Self employed, Pro/cons of reg as Ltd company

[WoodYouLike]

If you dont have to go VAT registered then don't, you immediatly become 20% more expensive than anyone else.

Nope, you become less expensive than those registered for VAT. But don't forget if you are not registered for VAT you pay 20% more for all materials/services you purchase yourself.

Plus if you supply other businesses (with products and services) there's not difference in regards of VAT, they can claim it back too

 

[expertgasman]

Doing your own accounts is simple at first, and for all the start up costs you may make, can be claimed against in your tax return.

Sorry, Moggie, that is really bad avice.

OP, get an accountant NOW. (I would be interestd in everyone else take on that). If you leave it "till later" you WILL go wrong. Experience talking here! Generally, we wnt LTD a few years back, and I didn't notice any difficulty in getting PLI. We've not needed finance, but your Acct (!) will advise.

 

[PrenticeBoyofDerry]

Thanks for all the replies.
I have done some research prior to making the original post.
But now I am a little confused, I did discuss with a business start up organization at becoming VAT regs. But by the time he had gone through the pro/cons it did not seem worthwhile doing unless you have to when reaching the 70k threshold.
But it would seem conflicting information has been given, surely is you are VAT regs. Bearing mind you can claim the VAT back, you can operate without having the VAT as an overhead as it is refundable. I don't think it would make you 20% cheaper, but there is a saving that could be passed over to any clients/customers.
I can manage my own books no problem but I will be employing an accountant, as from what I have been told they are a must!
I plan to speak to business link later this week, they are in the area on Thursday.

 

[expertgasman]

.
But it would seem conflicting information has been given, surely is you are VAT regs. Bearing mind you can claim the VAT back, you can operate without having the VAT as an overhead as it is refundable. I don't think it would make you 20% cheaper, but there is a saving that could be passed over to any clients/customers.

Being VAT registered only increases the cost to YOUR CUSTOMER by 20% of your PROFIT, or reduces your profit by 16.6% So, on a major job, with huge amountts of matrial that you are supplying, the effect is diluted. On a large labour only job, the cost is significant. As far as your domestic customer is concerned, they are only interested in what they pay, not whee the cash is going. So, if you charge, say £70 for a service, you have to stump up £11.66 to the Vatman. Remember, though, that you get back the VAT on capital purchases and overheads. The basic principle is that you contribute 16.6% of your PROFIT to the VATMAN.
I can not see any reason why one would volunteer for registration, unlesss you intend dealing primarily with VAT registerd business.

I can manage my own books no problem but I will be employing an accountant, as from what I have been told they are a must!

Absolutely

You seem to have your wits about you, so good luck.

 

[WoodYouLike]

.The basic principle is that you contribute 16.6% of your PROFIT to the VATMAN.
I can not see any reason why one would volunteer for registration, unlesss you intend dealing primarily with VAT registerd business.

Two remarks here:
even if you're self-employed, you will contribute part of your profit to the TAX man.
As for volunteering, there's nothing to volunteer if you hit the VAT threshold. Don't think you only have to start the registration the minute you hit that threshold - you'll have to register as soon as you think you will hit that threshold during the tax year.

 

[dizz]

If you set up a limited company, you may wish to sell all of your existing tools, at market rates, to that company, so the company has these on their balance sheet, and the depreciation can be offset against your company's corporation tax.

 

[WoodYouLike]

If you set up a limited company, you may wish to sell all of your existing tools, at market rates, to that company, so the company has these on their balance sheet, and the depreciation can be offset against your company's corporation tax.

Quite right, but not before you get advice on this from your accountant. Not always the depreciations is completely offset against the tax, it can - in some circumstances - even increase it. So, ask before you add it to the fixed assets.

 

[1john]

I think you could rent the tools to your ltd company.

 

[PrenticeBoyofDerry]

Could I just sell my tools to my company anyway, regardless whether a LTD company or not and still claim it back on the tax?
Could I rent my garage as storage and the spare room as an office?

 

[1john]

the thing is that if you rent the garage and spare room then accounts need to be done for renting them, ie you who receives the money, you can claim a percentage of gas and elec towards the busineess, there are corses that you can do that the HMRC do so you know what you can and cant get away with.

 

[fattony]

I was advised by my accountant similar info 1john, I wanted to build an extension and rent the space to my company but apparently HMRC take a dim view of it so I left it alone

 

[PrenticeBoyofDerry]

Got an appointment with Business Link tomorrow at 2.30pm, see what they come up with.
What do you do about drawing up contracts of work? Say I got offered a couple of rooms to plaster and some sockets to install, in some ones house are there any standard contracts to be drawn up?

 

[expertgasman]

[

.The basic principle is that you contribute 16.6% of your PROFIT to the VATMAN.
I can not see any reason why one would volunteer for registration, unlesss you intend dealing primarily with VAT registerd business.

Two remarks here:
even if you're self-employed, you will contribute part of your profit to the TAX man.[

Indeed, but the VAT is extra to the IT, and the 16.6% is extra to that which a non VAT reg trader will pay, making you less competitive.

b]As for volunteering, there's nothing to volunteer if you hit the VAT threshold[/b]. Don't think you only have to start the registration the minute you hit that threshold - you'll have to register as soon as you think you will hit that threshold during the tax year.

Again, perfectly true. But somewhere during these posts it was suggested that VAT registration is useful because of what you can claim back. My point was don't do it until you have to, and yes the rule of anticipation exists.

And get an ACCT straight off.

 

[WoodYouLike]

the thing is that if you rent the garage and spare room then accounts need to be done for renting them, ie you who receives the money, you can claim a percentage of gas and elec towards the busineess, there are corses that you can do that the HMRC do so you know what you can and cant get away with.

And don't forget the council can come knocking on your door and charge you fro business rates as well as normal council tax

 

[WoodYouLike]

Indeed, but the VAT is extra to the IT, and the 16.6% is extra to that which a non VAT reg trader will pay, making you less competitive.

True, but if a client has nothing else to base its decision on he/she will go for price always. So.... make sure you give them something else to base their decision on: craftsmanship, information, being there on time etc etc etc