vat!!!

[wayneward25]

Hi

I'm looking for some feedback and advice.

I'm a small business dealing with private domestic home owners providing home improvement work.

There is myself and a couple of subby that I use. I am flat out until August with work.

I want to expand the business and take on a few more subbys but this will take my turnover over the vat threshold.

I don't think I would get the work if I added 20 percent to my quotes. I would have to take it out of my profits. I would need to double my turn over to earn the same money I'm on now.

 

[noseall]

You won't actually be adding 20% to the quotes in their entirety, should you become VAT registered, just an additional 20% on the labour.

Your quotes are already allowing for the VAT on mat's.

 

[garethpa]

don't forget that being vat registered allows you to claim all your vat back that you paid for business related purchases.

 

[FiremanT]

OP:From your comment about doubling turnover will result on the same profit, I assume you have current profits of about £30K. on turnover of approx. £80K. But your understanding is flawed. As mentioned, paying 20% VAT to HMRC is not a real increase in costs of 20%. You are, I think, assuming VAT roughly of £16K (on current turnover) whereas it would be probably about £6K. However, this figure would assume your subbies are VAT registered. If they are not, your VAT bill would rise by 20% of what you pay them.

Also, did you know that when you register, you can also claim back VAT on allowable purchases you have made, going back several years.

 

[wayneward25]

Hi thanks for the replies.

Yea my current profit is around 30k

my subbies are not vat registered.

 

[wayneward25]

see this is how i calculate it. my current situation

my profit £30,000
my materials costs are around £10,000

subby costs around £27,000

other costs £8000

Total £75,000

I know I could do commercial work but its not what i want to do.

I would like to take probably 1 or 2 more guys on thats all nothing to great and i estimate i would make an additional £15,000 profit but then there is the basic rate tax bracket also. I am a sole trader not limited

 

[noseall]

Have one of the subbies buy their own mat's.

 

[D_Hailsham]

Talk to your accountant.