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supernova77

  • Posts: 3547
VAT
« on: May 29, 2020, 04:50:20 pm »
Hi Guys.

For those of you who are mainly domestic and VAT registered...

What did you do to prepare for VAT ?

Did anyone put up their prices at the same time in order to reduce the hit slightly?

Also... Are you flat rate VAT or full 20% ?

Andy 😊

Smudger

  • Posts: 13438
Re: VAT
« Reply #1 on: May 29, 2020, 05:29:25 pm »
In year one of vat we paid 11% so before hitting the threshold prices went up 10% and heavily canvassed more work to get a good run once over the vat limit this is also when we started taking on more commercial works as you charge them 20% all the above help offset that big lump to the tax man

Darran
Never argue with an idiot, they will only bring you down to their level, and beat you with experience

Richard iSparkle

  • Posts: 2491
Re: VAT
« Reply #2 on: May 29, 2020, 05:37:52 pm »
before going through VAT i got everyone on DD so i knew i could do successive price rises simply.

then i did the price rise (for all customers 12 months old or more) and the following year did a price rise for the others

i also made sure my cashflow was sorted. so DDs for domestic cleans were part of that, but also going to use a cloud based accounting system (xero) and then making people pay upfront for one off jobs (managed easily with xero)

make sure you have a decent accountant, and in my case i needed a bookkeeper too. i'm not good at being organised so cant manage my own books.

R
iSparkle Window Cleaning

www.isparklewindowcleaning.uk

Mike Burd

Re: VAT
« Reply #3 on: May 29, 2020, 07:21:47 pm »
Are you  limited? If not, go limited before you hit the threshold and the clock starts again.

Other than that the best advice I can give is add the vat to every bill. You will lose some, but overall you’ll be well up until you hit £230k. Takes courage, but if I could go back that’s what I’d have done. Otherwise you’re always chasing to claw back your margin.


Ortsa

  • Posts: 84
Re: VAT
« Reply #4 on: May 29, 2020, 07:29:12 pm »
Are you  limited? If not, go limited before you hit the threshold and the clock starts again.

Other than that the best advice I can give is add the vat to every bill. You will lose some, but overall you’ll be well up until you hit £230k. Takes courage, but if I could go back that’s what I’d have done. Otherwise you’re always chasing to claw back your margin.

Hi Birdy, why is the £230k point significant?

Mike Burd

Re: VAT
« Reply #5 on: May 29, 2020, 07:34:49 pm »
Are you  limited? If not, go limited before you hit the threshold and the clock starts again.

Other than that the best advice I can give is add the vat to every bill. You will lose some, but overall you’ll be well up until you hit £230k. Takes courage, but if I could go back that’s what I’d have done. Otherwise you’re always chasing to claw back your margin.

Hi Birdy, why is the £230k point significant?
About 230. You have to come out of the flat rate scheme. Incidentally, it you aren’t paying rent and utilities you’ll struggle to get the 12% now. I can’t remember the exact figures but if your non Labour and vehicle costs aren’t a certain percentage of turnover you pay 16%.

Ortsa

  • Posts: 84
Re: VAT
« Reply #6 on: May 29, 2020, 08:06:40 pm »
Oh fair - as far as I'm aware the flat rate VAT scheme ends at £150k turnover. But yes you're right it's 2% revenue which can be easily made up of poles, cleaning fluid etc

Mike Burd

Re: VAT
« Reply #7 on: May 29, 2020, 08:14:44 pm »
Oh fair - as far as I'm aware the flat rate VAT scheme ends at £150k turnover. But yes you're right it's 2% revenue which can be easily made up of poles, cleaning fluid etc
No, you can’t join if your turnover is over £150 but you can stay in up to £230k.

https://www.gov.uk/vat-flat-rate-scheme/eligibility

Ortsa

  • Posts: 84
Re: VAT
« Reply #8 on: May 29, 2020, 08:33:30 pm »
Ah yes - thank you for clarifying!

Mike Burd

Re: VAT
« Reply #9 on: May 30, 2020, 07:48:45 am »
Oh fair - as far as I'm aware the flat rate VAT scheme ends at £150k turnover. But yes you're right it's 2% revenue which can be easily made up of poles, cleaning fluid etc
It's not that easy. I really struggled when it came in to spend the 2% with staff. When you're suddenly paying out an additional £1,500 a month on VAT, spending on unnecessary equipment becomes more difficult. This is why you should just be brave and add 20% across the board. You WILL lose some. But overall your business will be stronger.

