[keeping it clean]

Hi there,
I would be most grateful for any advice....  I have run my cleaning business for two years now, and in the last 6 months I have started to employ cleaners.  The customer base is growing steadily, however I now need to register as a VAT vendor - and so many of my customers are canceling as a result.

They are being charged £10 per hour which will push it up to £11.75 with VAT.

I find it disheartening that they cancel and as I need their business I offer the service with no vat and hide them from my accountant!  All I want to do is run a legitimate business. 

Any advise would be great - please be gentle !

Thanks,
Claire

[*Chris Browne]

Is it domestic? if so i can understand because more than often they cant claim it back. but it shouldn't be a problem with commercials.

Chris

[keeping it clean]

Hi Chris, thanks for your note, it is domestic, and some commercial.  not to worry, just means I need to get more business in to make up for it all.

[Les]

Hi, I know how you feel.

We had to register for VAT a few years ago and all of a sudden my prices went up 17.5% and I never earned an extra penny.

We kept losing out to non VAT registered companies and individuals. We never really benefited by reclaiming VAT on our purchases as cleaning is very labour intensive and our purchases were minimal.

Last year we lost a couple of contracts totaling close to 20k. They were both pleased with our work but due to business difficulties they decided to take their cleaning 'In house' and just got a member of staff to do the basics.

This dropped us under the VAT threshold and we immediately de-registered with positive results. I have been able to increase our prices and still quote less than before.

If we get close to the threshold again we may consider to split the company and run a 'Commercial' and 'Domestic' set up.

Les

[sam1975]

the vat man is the most important man.
it is just a hump!  keep going

[heritagecleaning]

If you have to be registered then go on the flat rate scheme - you'll pay less.

[Cleaning Resource]

if you do commercial and domestic, then split the business into two
commercial vat registered, domestic not registered.

Job Done

[keeping it clean]

Thank you all so much for the info.  I shall take it all on board - have been feeling really flat about the whole thing, and am amazed at the lack of loyalty, the thing that gets me the most is that I am not earning an extra penny, am doing the 'right' thing and yet people don't appreciate it. (never mind their lovely large homes and Aston Martins!)

However having read all your comments I feel more confident.  Thank you!

Have also spent a great deal of time marketing to overcome the losses and this will hopefully pay off!

  thank you!

[CLEAN-MASTER]

I've spoken to my accountant before about splitting my business like this & he says you won't get away with it. The revenue will consider it the same business if it's run from the same office, you would need 2 different address's, telephone numbers etc.

I therefore started up by charging VAT & haven't found it an issue at all for domestic customers, provided you provide a reliable, professional service they will pay.

Robin.

[John Kelly]

To run 2 seperate businesses, one vat registered one not is only possible if either one is run as a limited company the other a sole trader. This way being a director you are actually an employee of the limited company. This is more trouble than its worth as the increased costs of being limited would be as bad as just being vat registered.
The other way is to have the two businesses in different ownership. However husband and wife probably won't wash with the VAT man.
As was mentioned as you don't claim much back just go with a flat rate system usually around 11% but you can't claim any back on purchases. Don't itemise the vat seperately on domestic bills.
Don't let vat hold your business back just accept it and push on.

[Cleaning Resource]

alright it was just a suggestion,


 I got a few old people we clean for and they claim the vat back, something to do with getting mobility or disability allowance.

[rob fryer]

just a thought, you can claim your vat back on any plant that you have bought in the last three years so long as you still own it, as long as you still have the recipts

[keeping it clean]

Thank you,  I understand where you are coming from,  I have decided to do a large leaflet drop and online advertising, and am going to now charge a flat rate of £10 plus vat.

98% of my business is domestic so I need to keep it going.  I will be registering witht he flat rate as i have so little to claim back.

My customers that I have had for two years are standing by me but it's the newish customers that are canceling.     

[turneylogan]

When we went through the VAT threshold 5 years ago we thought long and hard what we would do. In the end we decided that we did not want to lose any customers so we wrote to them all explaining that we had to register for VAT but rather than simply put up prices by 17.5% we would reduce their basic price so that their actual increase was half of the VAT rate. We thought we were smart but still they moaned and groaned and some cancelled.

In hindsight we wished we had simply put up prices by the full VAT rate and replaced those who cancelled with new customers because the existing ones kept complaining about value for money.

[Nick Vassilev]

Sooner or later you have to register for VAT (and become an unpaid tax collector  ).  But there is a good thing in this too - it means your business is GROWING!

Just write to your customers and explain why you'd have to put prices up. Most of them know what VAT is al about and will agree to the increase. You will lose some but you hopefully you will regain your position soon, as long as you provide a good service.

At the end of the day you have to stay legal and still grow your business. The VAT man is the last person you want to play with.

Good luck!

[Lesley J]

We have been paying VAT for 3yrs now and it is very hard at first and makes you wonder why you are bothering, but there is light at the end of the tunnel, we did lose a few, but we gained a few at the new price . we still have competition from from local ladies on bikes doing a cleaning round, but they will alway be around, did think about the 2nd company route, not worth the bother, now pay flat rate of 11% I hate paying it out, but what can you do if you want to grow.  Lesley