VAT - to be registered or not to be
I have just switched accountants and he has informed me if I want to claim back all the VAT from my equipment purchases, I need to do so before Feb 2012 as it will of been 3 years since I brought my equipment.
I have worked out the figure to be £1,600. Not to be sniffed at. However, this will push up my prices, or lower my income. I never intended to go VAT registered as my business has always been part time (to a day job), but now I have started full time.
Mostly doing corporate job with small to medium businesses with a mix who are VAT registered and not. I may (if money gets tight) branch into weddings too, where VAT registration will hamper me.
Of course if everything goes swimmingly and I earn over £73k I'll have to anyway! Plus apparently (seeing as I don't buy much stock) I can set up a scheme where I don't claim the VAT back, but keep a proportion of the VAT I claim.
It seems logical to go VAT registered but I'm worried that I will not be competitive and that it will be a pain to manage. On the flip side I don't want to lose out on £1,600 of all important cash flow now!
Do you think most Video Production Companies are VAT registered? If they are it would make sense to go VAT registered I think.
I cannot see myself earning £73,000 this year, however, I hope to soon and it seems silly not to go VAT registered now and lose the £1,600 I can claim back.
I also wonder if it makes a business look more credible with corporate customers?
But apart from the price difference, am I missing something else that would go against being VAT registered. Another reason not to?
Are you all VAT registered?
PS - Checked with my accountant and he seems to think I can go on the VAT scheme you talk about (where I keep some of the VAT).
I registered quite soon after I went freelance as it became clear that I was likely to earn around the threshold anyway (it was lower back then). I work for a selection of production companies, a couple of broadcasters and occasionally for a facilities company and all of those are VAT registered businesses so it doesn't make any difference. The corporate stuff that I do tends to be through a production company working for big companies (the kind where it's my reputation for broadcast that's got me the gig) so no issue there either. If you're working for/selling to people who aren't VAT registered then yes it puts your prices up (or reduces your income), so if you're in that part of the market you'll have to make your own judgement on that.
Even though I don't always cross the threshold (I haven't for the last couple of years TBH but work has picked up a lot this year so maybe...) I reckon it's worthwhile for me as I do spend quite a bit on keeping my computers & software up to date, so I get to claim back a decent amount. If you don't spend a lot then the flat rate scheme is quite attractive (and simplifies your VAT accounts).
(I am not an accountant), but I would think that you should register immediately, write off that £1600 against your income, then,
if you don't normally have many large purchases of equipment, register for the flat rate scheme as soon as you can.
I presume that you're refering to England. While I was there, I only had travel expenses to claim for, and I was making an extra 10% on my invoices from that scheme.
Hopefully all your clients will be VAT registered, so if anything you'll look more professional and established with VAT registration.
I wasn't VAT registered when I first started because my two main clients weren't either and with only so much money in the pot, I'd either loose quantity of work or have to adjust my rate down to compensate.
Once the balance shifted to more VAT registered clients, I became VAT registered too. The admin load isn't particularly heavy(and you pay your accountant to help you with that right?) especially with the flat rate scheme, and you can still claim for big purchases (above £2000 I believe)so I think you'll find it worthwhile.
Incidentally, I still get plenty of work from those two non VAT clients...
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