OK bit confused. I want to start work cleaning peoples homes and holiday lets, but not sure about tax etc. Should I register for VAT as I can claim tax back on my purchases, or is it not worth it?? I want to appear as professional as poss.
Registering for VAT creates a lot of palaver - you have to complete quarterly VAT returns and pay over the VAT you have collected (less the VAT you have paid on supplies). And of course it means higher bills for your customers. If you are not going to spend a lot on supplies then I would say it's not worth it.
You only need to register for VAT if you are being paid over £58k pa. With respect while you start up you won't be. However you should consider starting yourself up as a limited company, which will protect your assets if it all goes tits up and someone sues you. Also you need liability insurance in case you set fire to someone's house etc. Your local business link office is a good place to get advice on all this. Also bear in mind you need to put around 30% of your income aside for tax/NI.
Oh it's a complete minefield, I've been the finance director for five years now and I still don't get everything about it.
For example, if you deregister because you aren't making enough money to hit the threshold you have pay HMRC 17.5% of all the purchases you've had relief on less depreciation at an indexed rate. Lost? Yep me too, which is why my accountant is driving a newer car than me
Seriously get in touch with your local business link service - they do free one day courses on this stuff when you are starting up and you can also meet up with others starting up and develop a peer group (and find customers!)
I disagree, it basically means you are 17.5% more expensive to most customers unless they themselves are VAT registered and so can reclaim the tax.
If you are cleaning for individual householders, it's just an extra cost. Yes you can reclaim VAT on large purchases but if you then close the business you owe the HMRC that money back it's not a free discount on stuff.
Customers will view a business as professional on many levels, for a cleaner to have a VAT number isn't high on the list of priorities though I'd think.
from gfm's point of view - being vat registered will mean she can claim back vat on what she has bought BUT - she will cost 17.5% more to her non-vat registered customers than if she wasn't. if she is cleaning homes and holiday homes then they are unlikely to be vat registered so this will make her relatively expensive.
So on teh VAT I would say no unless you expect your TURNOVER to above the threashold in which case it's compulsory, or if all your business is going to come from businesses who can claim back your VAT, which seems unlikely
To appear professional get printed stationery and act in a professional manner - don't let the kids answser your business phone etc. Do some Terms and COnditions and make sure you get paid on time.
I was on a VAT training day last Tuesday! Man, I was bored.
Anyway, there's a lovely scheme called the Flat Rate Scheme which you can use when your turnover creeps over £150k a year. It may end up costing you a smidge more but well worth it because it makes VAT calcs ridiculously simple! Hairdressers and similar businesses use it, apparently.