Can VAT registration mean less profit?

I can beat that, my Ebay turnover last financial year was just shy of

187,000 with a NET profit margin of 17.8%

FWIW, you don't necesarily lose 17.5% of the profit by going VAT regged as you can claim VAT back on various other business related expenses such as shipping, packing materials, vehicle costs etc etc etc. In my experience becoming VAT registered has in the long run generated more profit as it means that businesses are happier to bid on my items as they can claim the VAT back on the things I sell on Ebay. (But then I consider the closing auction price to be VAT inclusive while a lot of other sellers tend to add the VAT on after the close of the auction to try and avoid paying Ebay commission on the VAT element - allegedly)

Being VAT registered is generally good if only for the impression it gives that you are a serious player. People who post here for advice give so few details it is impossible to say yea or nay, so I fire a few warning shots across their bows.

In a "few" months he has knocked up £50,000 or so of sales Neil, he is matching *you* pretty much! Where do you stand on john boyle's suggestion that he should't waste money on an accountant!?

I disagree. Up until the end of last year I did my account myself. However I was talking to a friend who has a business with a similar turnover and he suggested popping along to an accountant and seeing about incorporating to sound them out.

I did - and I am. On my net profit it seems it will save me about 4k a year in tax if I pay myself a minimum director's wage and then take quarterly dividends as opposed to filing future tax returns as personal income gains. She also pointed out a few other advantages to having my accounts prepared by a qualified third party which was probably sales spiel but also made perfect sense to me and, let's face it, with that kind of turnover/profit it's easily affordable to take the hassle off my hands and let me run the business. It also helps that the accountant is a friend of a friend and I am happy about her honesty. Based on my experience I would definitely advise your friend to go and see an accountant, had I done so last year I wouldn't be facing the whopping tax bill that I am now.

Having just completed a degree in accounting I thought it would help me when I take the business full time but as sods law dictates it looks like the opposite is going to happen and I won't use the knowledge at all. Most of it wasn't small business accouting related anyway.

On the plus side, you get to earn interest on HMC&E's money for upto three months, so you might not be as much down as the above calculation would imply.

Best Regards, Alex.

in

reduced by

Especially when I can prevail upon people like your good self and have my questions answered for free.

Thanks for correcting my maths (this was never my best subject at school).

So, I've been wondering if all of my sales are going to decrease by 14.89%. Like this was some kind of magic number when it comes to VAT.

This being the case (and being solely for my own benefit) I'm going to choose a new set of figures and do the same again. Once again please correct any math error. .

Pre-registration:

Buy something for 25 + 4.375 VAT

Sell for 60 thus making 30.625 profit.

Post registration:

I still sell for 60 but this time it's 51.06 + 8.94 Output VAT.

So now I only make 26.06 profit so equalling a 14.9% reduction. Well this seems to answer my question. If I was making 500 per week then post registration this is going down to 435.

Actually this doesn't sound too bad, not really I suppose. Although nevertheless Bastards!

In article , Troy Steadman writes

So... the aim is to have your takings remain at around £50,000, until they actually reach around £70,000?

message

margin 6%)

margins?

No my margins are nowhere near 6%. They do vary wildly from item to item and sale to sale but I usually do allot better than 6% (apart from the times when I make a loss that is).

avoided

Really, what should I say?. You see I don't actually have an accountant as such. Also I've always been led to believe that when turnover exceeds the threshold then registration was mandatory and unavoidable, at least for UK based businesses.

To continue the "business" was actually started at the "end" long long period of profound anguish and misery. To be honest I've only really kept a record over the last 3 weeks or so. It's actually quite nice to know that I'm finally making money and being able to put rough number on the amount.

"Richard Faulkner" wrote in message news:Adwb7DAg7oE$ snipped-for-privacy@estate.demon.co.uk...

registered,

Hi Richard

Generally my suppliers are based in the US. They send the goods to me and I pay the VAT and Duty to the courier upon delivery.

message

paying Ebay

impression it

advice

fire a

Hi there, unfortunately this isn't right. It's only in the last few months that I've realised my turnover will exceed the threshold by the end of the years trading.

You could alsways do what my parents have done. Since introducing them to Ebay they've both found little niches in the market to sell stuff & keep themselves busy in their retirement. Unfortunately the VAT limit for them is looming and with 3 months to go until 12 months is complete they have completely shut down their operation until October and gone on holiday all over the place.

Unless it is 2 separate businesses - his & hers - then each would have their own registration limit.

Balinese silver jewellery and Jamaican Blue Mountain Coffee are so far removed from digital cameras and mp3 players that they may actually constitute a separate trade for all I know.

So if "GN Jewelery Ltd" and "GN Coffee Ltd" were to start trading as separate entities, that would be sensible and make good business sense. It just so happens each would have its own VAT threshold.

But there is a bigger picture and it is that which a good accountant will look at. When exactly did you start trading? What expenses are allowable against your profits? What investments do you have? Are you married? Does your wife work? Your vehicles? Your leases and hire purchase?

You cannot hope to get it right, Niel didn't and he has a Business degree, now is the time to see a chartered accountant while the clouds are swirling around your activities and before chaos sets in. A good accountant will *save* you money.

It's mostly my Mum's side of things that's nearing the VAT limit. Either way she would have definitely hit it if she didn't shut down.

There are also complications as they used to be in business together in a partnership and only de-registered a couple of years ago. It may be OK but they don't want the hassle of the possibility of any kind of investigation to confirm they are trading separately as it's only a hobby really.

In message of Tue, 15 Jul 2003, Troy Steadman writes

Or more importantly a Chartered Tax Adviser.

A good Chartered Tax Adviser will save you tax.

DF

Delighted to meet you David. Graeme is selling or considering selling:

digital cameras digital voice recorders mp3 players jewellery computer components hunting crossbows coffee

[1] How many trades is he indulging in? [2] How should he organise his bookkeeping?

The second is not a tax question, but if he gets either of these questions wrong at this stage his books may one day have to be rewritten.

I have learnt a lot from this thread. Niel, your site at

is fascinating. Thread which may (or may not) interest you is:

uk.business.accountancy "Sole Trader or Ltd"

I have attempted to cross-post it into uk.legal, and if I can learn how to do that I will be "well-rounded" in mind not just in shape.

Yep your mind is good, it appeared here in uk.legal. :) Thanks for that second link, very interesting. Now I almost understand!

He's indulging in one trade. Even if he did business via several limited companies they should be in one VAT group.

The easiest way to keep accurate records would be to use QuickBooks. As long as he takes time to customise it how he wants and considers how to post transactions efficiently it shouldnt take long yet he would have better analysis and understanding of his business than by using a spreadsheet. I think QuickBooks is great for the ease of producing reports and graphs - pity they dont understand how to export to Excel using UK formats!

Peter Saxton from London snipped-for-privacy@petersaxton.co.uk

Quickbooks? Now I know you are a lightweight Peter :o)

Please don't accuse Graeme of coming up with VAT scams, if you have to accuse anyone acuse me. We are "kicking round ideas".

It is not a scam for a trader to trade less to avoid registration, or to concentrate on higher margin sales and dump the rest to avoid registration, in the pub trade it is (or used to be) common for Hubby to trade as Drinks and Wifey to trade as Food, not to avoid VAT perish the thought, for very good business reasons, but nevertheless having that effect.

He has only one trade does he? £ Sales of digital camera 100,000 Purchases of digital camera (50,000) Abortive trips to exotic parts of the world trying to buy jewellery and coffee (50,000) ------ Profit - =====Yea right!