Imminent Online Change from HMRC

[Gouldie0]

I think this may have came up before but i thought i'd post the information to ensure you get plenty of time to prepare. Although it won't effect everybody it does give an indication of the way HMRC are moving with there requirements.

From the 1st of April, if your businesses turnover passes £100k then you'll need to complete your VAT returns online. This includes any payments to HMRC as these will have to be made electronically.

HM Revenue & Customs: Moving from paper to online VAT Returns and paying electronically

Kind Regards

Neil

 

[selfemployed]

VAT is a terrible tax for business as it has no relevance whatsoever to profitability - so you could see your turnover move over the 2017/18 VAT threshold of £85,000, actually make a loss but be hit with a 20% VAT charge! It is possible to oftset the VAT you pay against the VAT you charge your customers but businesses which "make" products might pay minimal VAT on the base parts and be hit with a large ongoing VAT bill. Do you increase the cost of your goods/services by 20% (and make yourself less competitive) or do you take the hit (or part of the hit) yourself which would impact your profits. Shocking in my view!

 

[Businessman]

It's a cross we've had to bear for generations... And yes, if you're (say) a jobbing electrician, and you cross the threshold, suddenly you 'apparently' have to charge your customers 20% more. - But don't forget that once you cross the threshold you then get to claim back 1/6 of the inclusive price of your supplies from other VAT-registered businesses. - In certain B2B contexts being unregistered can actually make you less competitive!

Think of it this way...

You're a non-registered trader. A job costs you £120 in materials and you need £30 to cover your labour. So you charge out at £150 to the customer.

Crossing the VAT threshold, your £120 of materials now costs you £100, because you get to 'claim back' the VAT. This means to make your £30 you now have to charge the customer £130+VAT... Which will be £26 = £156... I'm not defending it, I think the VAT-rate should be lower and there should be some relief given to traders for the extra admin. But it's not necessarily quite the kicking many people trading at or about the threshold fear.

Where it does hurt is if you're charging out for a service but have relatively low costs...

Say the job cost £30 in materials and you 'need' £120 from it... £150 again. This time you will recover just £5 in VAT meaning you're charging out £145 + VAT bringing the job up to £174... There are freelancers I know that shut the doors and go fishing when they've turned over £70K rather than register.

 

[Needhelp]

It is a killer for the catering industry - I have seen this first hand. The difference between the cost of ingredients and the final price to the customer can be extremely wide simply because it is the skill of the chef which converts the raw ingredients into a master piece.