When do I need to register for VAT?

You must register for VAT when your VAT taxable turnover exceeds the ‘VAT registration threshold’ of £83,000.

This is calculated on a rolling 12-month basis and is not solely based on your year-end accounts turnover … so please be aware of this!

What happens if I don’t register in time?

If you forget to register for VAT when you should, and register late, you must trace back and pay the VAT you owe from the date you should have registered.

If you sell to the general public, and not to other VAT registered businesses, this could cost you a lot of money, as you will not be able to go back and charge your customers the VAT!

You may also be liable for a late registration penalty.

How much time do I get to register, once I need to?

You must register within 30 days of your business turnover exceeding the threshold. You can do this online on HMRC’s website.

By doing this you will create a VAT online account – you need this to submit your VAT returns online to HMRC.

You should receive a VAT registration certificate within 14 working days.

If you know you are close to the threshold, and think you might have to register for VAT soon, then contact us and we will be happy to help you calculate if and when you need to register.

But what if it was a one off?

If you only exceeded the VAT registration threshold temporarily then you can apply for a registration ‘exception’.

You must write to HMRC with evidence showing why you believe your VAT taxable turnover will not go over the de-registration threshold of £81,000 in the next 12 months.

HMRC will consider your exception and write confirming if they will allow it. If not, they will register you for VAT.

If you would like to discuss any of this further then please get in touch.

Tom Luckett, Accounts & Tax Tom Luckett.JPG

The importance of keeping your company statutory books up to date.

What are company statutory books?

Statutory books are records about your limited company which are legally required to be kept and safely stored. The relevant documents are usually kept in a bound book or a ring binder.

Alternatively, they can also be held in electronic format providing that you are readily able to obtain hard copies of some documents if required to do so.

Some companies may find this more practical but to avoid any problems, Torr Waterfield keeps the original, physical copy and also a scanned copy of the documents if we are your Registered Office.

Every UK Company is required by law to have a set of statutory books and to maintain/adjust them accordingly. 

What should be stored in them?

These are just a few of the documents which are usually kept in the company statutory books, there are other relevant documents which should be stored, but the list would be too long if I was to write them all! – So here is a basic list of both compulsory and recommended documents to store:

  • The certificate of incorporation
  • The memorandum and articles of association
  • Any share certificates and stock transfer forms
  • Any minutes of meetings
  • Register of members (compulsory)
  • Register of directors (compulsory)
  • Register of secretaries (compulsory)
  • Directors and secretaries residential addresses (compulsory)
  • Company address or company name changes

Because you are required by law to have statutory books, it is extremely important that the records are kept up to date and adjusted where necessary.

How long should you keep them for?

The statutory books should be kept from the date of incorporation until the cessation of the company – This means even dormant companies should continue to maintain them.

The minutes of meetings and resolutions must be kept for at least 10 years from the date of the meeting to which they relate.

Where are they stored?

The statutory books are usually stored at the Registered Office address. However, they are also commonly stored at the companies SAIL address (Single Alternative Inspection Location).

Who can view them?

Any member of the public has a right to request an observation of the company’s statutory books (with a notice period of 2 to 10 working days, depending on the circumstances) if they provide a reasonable explanation for doing so. This will involve stating the following before allowing access:

  • Name and address of person, company or organisation making the request
  • Purpose of inspection
  • Who the information will be given to
  • How the information will be used

Of course, the statutory books should also be available for inspection by HMRC and Companies House. This can be any time between 9:00am and 3:00pm every working day.

In reality, it is rare that requests are made to view the statutory books of a company. Information that would be kept relating to any given company is available from Companies House either electronically or through the post for a small fee.

So why is maintaining the company statutory books so important?

HMRC guidance states that “If you do not keep adequate records or you do not keep your records for the required period of time, you may have to pay a penalty.”

If during HMRC’s visit they find that the records are not kept to an adequate standard they will give you the chance to update them before they come for a second visit.

If the records are still deemed as inadequate, it means that you could ultimately receive a fine of up to £3,000 – Even for small companies!

What if my company statutory books are missing?

It is not unusual for clients to admit to not being aware of the company statutory books whereabouts – it is however possible for them to be reconstructed.

