If you're turnover is likely to be less than the VAT threshold, what are the pros and cons of registering anyway - apart from: Looks (slightly) more professional to be registered.
My friend says that it 'doesn't matter about reclaiming vat as what you can't claim back when not registered, is still a cost and therefore you still get it back by declaring it as a cost"
But when I play with the figures
ie assume sole-trader with taxation at flat 20%
Vat Registered Not Registered Income £100 + £17.50 £100 Costs £50 + £8.75 £58.75 Profit £50 £41.25 Less Tax £10 £8.50
Take Home £40 £32.75
it seems that you are just giving the money to the vat man. You are just inflating your costs by 17.5%, yes? Am I missing his point or am I right here?