[creighton foyle]

i know some people on here think if you dont have to register then give it a wide birth but having been registered in the past both in the uk  and in france and ireland i have never found it to work against me.  i have found that in the commercial sector some companies expect you to be registered and in the domestic sector you can turn the negative into a positive by offering to pay the vat for the customer as a marketing ploy with some customers even suggesting you break the law and accept cash ( what will they think of next lol ).

i would also like to know if anyone is running their business as a ltd co one man operation as that is what i intend doing but a ltd co is all new to me.



 

[Graeme@Access]

Hi,

As a LTD (not just me here though)  i can say that your looking at £800 pa for accounts at least. You can avoid NI by paying dividends so basically you are 8% up. The way you extract money though is "risky" but not illegal. Ask your accountant, the tax man owes us 1.2k at the mo as we have a good one.

Graeme
Access Cleaning Solutions

[Mike Halliday]

I'm limited and pay £475 a year.

my wife owns the company, we have me & 1 subcontractor, we both work as a 2 man team but he is self employed

[happy mondays]

Hi,

As a LTD (not just me here though)  i can say that your looking at £800 pa for accounts at least. You can avoid NI by paying dividends so basically you are 8% up. The way you extract money though is "risky" but not illegal. Ask your accountant, the tax man owes us 1.2k at the mo as we have a good one.

Graeme
Access Cleaning Solutions

Paying dividends isnt risky if your company is making a profit...  its totally legal. Ive had a ltd company for over seven years and have allways made a profit, never been owed tax as you pay corporation tax on your profits, 21% up to £300k profit. If your not making a profit then you cannot take dividends.

Graeme is right about accountants charges, it costs more for ltd, mine have ranged from £1200 to about £2200 and my accounts have always been kept spot on by myself, I now pay monthly over the year so I dont get a huge bill, any accountant will be happy to do this as it also benefits them in this current economic climate.

Vat reg is a pain for domestic customers, its best if you can avoid it. It wont really make any difference to commercial clients, or make you not get the job. Claiming it back on purchases is ok, equipment, supplies, fuel etc. If you do register have a seperate bank account to transfer any vat owed in to. Saves getting in a mess, same for corp tax if you go ltd, put 25% value of dividends away.

Regards,

Paul  

[clarkson]

Hi
 I would be wary about going LTD to early, but depends on your turnover. you certainly want to go ltd if your profits will be over 38 000 to avoid 40% tax rates.

 Below that you do avoid 8% ni as stated, but there are complications you also avoid payments on account which eases cash flow. One is i would certainly consider a book keeper as the accounts need to be in very good order. Also you need good cashflow. you cannot just take the money in the business account as you are able to do as a sole trader so funds need to be available to pay bills and supppliers and still pay you.

For vat registration it depends how much commercial you will be doing if you have leads for large commercial companies they may expect you to be vat registered.  However they do not insist on it unless you are doing really big tenders.

If you are doing  domestic dont touch it until you hit the threshhold around  70.000 i believe. Then consider the flat rate scheme which will save you thousands.

it is very complex decision and depends an awful lot on circumstances.

cheers

john

[happy mondays]

Hi
 I would be wary about going LTD to early, but depends on your turnover. you certainly want to go ltd if your profits will be over 38 000 to avoid 40% tax rates.

 Below that you do avoid 8% ni as stated, but there are complications you also avoid payments on account which eases cash flow. One is i would certainly consider a book keeper as the accounts need to be in very good order. Also you need good cashflow. you cannot just take the money in the business account as you are able to do as a sole trader so funds need to be available to pay bills and supppliers and still pay you.

For vat registration it depends how much commercial you will be doing if you have leads for large commercial companies they may expect you to be vat registered.  However they do not insist on it unless you are doing really big tenders.

If you are doing  domestic dont touch it until you hit the threshhold around  70.000 i believe. Then consider the flat rate scheme which will save you thousands.

it is very complex decision and depends an awful lot on circumstances.

cheers

john

John please dont take my reply to your post the wrong way, but alot of what you have wrote is total cobblers.

For a start, if the shareholders took 40k pa each in divs, and paye £100 pw, they would pay 40% on the 7.2k over the 38k. If you were a sole trader taking the same £ in drawings it would be the same, this is unavoidable.

You can take money out whenever you want to as a dividend, weekly monthly or once a year as long as all shareholders get the same and providing the company is making a profit. Funds need to be available in any business to pay suppliers and bills, why just Ltd???

Why will the flat rate scheme save you thousands? 

Going Ltd isnt a complex decision, just have a chat with an accountant.

Regards,

Paul

[Doctor Carpet (Ret'd)]

Hi Creighton

I would very much second what Paul "Westy" has said.

I'm a one-man band limited company. With t/o above £70k I have no option about being VAT registered. the pros and cons of the flat rate VAT scheme have been well debated on the forum before now so have a search but the main advantage is that VAT is only payable upon monies collected and paid into your accounts. In other words it fits to your caash flow. Otherwise you have to pay the VAt even if you are awaiting on debtor invoices to be paid.