One of our services for clients is to act as the Registered Office for their company, if requested to do so – which also involves storing and updating the company statutory books and filing the Annual Return. For more information on this, please contact us so we can help!

Amy Fisher, Administration _DSC1514.JPG

Voluntary VAT Registration

It is not compulsory to register for VAT until your annual turnover/sales reach £83,000.

However, any business can register for VAT at any time.

So why would anyone want to register for VAT and charge their customers an extra 20%?

Do you sell to the general public?

If so, registering for VAT is not for you!

The general public cannot reclaim the VAT you charge, so your prices will effectively increase by 20%.

You should only register for VAT when you exceed the £83,000 threshold.

Do you sell mainly to VAT Registered Businesses?

If all (or most) of your customers are VAT registered businesses, then it is ok to charge them an extra 20%.  They will simply reclaim this VAT on their own VAT Returns, so they are not out of pocket.

It is probably a good idea for you to register for VAT and earn yourself some EXTRA CASH!!!

How??

Option 1 – Reclaim the VAT on your expenses

By registering for VAT, you must pay HMRC the VAT charged to your customers, less the VAT that you incur on your expenses.

Therefore, VAT can now be reclaimed all business expenses, where VAT has been charged, including:

  • Vans
  • Computers
  • Materials
  • Phone bills
  • Accountancy
  • Etc etc.

Option 2 – Join the Flat Rate Scheme (FRS)

Many businesses can make further profits from the VAT man.

On the FRS, you pay VAT to HMRC as a set percentage of your ‘GROSS’ sales, depending upon your trade sector.  For example, the FRS for a courier is 10%.  You continue to charge VAT at 20% to your customers, whilst paying only 10% to HMRC.

         
  Example: £  
    Yearly turnover (NET) 60,000  
    VAT Charged to Customers (20%) 12,000  
    Cash received into the bank 72,000  
    VAT payable to HMRC (72000 x 10%) (7,200)  
    Income for the year 64,800  
         

As you can see from the above example, by taking the time to submit only four VAT returns each year, you have increased your annual income from £60,000 to £64,800, an additional £4,800.  On the downside, you cannot reclaim VAT as in option 1, but if your purchases and expenses are low, this could be well worth doing.

Note: You also get a 1% discount on the FRS rate for the first year of your registration (an extra £720 in the above example).

TorrWaterfield can assist you with VAT registration, advise on the choice of scheme and help with completion and submission of your VAT Returns.

For further advice, or to discuss whether VAT Registration is for you, please give myself or your usual contact at TorrWaterfield a call on 0116 242 3400.

Stuart Caney, VAT Manager Stuart Caney April 2012.JPG

Sole trade vs. Ltd Company – What’s right for you?

Once you have decided to be your own boss, you then need to choose the best structure for your business.

When considering whether to trade individually or through a company, there are many factors to take into account, be it tax implications, legal obligations or the amount of paper work that needs to be filed on a yearly basis – the main concern for most individuals will be the tax that they will have to pay!

There are pros and cons to both options so it is important to think about which will benefit you the most.

Taxation differs when it comes to limited companies and individuals:

  • Companies are currently taxed at a rate of 20% – this stays the same no matter what profit is made during the financial year.
  • Sole traders, as individuals, have a tax free personal allowance of £11,000 for 2016/17. Once this has been used up they are generally taxed at 20% on any income up to £32,000. They then have to pay higher rate tax of 40% on earnings up to £150,000 – anything above this is taxed at the additional rate of 45%.
  • Sole traders also have to pay class 4 National Insurance @ 9% on profits from £8,060 – £43,000 and then 2% on anything above this.

Actual calculations of tax are never simple but overall, trading through a limited company will usually result in the lowest total tax to pay.

When it comes to the administration side of things, sole traders have it a lot simpler.  The money they have earned for the year has already been taxed and is in their bank account – that’s the end of it.  Companies however, have to file annual returns, submit detailed corporation tax returns and statutory accounts before the various filing deadlines.

Also note that accountancy fees are generally higher for limited companies, which is something to bear in mind!

Overall, many people will choose the limited company option.  We are here to help you decide what is right for you, and to guide you once you have started your business.

Please get in touch if you would like to discuss any of this further.

Jake Dempsey _DSC1536