VAT - **** 'em

[Louis Balfour]

I've just been in to see a clothes alteration place I know. A sign saying "cash only" has sprung up on the counter.

I asked the owner about it and he said, "I crept into VATable turnover and had to shell out £18k that I didn't expect. So I've laid off my part-time lad, I'm closing an extra day of the week and just in case it's cash only from now on."

He went on to say that he was the sixth business this month that his accountant has had wanting to de-register.

Our local barber has done the same thing.

Assuming this is country-wide, it cannot be helping our economy or government receipts.

[2 GKC]

I’d bet the majority of the population will have paid cash for something specifically to avoid VAT

[untakenname]

tbh I think it's good the government are clamping down on tax fraud but saying that I'm on PAYE so don't tend to use cash much, others may have different views.

[Mobile Chicane]

A clothes alteration place turns over in excess of £85k a year. Really?

Sounds like money-laundering to me, moreover the perfect front for it. Not as though they have to buy much in the way of stock.

[Mr Pointy]

Mobile Chicane said:

A clothes alteration place turns over in excess of £85k a year. Really?

Sounds like money-laundering to me, moreover the perfect front for it. Not as though they have to buy much in the way of stock.

I had a zip replaced in a jacket which cost £30. £85000/30/365 is 7.8 garments a day over a year & plenty of those will cost more than £30. I can see it being legit.

[Gio G]

I only keep cash for paying the dry cleaners and the wife's nail shops, now I bet they see some serious untaxed cash!

G

[robinh73]

I run a tree surgery business and have this year just gone over the VAT threshold. I have a mix of personal and business customers and while the business ones can claim the vat back, the personal ones cannot do so. This is going to cause issues as I will be 20% more expensive in an already very competitive sector. I am just hoping that it won't be as much of an issue as I fear it may be.

[Jordie Barretts sock]

robinh73 said:

I run a tree surgery business and have this year just gone over the VAT threshold. I have a mix of personal and business customers and while the business ones can claim the vat back, the personal ones cannot do so. This is going to cause issues as I will be 20% more expensive in an already very competitive sector. I am just hoping that it won't be as much of an issue as I fear it may be.

It will be.

If I were you (and I'm waaaay over the VAT threshold) I'd be doing all I could to get back under it. You say business can claim it back, yes they can, but they still have to pay it out in the first place. There really isn't an upside to being an unpaid tax collector.

[robinh73]

Jordie Barretts sock said:

It will be.

If I were you (and I'm waaaay over the VAT threshold) I'd be doing all I could to get back under it. You say business can claim it back, yes they can, but they still have to pay it out in the first place. There really isn't an upside to being an unpaid tax collector.

It is something I have fought to stay under but this year has been too successful! It is a nice situation as the business is only 5 years old but it is a pain all the same. I have a meeting with my accountant to see what we can do.

[Seasonal Hero]

The threshold (which has been left unchanged for years) is the single biggest barrier to growth in my field (photographer). We are all B2C so can’t claim back and anyone over it has to raise their prices by 20% to earn the same and is then immediately uncompetitive with a peer below the threshold.

It’s insane to me that they bang on about growth yet have such a regressive tax that caps it with a total cliff-edge.

[wombleh]

VAT threshold seems very unfair for small companies with customers that aren’t other companies, if you’re successful then you suddenly get 20% more expensive.

I believe in Europe the threshold is far lower, like 10k, which at least evens the playing field a bit better for the companies, not so good for the customers though!

[r3g]

robinh73 said:

I run a tree surgery business and have this year just gone over the VAT threshold. I have a mix of personal and business customers and while the business ones can claim the vat back, the personal ones cannot do so. This is going to cause issues as I will be 20% more expensive in an already very competitive sector. I am just hoping that it won't be as much of an issue as I fear it may be.

A friend of mine with an MOT and light repairs and servicing garage went VAT just over a year ago and reckoned that his long time regular customers would keep coming because of his excellent reputation. He has a diary of them all and his wife contacts them when the car is due but a significant number have not been seen again so are going elsewhere, presumably to one of several other garages in the vicinity who are non-VAT. He's still doing alright from the MOT side of the business, but the servicing and light repair work has seen a sginificant reduction. It used to be roughly 50/50 split for MOTs and servicing/repairs but it's now more like 80/20. Once those loyal customers go elsewhere, you've lost them for good.

[Evanivitch]

Mobile Chicane said:

A clothes alteration place turns over in excess of £85k a year. Really?

Sounds like money-laundering to me, moreover the perfect front for it. Not as though they have to buy much in the way of stock.

If they're doing military uniforms too then it's shooting fish in a barrell.

[SamR380]

Seasonal Hero said:

The threshold (which has been left unchanged for years) is the single biggest barrier to growth in my field (photographer). We are all B2C so can’t claim back and anyone over it has to raise their prices by 20% to earn the same and is then immediately uncompetitive with a peer below the threshold.

It’s insane to me that they bang on about growth yet have such a regressive tax that caps it with a total cliff-edge.

The flat rate VAT scheme means a photographer would only need to put up their prices 11%, presumably because there is consideration that they mostly work B2C.

[Seasonal Hero]

SamR380 said:

The flat rate VAT scheme means a photographer would only need to put up their prices 11%, presumably because there is consideration that they mostly work B2C.

Only.

Whilst that’s true the point stands. It’s a massive barrier to growth.

[MitchT]

Is legal to have a VAT-registered limited company for your VAT registered business clients while operating as non-VAT-registered a sole trader for everyone else? If not then I guess it's a case of keeping your turnover under the threshold.

[Jordie Barretts sock]

Err, very much no!

[21TonyK]

I've owned numerous businesses over the years. Some professional services B2B where VAT was irrelevant but I've also owned a couple of businesses where its been B2C and competitors are trading under the threshold yet charging the same prices as those that are, i.e. accommodation or food

Aside from making life easier for those under the threshold I really don;t see the logic in it. To my mind a product or service either attracts VAT or it doesn't and the status of the seller should be irrelevant.

Either way. If there is a next time I will be using every trick in the book to reduce my liabilities.

[MattsCar]

It is a huge barrier to growth for small businesses.

I have recently gone over the VAT threshold, after spending 2 years, deliberately underneath it. This included calculating what i was allowed to sell on a daily basis, based on what i had sold on that day the previous year and shutting shop, turning customers away when it looked like i was going over that limit.

With all things considered... this is where I am at...To equal the profit, with a turnover of £85,000, not VAT registered, I will have to Turnover £110,000 a year when VAT registered.

It feels like a massive gamble, it has stressed me out over the past few months due to all the extra paperwork and the complexity of Making Tax Digital, but on the plus side, business is looking good and it feels nice to be able to actually sell whatever I want.

However, as soon as I get an inkling that I will soon be under, then I will be straight on to HMRC to deregister and I will go back to enjoying an hour or two work a day and plenty of holidays.

ETA- Also this idea that everything will be fine and you just charge more because you are now on VAT is a trope given by people who have no idea how customers work....If the customer is not VAT registered, then the increase in price will result in fewer sales.

Edited by MattsCar on Wednesday 31st January 22:16

[MattsCar]

MitchT said:

Is legal to have a VAT-registered limited company for your VAT registered business clients while operating as non-VAT-registered a sole trader for everyone else? If not then I guess it's a case of keeping your turnover under the threshold.

It is not allowed.

Neither is splitting the company in to two.

However, if you have two companies, one that sells chalk, the other cheese (i.e completely different, unrelated products or services), registered to two different addresses, then you might get away with it.