Business
Business advice from Griffins – Terry Keep answers your questions
I have recently started my own business in management consulting and anticipate sales of£100,000 in the first year. I am regularly asked whether my company is VAT registered. I am worried that VAT is very complex and there is a high risk of penalties. Should I register my business for VAT? Mark
Dear Mark
Once your taxable turnover exceeds £ 73,000 in a rolling 12 month period registration becomes compulsory. Therefore based upon your anticipated turnover of £100,000 you will have to register for VAT during your first year.
Alternatively you can voluntarily register immediately while your turnover is below the threshold. This has the advantage of not having to revise you documentation within a matter of months. It also provides an element of credibility to a new company seeking contracts.
Since your expected turnover is below £ 150,000 you are also able to use the ‘Flat Rate Scheme’ for accounting for VAT. Full details are available from the HMRC website. Using the link below.
http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm
The scheme simplifies how VAT is accounted for. You still charge your customers 20 per cent VAT but you do not need to know all of the rules for the VAT you can reclaim. This is because you only have to pay a percentage of you VAT inclusive sales value to the HMRC.
For a management consultant, the percentage is 14 per cent of the VAT inclusive sales value. As an added incentive you will receive a further one per cent discount for the first year of VAT registration.
If you are at the early stages of your business might also want to look at our new business kit available to download from the Griffins website.
http://www.griffins.co.uk/small-businesses.html
The new business kit looks at the financial, tax and accounting considerations of starting a new business. This reference guide to starting a business gives you an overview of the areas involved with setting up a business so you will successfully be able handle many of the problems encountered in starting and running a business. It is important to remember to seek professional advice in areas that you are not sure about. The benefits will far outweigh the cost.
If you would like any more information on any of these issues please contact Terry Keep on (01635) 265265 or email t.keep@griffins.co.uk
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