My biggest problem was overcoming my own reluctance to charge it to domestic clients, but as has been said you can use this as a "discount" for first-time clients. All repeat customers are charged it a standard.

Accountancy fees in general will be higher for limited companies than being self-employed as there are certain statutory niceities to be complyed with. As with most things you will find some accountants are more expensive than others, and as with most things (including choosing a cc) you may get a better accountant if you pay a bit more. you pays your money and takes your choice. I know my accountant is a bit pricey but i have no complaints with the level of service, skill and their reputation. (O, and I also clean their carpets!!)

Hope that helps?

Rog

[creighton foyle]

hi rog,
my thoughts are along the same lines as you, i used to play darts with my accountant so he is not as expensive as he might be with others.
 i have to start out with some ambition and i think with hard work i can be over the vat threshold in three years, meanwhile i get the vat back from my start up costs which will be over 1k and all that can go into marketing, i can and will do my own vat returns and i do not think i will lose many customers through charging vat. i will be happy to clean carpets and upholstery for anyone but my main target clientel will be in the more affluent areas where i live but what is more important is from my previous experience as a decorator i know that in certain areas you can charge more whilst in other areas if you need the income you have to ajust your prices accordingly i want to be flexible, having said that i have'nt a clue about marketing but i am doing the ncca carpet cleaning course in september and a course with cleansmart next week so i hope i will get an inkling from one of them. i am optimistic (i have to be)heres to the future !

[Graeme@Access]

Paying dividends isnt risky if your company is making a profit...

Apparently if you pay a monthly dividend it can be seen as a salary therefore subject to NI.

[happy mondays]

Paying dividends isnt risky if your company is making a profit...

Apparently if you pay a monthly dividend it can be seen as a salary therefore subject to NI.

That isnt true either, a dividend is a dividend and nothing else.

[absolutecleaning]

What is your understanding of it Westy?

Our accountant thinks it fine just to take dividends from our limited company as and when but another accountant I spoke to suggested that myself and my partner should be taking a small "wage" as well to avoid problems.  (There are currently no employees on that payroll and we were taking the p*** just using it for dividends.)

Cheers

Simon

[happy mondays]

What is your understanding of it Westy?

Our accountant thinks it fine just to take dividends from our limited company as and when but another accountant I spoke to suggested that myself and my partner should be taking a small "wage" as well to avoid problems.  (There are currently no employees on that payroll and we were taking the p*** just using it for dividends.)

Cheers

Simon

Hi Simon,

Any accountant should tell you to take about £100 pw each as paye, as this is tax free and avoids ni conts. I think this is what he would have meant. As ive said as long as your company can cover dividend payments out of the companys profit it is totally legal to take dividends (equal to all shareholders) whenever you want to, weekly, monthly or whenever the funds are there. As ltd you are employees of the company, it doesnt matter that you dont employ others.

Regards,

Paul

[Doctor Carpet (Ret'd)]

What is your understanding of it Westy?

Our accountant thinks it fine just to take dividends from our limited company as and when but another accountant I spoke to suggested that myself and my partner should be taking a small "wage" as well to avoid problems.  (There are currently no employees on that payroll and we were taking the p*** just using it for dividends.)

Cheers

Simon

Hi Simon,

Any accountant should tell you to take about £100 pw each as paye, as this is tax free and avoids ni conts. I think this is what he would have meant. As ive said as long as your company can cover dividend payments out of the companys profit it is totally legal to take dividends (equal to all shareholders) whenever you want to, weekly, monthly or whenever the funds are there. As ltd you are employees of the company, it doesnt matter that you dont employ others.

Regards,

Paul

Paul's right. That's exactly my understanding of the situation as well.

Rog

[absolutecleaning]

Cheers guys.

[clarkson]

 Westy
  i will not take your coment that my statements are cobblers the wrong way, even though it is very offensive.

  My statements are all true. Many accountants will not advise going limited until profits would put you in the 40% bracket thats one of the main points of going limited. Below that is it worth it is my point.
yes you save the ni but on twenty or thirty turnover minus personel allowances especially when the cost of running the business will be higher that isnt much of a saving over sole trader.

  My point about funds in the business is relating to cashflow. Iam talking about needing cash out the business urgently because nothing has come in for awhile. Not the whether you are entitled to it or not. in domestic cleaning you can be cash rich but if our friend is doing commercial he mabe on 60 or 90 day accounts. you are correct on paper it doesnt make a difference but in practice it does.



