Thread: Registering for VAT - Pros and Cons?

one thing to think about

If all your income is from affiliate programs then the only thing to bother about will be paperwork; i.e the networks aren't bothered if they have to pay you VAT.

However if you sell to other bisinesses or oter people the 17.5% price hike may mean less sales.


You've probably thought of this, but thought i'd mention it.

So basicly more paperwork and price hikes.

Allthou I understand businesses get the VAT back on stuff they purchase for the business/

most of the companies I sell to are VAT registered so it does'nt really effect them apart from cash flow. it also means that I can apportion some of the VAT on items that I currently use but were bought before tax registration back. i.e. the first quarter I may have a net repayment?

I became VAT registered a few months ago and there is a little more paperwork, but as you should be keeping records anyway it's really just a matter of amending the way you do that to include the accounting for VAT. Plus every so often you have to fill in a VAT return based on those records you've been keeping, but if your records are ok then the VAT return's quite simple.

So initially it does take some time to work out what to do, what records you need to keep, how to invoice people, etc. But once you've got over the initial transition it should be quite easy to account for VAT.

As for price hikes, this doesn't really affect most of us as we deal with businesses. Most businesses will be VAT registered (any that earn over something like 55k have to be) so if you charge them VAT then it's no problem as they just claim it back. If you sell to the public, though, then it is a real price hike.

E.g. if there are 2 plumbers that charge £100 for a job and one becomes VAT regisitered so has to charge VAT then any individual employing them will have to pay £17.50 more to the VAT registered one, so he's less competitive and his business will suffer. But, if they both did work for a business that needed the same job doing, the business wouldn't care which they employed as if one charged them VAT they'd just claim it back.

As I said before, there is a level of turnover (around 55k) where you have to be VAT registered if you make more than that in a 12 month period. If you think that you're likely to make that at some point soon (remember - it's turnover, not profit) then you may as well become VAT registered now if you're going to make a few purchases soon.

I sometimes spend a couple of thousand a month on advertising, so that's why I became VAT registered as I was paying an extra 17.5% on that. Now I'm VAT registered it's like I save that much and (after tax) it all goes straight into my pocket for a small amount of extra paperwork.

Another reason for becoming VAT registered is that if you deal directly with businesses then they will take you more seriously if you charge VAT. I.e. it's an indication that you're a proper company.

If you priced your services properly in the first place there should be no need for a price hike.

Those operating outside of VAT illegally want stringing up as they are playing an unfair advantage.

We had a competitor operating illegally outside of VAT and we simply could not compete on price as he had effectively 17.5% less costs in his product. Am very pleased indeed to see he has to pay VAT now. HA HA HA.

He will either have to price hike or take the loss.

How do you mean "If you priced your services properly in the first place there should be no need for a price hike."? The moment you become VAT registered you have to charge 17.5% more.

If you're not VAT registered then you don't charge VAT. On becoming VAT registered you have to charge VAT. If your customer's VAT registered themselves, e.g. a business, then the price increase makes no difference. If your customer's not VAT registered, e.g. the public, then your prices will have been hiked by 17.5%. How do you mean that they wouldn't wouldn't if you priced services properly in the first place?

If somebody's illegally pretending their turnover's less than the VAT registration threshold then that's one thing and is very bad. But if your competitor was a smaller business that didn't have to VAT register and you both sell to the public then you're going to be at a disadvantage due to your higher prices. But that's the way it works, unfair as it may seem.