My first self-assessment - some advice needed

[snowcat]

Sorry I disagree on the VAT. If you are buying stuff for jobs 20% is a lot to loose on all materials and consumables.


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Actually that make little odds if your working for a customer because your still charging the materials + VAT, the only difference being is the way its invoiced, and your requirement to be an unpaid Tax collector. You will lose of course on consumables tools and other expenditure granted, but on the flip if you work for joe public your either 20% worse off or 20% less competitive.

If you have large Capital Expenditure VAT registration is a no brainier or compulsory, over wise its debatable, Im cautious on the VAT as We as a company were investigated around 15-20 years back They found nothing but it honestly felt like there was a prison sentence coming.

The over reason to avoid registration is an excellent excuse for a fledgling company to avoid cash flow problems, ie getting the registered client to buy materials, of course once Cash flow inst an issue (let me know when it isnt) a Cost+ system can be implemented, to increase the bottom line on the job.

 

[Rocketman]

Actually that make little odds if your working for a customer because your still charging the materials + VAT, the only difference being is the way its invoiced, and your requirement to be an unpaid Tax collector. You will lose of course on consumables tools and other expenditure granted, but on the flip if you work for joe public your either 20% worse off or 20% less competitive.

If you have large Capital Expenditure VAT registration is a no brainier or compulsory, over wise its debatable, Im cautious on the VAT as We as a company were investigated around 15-20 years back They found nothing but it honestly felt like there was a prison sentence coming.

The over reason to avoid registration is an excellent excuse for a fledgling company to avoid cash flow problems, ie getting the registered client to buy materials, of course once Cash flow inst an issue (let me know when it isnt) a Cost+ system can be implemented, to increase the bottom line on the job.

Not sure what you mean on the materials? You will claim the vat back on them where as if you weren't VAT registered you could not claim the VAT back yet you still charge the client the same. Hence you will either be able to reduce your costs to the client or be able to keep the extra money yourself in the finial charges.

Now the flat rate VAT scheme is total different to the above. You forget about all the bits and bobs you buy with VAT on them (unless it's £2000+ capital expenditure on equipment in a single purchase). All you do is invoice with 20% VAT added for the work you do. Any company that is VAT registered too won't mind that of cause. But here is where the scheme gets interesting and is very simple when you go to pay your VAT you don't pay all the 20%!! On the flat rate scheme it gives you a discount % so you don't pay the full 20% - for instance it may be 14% for a particular industry sector. All you do is fill out the return with the discount on and you just keep the discount for yourself.

But saying all that I can see your point to from your own experience and can understand the stand point to avoid such things unless you need to.
It's partly why I tend to advise self employed people to get an accountant as you are much less likely to get audited in the first place and they know all the in's and out's of what you can do legally.

 

[snowcat]

What I ment with materials is if your claiming the VAT back your still having to charge it the other end, so your reclaiming then recharging, the net output is still the same, the %you mark up on materials is still the same Its not posible to make on a product your reselling unless your the end user and are VAT registered. As I said the only real difference is the way its shown on the Invoice, and the fact you have to pay the VAT man the materials VAT and of course add it onto your labour.

Iv never been involved in the Flat rate system but it seams to be popular in retail, especially garden nursarys. There also was a retirement scheme IIRC that allowed those to continue certain business and still reclaim some % of VAT. letting units springs to mind.

There is no wrong or right way of doing things, just as long as you Pay your VAT, and TAX without your be sunk.

 

[Rocketman]

TBH Snowcat the biggest headache I get from running my own business in the past and continually is payment.

I've had to drop clients because payment is so poor. It really puts my back up when you have done a good job and everyone is happy but you have to badger the client for payment. I have had payments as late as 9 months after I have done the job. They then ring you up to do a job and are surprised you aren't interested!

I'm chasing one now from a client who in the past has been pretty good. But for the last few months it's been getting harder and harder to get payments off them - I assume they are hitting some cash flow problems.

So perhaps my best advice on this is if it is possible always have a cushion of cash available to tide you over.

 

[snowcat]

I have one who after ascertaining he didn't have the money to pay me negotiated a 50% discount which just about covered costs, and still has not paid me, the job was done wait for it August. Maybe the best advice is to forget it and work for someone, less hours, better wages, holiday pay, sick pay but wheres the fun in that

 

[F.J.]

Twice I have come across bad payers. The first was being cheeky just trying his luck and seeing how long he could get away with it for. In the end he stopped taking my calls so I turned at his yard with a breaker bar. He coughed up straight away.

the second was a big firm with the main office being down south. As I wasnt prepared to travel down to see the finance director I just went back to the depot and cut off what I had repaired.

Sometimes its better to cut your losses and find another customer to fill the gap