To register for VAT or not?

Well they wouldn’t be QUITE 17.5% better off, but you’re 100% correct that everyone in this business should be VAT registered – it’s just doesn’t make sense not to be.

If anyone’s worried about the paperwork (and they shouldn’t be) then at least register on the Flat Rate Scheme; it shouldn’t take you more than half an hour a month to do the admin and you’ll add over 6.9% of your turnover straight on to your bottom line.

Posted under Courier Financial Issues, VAT

Posted by Alec at 3:38 pm, December 4, 2007

4 Comments so far

  1. Alec added on  December 4th, 2007 at 16:10

    I did say ‘at least’ Steve. My point was that even if you can’t face the full horrors (and it’s really not that hard) of accounting for VAT in the normal way then even the most innumerate muppet could administer the FRS without any problem and still benefit substantially.


    FRS or normal VAT? As a general rule:

    Do you hire or lease your van, rather than buying outright/HP/bank loan?

    Do you sub out work to VAT registered subbies?

    Do you drive a van larger than a Fiat Scudo?

    If you answer yes to 2 or more questions you’ll probably be very slightly worse off on the FRS.

    More accurately though: work out how much VAT you pay on fuel, van hire, repairs, ‘Network’ membership, subbed out jobs (only the VAT registered subbies) and mobile phones etc over the course of a month. (you can just add the total spend and multiply by 0.1489 to work out the VAT).

    Add up your turnover for the same period and multiply it by 0.06925. If the first figure is lower than the second you’ll be financially better off on the FRS. If the figures are about the same then I’d suggest that you go on the FRS anyway as it’s a lot easier to administer.

  2. Alec added on  December 4th, 2007 at 16:32

    You’d only be claiming back in a lump sum what you would have been able to claim over the last 3 years anyway and you wouldn’t be able to claim back your fuel costs except for the fuel that you had in your van on the day of registration.

  3. You can go back and claim 6 months for services, 3 years for goods. So if you bought your vans you could claim back the VAT up to 3 years later providing you still own the vans at the time you register. You can only claim back rentals or lease payments for 3 months though.

    It makes more sense to register at the earliest opportunity though, unless you want to supply to a lot of non-registered customers.

  4. And if you had more than one van then you’d probably be over the compulsory VAT registration threshold anyway.

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