Yet another VAT question (or two)

More or less. Actually when your turnover exceeds that amount, you must register, though you may register even if it isn't.

Once registered, then until you de-register you *must* charge VAT no matter what your turnover is.

There is never any question of "needing to" in the sense of it being optional. There is no halfway house, charging VAT is either mandatory or forbidden.

More or less. There is no exemption. They have to pay VAT on their purchases, but get it back from the vatman, usually by subtracting it from the amount they collect on sales, and just remit the difference.

Yes.

If you are not VAT registered, you cannot charge Vat to your customers, nor can you recalim the Vat which you have been charged.

Yes.

Okay, so for the sake of cashflow, you should either register for VAT or pass your own VAT cost onto the customer? I would have thought the latter was preferable since it would involve less red tape?

Thanks,

Roland.

It's not only a question of red tape.

Taking an example of buying in stuff costing £200+VAT which you process and sell for £400+VAT, then if you are registered, your cashflow in is £470 (from your customer), while your cashflow out is £235 (to your supplier) plus £35 (to the VATman, though this is really £70 output VAT minus £35 input VAT), leaving you a profit of £200.

If you were not registered, your cashflow out to your supplier would still be £235. You'd have a choice between charging the customer £470, thereby making a bigger profit of £235, or charging only £435, thereby making yourself more competitive, or anywhere inbetween.

It depends whether your customers are themselves registered. If they aren't, you have the triple benefit of less red tape, more profit, and more competitiveness (with the last two being traded off against each other), but if they are, then you make yourself either less competitive or you expose yourself to having to take a cut in profit. This is because your customers cannot reclaim the VAT which is "hidden" in your prices. Because you are not VAT registered, you cannot issue VAT invoices, you can't explicitly charge them VAT, and so they cannot reclaim it.

Sure, less red tape. But with accounts software, the Vat should just be a mouse click away.

Voluntary registration can be influenced by the status of your customers - if private individuals, your higher price through adding Vat may make you uncompetitive.

In article , Doug Ramage writes

Yeah! Right!

Thanks for the various replies.

Roland.