I think next month I am going to exceed my 12 month turnover over the £82,000 VAT threshold! I am looking into registering for the flat rate VAT scheme which is 4% VAT of turnover.
I was just wondering any advice anyone had for me and whether anyone else was also on the scheme?
I have done a bit of research and understand the only VAT I can reclaim on the flat rate scheme is machinery as long as the invoice total is over £2000. This is pretty handy as I have recently won a contract for a childrens play centre and the machinery I will have to purchase is around £15,000
Do you plan to grow your business to way beyond the VAT threshold?
Each case of which route to take is very personal to your business and can only be calculated based on your input/output. To claw back VAT on your last lot of equipment is one hit unless you are constantly planning on purchasing equipment, so don't let that bias you to going for the flat rate.
The only way to know what your liabilities are is to work out the two options for registration for VAT.
If it were me I would split my business up into two, register one in the wife's name, and have this one voluntarily registered for VAT. If you are careful you can just put anything you do each month over the VAT threshold through the second VAT registered company, and also use this one for large purchases such as your machines so you can reclaim the input VAT.
It's not uncommon for a couple to both be operating companies in the same industry (mike at midland vending and his wife), and it would be difficult for the HMRC to say with any certainty which machines were yours and which were hers.
I registered for VAT this year as I have bought a lot of new machines and a new van , I am just under the threshold but registered mainly to get the VAT back on machines and van . Can I now change to the flat rate or do I have to continue on for a set amount of time .Any info on the flat rate scheme would be great as my accountant says the flat rate scheme is for those in retail owning or leasing shops etc not vending machines . Thanks
Mark, it's interesting what you say but if I had an inspection from HMRC do you not think it would get there backs up and deem it as VAT evasion? As they will clearly be able to see what we have split the company up to avoid vat they could potential back date all the vat they calculate I have avoided and hand me a big bill?
I would be pretty pi55ed off with my accountant if I were you! He should have informed you of the flat rate vat sceme as you still could have claimed back all the vat on your van and machines as long as the invoice is over £2000. I think flat rate vat is eligible for most businesses, confectionery is 4% so pretty decent rate as a lot of industries at 7% plus!!!
You should be able to switch over to the flat rate scheme tho! Perhaps call up HMRC?
I would advise not getting your partner involved to set up another company and splitting your business. It's known as fragmentation and HMRC do not like the practice.
My wife is a tax inspector and works very closely with the vat people in her office.
Splitting the business is a definite no no.
If you ever get audited you will be in trouble.
I have been on flat rate scheme now for 6 years.
I got audited last year which was an absolute nightmare getting all my accounts in order.
Thankfully they were happy with everything.
Only good thing about it is claiming vat back from last 4 yrs on big purchases.
Really winds me up having to pay them every 3 months for nothing though.
I believe you can split any business if they are different Ifor example at the moment we are a catering and vending but are going to split the catering from the vending as they are classed as 2 different types of business.
I know of companies that 1 rents out vending machines to company number 2 who operated vending machines which is 2 different types of business again .
But yes I agree splitting one business in 2 to avoid vat or tax is a definite no no
