VAT registration ot not?

GinnyBee Registered, Tutor Posts: 131 Dedicated contributor 🦉
As a new MIP I have a very small client base so far but my aim is to build my practice as far as I can (what I actually mean by that comment remains to be seen!).

Currently I do not have to register for VAT but have been advised it would be best if I did now so my fees always include VAT and I don't look like an ammeter outfit. (It's my old boss who told me this when he emailed me to congratulate me on starting my practice!! Very nice I thought!)

Would welcome people's thoughts on this please.



  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    It depends who your target clients are.

    If you are after tiny businesses who aren't going to be VAT registered (and these are likely going to be the very price conscious crowd), then you not being registered is a selling point as your prices will be more competitive to them. However, after many years as a MIP, in the nicest way these clients can be not very profitable compared to other small business clients.

    If you are going after larger small businesses, t/o £100k ish, they will be VAT reg so its won't make a difference to their bottom line.

    A lot of people expect to pay VAT on accountancy fees so if you voluntarily register you won't be reducing your competitiveness in that sense, other than with other small sole practitioners.

    Some people even if they are price conscious will want to go to a VAT reg firm as they perceive something of value in that.

    Personally, having been non-registered and then registered, I do think being registered gives a more professional image. However, I don't think being non-registered makes you look amateur, it just discloses that your turnover is under £70k.

    Remember, if you don't register and then you do in a year or 2, either through choice or necessity, how will your current clients feel about a price hike of +20%?

    You can't get it right for all clients, and I think the bottom line is: who is your target market?
  • babsa
    babsa Registered Posts: 118 Dedicated contributor 🦉
    There is always the option of the sole trader being VAT registered and a Limited company not VAT registered. However it will mean two lots of accounts to do.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    babsa wrote: »
    There is always the option of the sole trader being VAT registered and a Limited company not VAT registered. However it will mean two lots of accounts to do.

    On person can only control both businesses as described if they are separate trades. You cannot run the same trade as above or it will be artificial separation for VAT you will get into very hot water with HMRC!!
  • payrollpro
    payrollpro Registered Posts: 427 Dedicated contributor 🦉
    Monsoon is right, HMRC will put the two businesses together and treat them as one for VAT registration purposes so it is not worth it.

    I always advise people like yourself to register voluntarily, firstly it does disguise the size of the business, secondly it means you never miss the deadline for registration, thirdly you get VAT back on set up costs without worrying about the three year rule and finally, as Monsoon pointed out, you don't ever have to explain the 20% hike in charges to existing clients.

    No matter how often you explain clients will see the increase and jump ship so generally you would end up taking the hit on the VAT.

    Saying that our practice is not registered, I did not agree but I was outvoted by the other two partners.

  • NeilH
    NeilH Registered Posts: 553 Epic contributor 🐘

    You might want to consider the flat rate schemes, particularly if your input VAT is quite minimal compared to your output VAT.

    A friend of mine has a management training and coaching business and is flat rate, it actually makes him money over being standard registered.

  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
    Personally I've not registered for VAT because:
    1. The VAT I could reclaim would be minimal
    2. I don't think that I will ever earn anywhere near £70k a year - I don't have any plans to move out of my spare room or employ more than one person.
    3. A lot of my clients aren't VAT registered either so it does make me more appealing to them

    As Monsoon says, there's no right or wrong answer, you have to make the decision based on your current position and future plans/aspirations.
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