Beautician

K H

I have a Beautician as a client who is quite successful and exceeded the vat threshold.
I registered her and warned that , as she is selling to the public, it was going to be expensive and that she might try to put her prices up to compensate for the vat cost.
I also looked at a flat rate scheme for her but it wasn't appropriate.

On her first return i obviously claimed for stock on hand and equipment held but she is now complaining about her vat bill being almost £3k on the second return.

I feel like telling her to get someone else to deal with it!

Has anyone had similar experiences?

groundy

It is always hard for Beauticians and hairdressers to accept VAT as there is very little inputs to recover. Something I have done in the past is incorporate the business, this doesnt avoid VAT but will usually get you another 6-9 months before you need to register.

They have two choices:

1. Look at increasing prices and be certain to move some money each week into a savings account.
2. Reduce hours / staff to return below VAT threshold

There are probably plenty of other options but for me these are the most realistic.

Newbie

I thought if you incorporate it would come under the TOGC rules

Bluewednesday

We've just taken over a client who's previous accountant had incorporated to avoid the VAT threshold, now having a VAT inspection and inspector said the same thing as Newbie, TOGC overrules and turnover limit won't start again

groundy

Newbie / Bluewednesday

Thanks for that. I was not aware that this was the case and have never come across it before and therefore thank you for your views

Cheers

Ste

stevo5678

Interesting I remember looking into this a while back and thought that going Ltd was a seperate business in terms of the t/o limit. I believe someone who discussed this with me on another forum actually called HMRC and they said it started again on a seperate basis...

I'm not sure if the TOGC means it is compulsory to cary on the VAT registration but I could be wrong

Here's the intitial discussion and the last post is what HMRC apparantly advised.

http://www.accountingweb.co.uk/anyanswers/question/vat-registration-incorporation

Looking at it again it appears that maybe the TOGC rules imply who should take into a/c T/O from the previous 12 months...

stevo5678

I've confirmed with our tax advise helpline (Tax wise - who are all tax geeks that actually use the legislation on a daily basis!) and apparently the rules are:

1) If the sole practioner was not vat registered and not required to be then the Ltd co's t/o clock starts form zero.

2) If the SP was vat registered or required to be then the Ltd Co will need to register.

This actually makes alot of sense to and conforms with the TOGC rules:

3.8 Taking over a business as a going concern
If you take over a business (or part of a business) as a going concern from an owner who was, or was required to be, registered for VAT, there are some checks you need to do.

Work out the value of the taxable supplies the business you're taking over made in the 12 months before the transfer.

Add that figure to the value of any taxable supplies you made in the 12 months before the transfer.



So basically if you are already registered then you can't get out of it due to the TOGC rules. If you are not registered as a SP then it's perfectly fine and the clock starts at zero.

When taking this information together with HMRC's advise via the telephone call (see link for previous thread) it would appear pretty clear. However it is alarmingly inconsistent with Bluewednesday's post but I have seen HMRC be wrong on more than one occasion and lose an argument.

Bluewednesday

stevo5678 wrote: »

When taking this information together with HMRC's advise via the telephone call (see link for previous thread) it would appear pretty clear. However it is alarmingly inconsistent with Bluewednesday's post but I have seen HMRC be wrong on more than one occasion and lose an argument.

With this one, he should have been registered so that's how it got caught, I think. He just hit the threshold before he incorporated.