In the cleaning industry the flat rate scheme does save you money, we have very little to reclaim and the generous 7 or 8% the government allow you to claim is far more than you would claim on a standard  return except for start up costs like vans  and equipment which are reclaimable as they allow one ofs for capital items.

my simple point is you loose nothing if you trade as a sole trader for a short period to see what your figures will be then incorparate if you are making good profits. I agree with you being ltd is not difficult but if someone is starting out it is a complexity that is unnecessary.

regards
john

( director of a vat registered company)





   

[happy mondays]

 Westy
  i will not take your coment that my statements are cobblers the wrong way, even though it is very offensive.

  My statements are all true. Many accountants will not advise going limited until profits would put you in the 40% bracket thats one of the main points of going limited. Below that is it worth it is my point.
yes you save the ni but on twenty or thirty turnover minus personel allowances especially when the cost of running the business will be higher that isnt much of a saving over sole trader.

  My point about funds in the business is relating to cashflow. Iam talking about needing cash out the business urgently because nothing has come in for awhile. Not the whether you are entitled to it or not. in domestic cleaning you can be cash rich but if our friend is doing commercial he mabe on 60 or 90 day accounts. you are correct on paper it doesnt make a difference but in practice it does.



In the cleaning industry the flat rate scheme does save you money, we have very little to reclaim and the generous 7 or 8% the government allow you to claim is far more than you would claim on a standard  return except for start up costs like vans  and equipment which are reclaimable as they allow one ofs for capital items.

my simple point is you loose nothing if you trade as a sole trader for a short period to see what your figures will be then incorparate if you are making good profits. I agree with you being ltd is not difficult but if someone is starting out it is a complexity that is unnecessary.

regards
john

( director of a vat registered company)

Sorry you took the post the wrong way John and it was deemed to be offensive, this wasnt my intention!

The main point of the flat rate scheme is to save a new company some administration time and you can only join if your turnover is below 150k

Alot of companys are Ltd who dont work in the commercial world so cashflow is not an issue. Ltd is safer if the company go's bang, main point being tax liabilites are the companys and not personal.  Any good accountant will advise each individual enterprise accordingly before a business start up.

I am not qualified to give anybody advice on this subject but I do have a bit of knowledge from both angles from my own expierience and opinions. You like myself, must also be seeing it from both sides as A 2 Z Cleaning is not a Ltd company, so you must be a company director of another company.

Regards,

Paul

[Ian Rochester]

There seems to be two questions going on here, one asking about registering for VAT and the other about going limited.

They are totally separate issues, for the cleaning industry registering for VAT should only be done when you reach the turnover threshold (£72,000) and then it may be best to go flat rate as the majority of costs will be free of VAT (wages).  Once you hit the higher level £150,000 you have to leave the scheme and go on to standard VAT return.
http://www.hmrc.gov.uk/manuals/bimmanual/bim31585.htm

Registering for VAT before you need to is normally only viable for businesses that export the majority of the products, ie they claim VAT back on their raw materials and costs incurred in the UK but do not have to charge VAT on their exports.

As for going limited, that's a totally different question and one I've answered in the past

Regards

Ian Rochester
Managing Director
Lionheart Cleaning Services Ltd
VAT No: 904285531
Company No 6351932

 

[creighton foyle]

thanks guys answers helpful and informative as usual.

re the vat flat rate if someone was to do £100.000 in a year + vat so a total of £117,000.500 and in the first year they pay the flat rate -1% which i think would make it 9.5 %  = £11000.162 vat they would be left with £106,000,338 so they would be up by £6,388 or £3194 on £50.000. now i am pretty sure its not as easy as that or everyone would do it so can some teach me the error of my way of thinking please as even on £25.000 a year the £1500 you would be up on the vat would cover the cost of van and pl ins, van tax and some or all of accountants fees. or have i worked this out the wrong way.

[Doctor Carpet (Ret'd)]

Hi Creighton

You raise an intersting point but I think I can answer it for you. Firstly the flat rate scheme IS designed to help small businesses, especially those who have to go vat registered having hit the threshold as of course vat isn't a regressive scheme of tax like income tax which moves from a nil rate band (personal allowance) to increasing higher levels of tax the more income you have. VAT is payable on all income once you are registered through hitting t/o threshold and is payable at the same rate on all t/o no matter how high that is.

As such it does give you some flexibility to not charge vat to clients (expecially domestic) and allow you to absorb that cost yourself in your pricing structure. Now any business can do this to some extent but that "profit" you mention is if you like the eqivalent of your own "personal allowance". If you choose not to charge vat to all your clients then of course you will lose that "profit" element.

My second thought on it is to do with marginal rates of VAT. For companies on the normal scheme their vat bill is the differnce between their input vat and their output vat. On the flat rate you can't claim back your input vat (unless for large capital expenditure). Therefore the input vat you pay to your suppliers (which you can't claim back) will reduce your "profit" element. Obviously each business will have different o/heads and input vat costs but you will find that they will almost/substantially eat up all of your "profit". As such therfore your marginal rate will simply be equivalent to approximately the standard rate of 17.5%.

Hope that makes sense?

Rog

[creighton foyle]

cheers rog
 i think i got it now.