer customers a 5% discount on invoice values if they pay in full within 7 days of the tax date on invoice. Irrespective of whether they do or not you can always deduct the amount of VAT on the 5% discount from your VAT payable liability. Ask your accountant about this, it is bonefide we use a high street chain of accountants and its been verified. Bit of fidling around involved with your accounts package (control accounts and seperate section on invoice detailing deduction values if taken) but it can be done. I’d recommend anybody interested check with their accountant first. There have even been legal cases where companies have tried to have the rule backdated when they found out, those that offered a discount anyway..

[Peter Normington]

quote Ryan:

Hi all, we are VAT registered and just keep the cash in a high interest account until period end when we transfer it back, this helps to get some interest back if nothing else!

Unsure if anybody else knows of this but you can offer customers a 5% discount on invoice values if they pay in full within 7 days of the tax date on invoice. Irrespective of whether they do or not you can always deduct the amount of VAT on the 5% discount from your VAT payable liability. Ask your accountant about this, it is bonefide we use a high street chain of accountants and its been verified. Bit of fidling around involved with your accounts package (control accounts and seperate section on invoice detailing deduction values if taken) but it can be done. I’d recommend anybody interested check with their accountant first. There have even been legal cases where companies have tried to have the rule backdated when they found out, those that offered a discount anyway..

So how does that work then? if I offer my customers 17.5% discount, for early settlement, but doesnt matter if they dont cough up, they can avoid the vat?

Peter

[Peter Normington]

Sorry just done the maths,
offer 5% discount on a £200 invoice.
without discount = £235
with dicscount = £190+ vat+ = £223.25

So difference in vat = 35 – 32.50 = £2.50

you give a £10 discount pay the vat mat £2.50 less total net loss £7.50

Moral of the story, tax man usually wins….

Dont forget, you are only collecting the vat, not paying it..

Peter

[Dave Bruce]

Peter, I think what Ryan is saying is that, you can keep £1.49 (ie pay £1.49 less VAT whether the customer pays within 7 days or not) according to your figures.

That is 17.5% of £8.51 = £10

Dave

[Peter Normington]

Yes dave I realise that, but if only 25% pay up in 7/ 10 days whatever, you are still out of pocket!. in effect you have given away £40 to gain £4.50, if none pay on time, you have
gained £6? but a lot of accounting time

Peter

[Ryan]

Peter, its not always suitable for everyone, in our case we invoice bigger amounts to blue chip clients – there is no way on earth they could even raise a chq in 7 days so we just gain the benefit of a 5% saving irrespective.