How VAT Affects Small Businesses

[S1:E39] How does VAT affect small businesses? As a new business start-up knowing how to work with VAT from the outset can help pave the right path for your business, when it comes to making a decision about VAT registration or not.

How VAT Affects Small Businesses Timestamps

  • [00:00] Welcome Introduction
  • [01:29] How does VAT affect a small business?
  • [01:55] What is VAT?
  • [02:18] Difference Rates of VAT
  • [02:57] Example of VAT calculations (VAT Registered Businesses)
  • [05:57] Example of VAT calculations (non-VAT Registered Businesses)
  • [07:33] Registration Rules
  • [11:24] Voluntary Registration
  • [14:19] VAT Registration Negatives
  • [19:20] How to Connect with Nicola
  • [19:30] Q: When is the best time to register?
  • [22:54] Contact Nicola

Meet The Expert

Nicola Hageman
Nicola Hageman Accountancy

The Problem

Not knowing what it is you don’t know, how that will impact you in the future and the business decisions you make.

As a small business, especialy a new business there are many different ways that you can operate and been seen as trading in the eyes of the UK goverment.

As the owner of a small business, one of your concerns will be to decide how you want to work with, or not, VAT.

The Solution

You need to understand it impacts on your business operations, how others perceive you, and how VAT affects small businesses profit margins depending if you have chosen to operate as a business that is (or not) registered for VAT.

As a VAT registered business, VAT is actually simple, the VAT you pay out on, for the goods and services you buy in to help run your business can be deducted from the final “vat bill” that you need to pay HMRC.

This VAT bill, is due to be paid annually and is the total sum of all the VAT charges you have applied to any products or services you have charged your consumers and clients.

There are lots of things to consider as some products and services may be excempt or charged at a reduced rate, but essentially what you’ve paid out on, is deducted from what you have charged, and the balance/difference is what you then pay HMRC.

As a sole-trader or non-regsitered VAT business whose operating below the VAT threshold, this can mean that you are paying for vat as an extra cost for running your business but as you do not charge this to your clients, you are therefore paying the VAT out of your own pocket.

Depending on your type of clients and the number of services you buy in that charge VAT your accountant can advise and direct on whether its in your best interest to register for VAT regardlessly.

The Benefit

For larger businesses, it makes life easier when talking shop to discuss tradining relationships as everyone is on the same page and even footing as far as VAT payments are concerned.

As a registered VAT business, everything you pay out can be off-set what you owe.

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