Crystal-clear

  • Posts: 3029
Re: VAT
« Reply #10 on: May 30, 2020, 05:32:43 pm »
Oh fair - as far as I'm aware the flat rate VAT scheme ends at £150k turnover. But yes you're right it's 2% revenue which can be easily made up of poles, cleaning fluid etc

No equipment and poles etc do not count they're Capital items unless you throw them away within a year and you don't not receive funds. Deliberately purchasing polls to chuck em after a year is a false economy and within your account's they're easily identified as capital items.

Every business is different whether you qualify for the flat rate scheme you should be able to find that out by asking your accountant ( everyone tends to get one once they creep around the 85k mark )
That way you will know exactly.

Anyhow Vat is challenging and everything gets more serious that extra hour at work most times to make up that little bit more profit you're always chasing profit net of vat eventually your mind will will automatically deduct a certain percentage of your daily turnover and you'll become better at it.

Couple of other things.

If you got a nice little bit of commercial work (wish I had more) you will really enjoy adding VAT to the invoice
In my case I didnt even mention I was going vat and supprised them with the vat not a Dickie Bird
Because they just offset it againts thier own vat bill. If you have 30% commercial and you genuinely are eligible for the flat rate you'll be making an extra 9% on that particular 30% of work in the first year as you will charge 20 but pay 11
Possibly keeping you on an even Keel on the other domestics !!

Also You won't necessarily need to up your prices at all instead you can just focus on volume and amount per day so all you have to do is deduct the vat amount you'll be paying from the turnover of your day rate and figure out if it's still profitable long term.

Hope this helps, first thing's first definitely hire a good accountant who is recommended ideally
Who can hopefully give you sound professional advice.


Tom-01

  • Posts: 1348
Re: VAT
« Reply #11 on: May 30, 2020, 09:56:01 pm »
Oh fair - as far as I'm aware the flat rate VAT scheme ends at £150k turnover. But yes you're right it's 2% revenue which can be easily made up of poles, cleaning fluid etc

No equipment and poles etc do not count they're Capital items unless you throw them away within a year and you don't not receive funds. Deliberately purchasing polls to chuck em after a year is a false economy and within your account's they're easily identified as capital items.

Every business is different whether you qualify for the flat rate scheme you should be able to find that out by asking your accountant ( everyone tends to get one once they creep around the 85k mark )
That way you will know exactly.

Anyhow Vat is challenging and everything gets more serious that extra hour at work most times to make up that little bit more profit you're always chasing profit net of vat eventually your mind will will automatically deduct a certain percentage of your daily turnover and you'll become better at it.

Couple of other things.

If you got a nice little bit of commercial work (wish I had more) you will really enjoy adding VAT to the invoice
In my case I didnt even mention I was going vat and supprised them with the vat not a Dickie Bird
Because they just offset it againts thier own vat bill. If you have 30% commercial and you genuinely are eligible for the flat rate you'll be making an extra 9% on that particular 30% of work in the first year as you will charge 20 but pay 11
Possibly keeping you on an even Keel on the other domestics !!

Also You won't necessarily need to up your prices at all instead you can just focus on volume and amount per day so all you have to do is deduct the vat amount you'll be paying from the turnover of your day rate and figure out if it's still profitable long term.

Hope this helps, first thing's first definitely hire a good accountant who is recommended ideally
Who can hopefully give you sound professional advice.

I remember my accountant explaining to me that HMRC will always get their money one way or the other. For example if you pay flat rate, you’ll have more profit so pay more corporation tax, and if you pay yourself a bit more you’ll pay more in income tax.

I think the trick is to price higher on add ons such as conservatory cleaning, gutter cleaning and perhaps adding building cleaning and soft washing.

Smudger

  • Posts: 13438
Re: VAT
« Reply #12 on: May 30, 2020, 10:01:25 pm »
Other than regular window cleaning all prices quoted are + vat

That way I don't under price myself  ;D

Darran
Never argue with an idiot, they will only bring you down to their level, and beat you with experience

Kev Martin

  • Posts: 6954
Re: VAT
« Reply #13 on: June 03, 2020, 04:48:39 am »
Don’t forget when you go VAT Registered anything you have bought in the last 4 years that you still have and have a receipt for you can claim the VAT back on your first return.  This includes Vans
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