VAT question

[zardoz]

lets just say that i didn't want to pay vat on a new Miller machine. What would be the best way to avoid it. What with all these people avoiding their tax obligations these days (a grey area though legally, mind you) I wondered what the best way to get out of paying vat would be. Don't laugh I don't expect it to be easy or everyone would be obviously doing it. Would it be worth setting up a company in my own name?

As i am planning to go in to business for myself anyway, although not till next year. (If i can get a part time contract where i work, so i have at least some regular income to rely on. I am going to try and set up on my own as a welder/fabricator. You never get rich working for anyone else!) ie: If i were to set up as a welder i will obviously quite legitimately need a machine or two to do my business, so as a tool of my trade I would not need to pay VAT on it. Or would I? (Is there some quicker way ?)

Or would it not be worth it just to save £550 on vat. Are there any other ways of going about this. There must be some grey areas that a poor working guy can exploit. There seem to be enough of them if you have millions to stash away. Gary Barlow and Jimmy Carr might not miss £500+ But that's a weeks wages to me and I'd rather not pay it if there is any way to slip through the cracks beyond the beady eye of the dreaded VAT man.

PM me if you don't want to post in this thread.

 

[chevy2]

Surely if setting up in business all legit as a welder then that new machine can be offset against your tax getting about the same return over a period of time?

Ps i found Empire welding to be by far the cheapest on Miller machines.

 

[Welderpaul]

If/when you set up a business and become VAT registered, you can 'back-claim' VAT on assets purchased for the business. I can't remember how far back, but i think it could be a year.

When i went VAT registered i claimed for all the gear i bought at the start. Quite a few quid.

Don't fiddle it, not worth it.

 

[Rocketman]

Yep Welderpauls right. I did the same. Also I can't remember off hand how long the period is you can claim back.

 

[steviec_lj]

I believe, from conversations of long ago, its something daft like 5 or 6 years you can claim for.

Rules have probably changed now though.

 

[scotty41]

4 years on machines still held, 6 months on services, nothing on stock unless its still on the shelf. i went vat registered last year but came back out after 9 months, when coming out of vat you add all the assets up bought in the time period of being vat registered and if its under 5k plus vat you don't pay anything, don't think you can go buy 10ks worth of gear and not pay the vat on it if you deregister. good for industry but the public hate it. good for European purchases as the vat is cancelled out. the reason, you would have to claim the vat from the country you bought it from.

 

[Wallace]

What's the Vat threshold now?

 

[scotty41]

78k last time I looked.

 

[Paul.]

£81000 for this tax year, I would think carefully about registering if you are a small sole trader, the costs of the accounting and other administration may cost you more than the VAT you can claim back, I've never registered and don't intend to, its never really been an issue except with one customer who now pass the work to me through a third party.

 

[AndyStobbs]

Don't forget it isn't a one way street. You'll have to charge VAT perhaps making you less competitive than someone who isn't VAT reg. Plus all of the extra time spent doing accounts as others have said.

 

[blenkie1]

You can also opt in and out for vat so many times in one year so I think it would be possible to buy all your equipment claim the vat back and then opt out and stop charging/claiming vat. Vat does not add that much more time to your accounts depends if the people you do most of your work for are vat reg

 

[steviec_lj]

Blenkie, the problem there is that you would still be liable to pay the VAT you "claimed back" on those purchases you made while registered.

Otherwise everyone would be doing it..

 

[blenkie1]

Doh of course never that simple is it. I know of a sole trader electrician and plumber we're charging vat on little jobs they were not making much money on and charging vat even though they were not vat reg. did it for a fair few years as well. Shocked when they told me

 

[brightspark]

Doh of course never that simple is it. I know of a sole trader electrician and plumber we're charging vat on little jobs they were not making much money on and charging vat even though they were not vat reg. did it for a fair few years as well. Shocked when they told me

and i expect they were saying to customers they would knock the vat off for cash. ive heard and seen it all before

 

[Rocketman]

Reminds me I need to do my VAT before the end of the month.

 

[AndyStobbs]

Really winds me up when I got idiot customers trying to reduce their bill by 'knocking off the VAT'. Morons.

 

[mike os]

I know of no way to do it legally, and you really don't ever want to be on the wrong side of a vat investigation.... if it was a one off for "home" use well your call

but for business use sooner or later some gimp from hmrc is going to visit and ask for the paperwork..... then they will go through every transaction you have made in the last 7 years with the premise that you have fiddled every single one.... Last guy I know had an investigation ( and he had done nothing wrong the idiot investigator just did not want to believe the accounts) cost him over £8k just in accountants fees.

If you are not VAT registered then you can claim the whole amount as an expense anyway (ie including the vat) and get the depreciation every year... so although you pay a little more short term, over a couple of years you get it back legally.

 

[lexi]

I know some people register for VAT just so they can claim back on plant etc.
The crazy thing is though, they are not turning the 78k over and their customers are not Vat registered ie. general public.
That means their service charges are higher because of the Vat and they have the unpaid tax collecter duty to perform ( doing vat returns)

 

[steviec_lj]

Because they think that they just claim the VAT back, but don't realise that you still get a VAT bill at the end of the year, plus the over inflated accountant fees.

 

[Rocketman]

I doubt anyone who has actually registered for VAT doesn't realise that they need to pay VAT. Most people actually do VAT quarterly instead of the annual accounting scheme on it.

There are other VAT schemes like the flat rate scheme where you get a discount on what you pay back on VAT but can't claim the VAT back on assets unless they hit £2000. And you can't claim back VAT on consumables on specific jobs. So this type of scheme you charge the client for 20% VAT but might be on a discount rate of 14% to pay HMRC.

Obviously with most people if you work for the general public it's best to avoid VAT but working for industry it makes no odds really and can save you a lot of money.