Please help me with this problem, I have been pondering it for months and I am still no closer to coming to a conclusion.
I have a small business -just me. The business is 8 months old and not going through a good patch! I provide a service that is VAT exempt and my turnover is nowhere near the threshold.
I am considering becoming VAT registered because in setting up the business I have probably spent £3000 in VAT (equipment etc), Also I pay about £90 VAT per quarter for various services provided to me. I do sell some VATable items but in total they may reach £20 per quarter in VAT ISWIM
I do all my own accounts which at the moment are not complicated and I don't want to have to employ an accountant yet (not enough cash flow).
So, are quarterly VAT accounts really difficult? would it be worth my while just for the amount of money involved? I know its not much but to me right now it seems like a lot of money that I'm paying unnecessarily.
If your services are VAT exempt then you would not be able to reclaim the input VAT you paid anyway. If however your services are zero rated, then you could. Another if, if your services are a mixture of exempt and zero rated then you'd have to consider partial exemption rules and reclaim a calculated proportion of your input VAT.
So if your vatable sales (including zero rated) are £20 out of a total of £2,000 sales you would be able to reclaim 20/2000 of the input VAT back.
So, in your case, yes it probably is complicated - Sorry. There is a reason the VAT guide is 214 pages long...
If your service is VAT exempt you will not be able to claim any input tax anyway. What service do you provide?
If you have spend £15,000 on equipment and your profits are low this year you probably need some advice to make sure you use the tax relief available optimally. A decent accountant may well cost less than you think.
Services of a registered chiropractor are indeed exempt so you could not claim any VAT on related equipment purchases or services.
As your sales are made to individuals it would not be worth registering for VAT for these because the amount of VAT you would have to give to HMRC (1/6 of the sales price) would be more than the amount you could reclaim (1/6 of the purchase price).
I agree that a good qualified accountant can really help ensure you get the best of the tax relief available for your expenditure. They could well save you more than their fee.
With respect, the difference between exempt and zero rated is a fundamental basic of VAT. Whilst you may be able to cope with the everyday 'books' some areas merit further advice. A little like the fact that I can give my son painkillers when he has backache but I wouldn't try and maipulate his bones. There is a reason both you and I have trained for several years to do what we do. We are both experts at very different things.