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This website is for education and information purposes only, is not intended to provide professional advice. This blog is written from a UK perspective. This site should not be used as a substitute for competent professional advice from a qualified accountant.
(Also note - Tax, Law and businesses can change quickly: always check the date of the post!)
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Category Archives: Small Business
I’ve blogged before about how VAT works, so here, I’m just going to highlight the symmetry of the VAT chain in the UK by considering a hypothetical supply chain of VAT-registered businesses, Company, A, B, C.
Company A makes a widget and sells it to Company B for £100+VAT = £117.50
Company A’s output VAT (the VAT on it’s sale) is £17.50 which it pays to HMRC
Company B’s input VAT (the VAT on it’s purchase) is also £17.50 and can be reclaimed, giving a cost of only £100
Company B does a bit of additional work and sells the super widget to Company C for £150+VAT = £176.25
Company B’s output VAT (the VAT on it’s sale) is £26.25 which it pays to HMRC
Company C’s input VAT (the VAT on it’s purchase is also £26.25 and can be reclaimed, giving a cost of only £150
Company C does a bit more work and sells the resulting super-duper widget to D for ££200+VAT = £235
Company C’s output VAT (the VAT on it’s sale) is £35 which it pays to HMRC.
Let’s suppose that D, is a private individual, who is therefore not registered for VAT.
D therefore cannot reclaim the £35 of VAT that it’s paid.
So the total cost to D is £235.
D bears the entire cost of the eventual VAT charge.
If a business is making zero-rated supplies, (ie, the products or services it sells), it charges VAT at zero percent, as opposed to charging no VAT. The distinction, although pedantic, is important: These businesses can reclaim all the VAT on the purchases.
(Some examples of zero-rated goods are given here)
If a business is making exempt supplies, it cannot charge VAT on it’s sales and it cannot reclaim the input VAT on it’s purchases.
If a business makes only some exempt supplies, it would only be able to claim the VAT on purchases related to it’s VATable supplies. (The Partial Exemption area of VAT is a whole huge area of VAT rules, in itself, which I will address in a later post)
A business that is unregistered for VAT or a private individual, is completely outside the VAT system. Obviously, they cannot charge or reclaim any VAT at all.
HMRC deems these businesses and individuals to be “out of scope“.
As soon as you list your business in directories and telephone books, register a limited company or otherwise publicise your business, it can generate an overwhelming amount of unsolicited mail and cold-calling.
It has been possible for some time, to register a residential address and telephone number for the mail preference service and telephone preference service. Companies must check that the addresses/telephone numbers are not registered in these databases before making contact. Therefore, registering for MPS and TPS can drastically cut down on the amount of unsolicited mail and telephone calls. Both services are completely free, so don’t pay anyone who says they will do it for you!
It is also now possible to make a corporate registration for the telephone preference service (although, if you work from home and your home number is already registered, you cannot register it again for the corporate service)
For anyone frustrated by automated call-centres and endless “touch-tone” menu options, this great site, GetHuman.com, shows you how to get through to a proper human being.
It’s always best to chose a good name for your business at the outset , but in case you hadn’t, it is possible to change the name of a limited company after it’s registered.
You must first check to make sure that the new name you have chosen is available. This can be done online using Comapnies House WebCHeck service. This service is available from Monday to Saturday 7.00am to 12 Midnight (UK time)
There is a fee of £10 (at the time of writing), which must be paid to Companies House before the name change is effected.
The process takes about 5 working days from the receipt of the request at Companies House. Alternatively, there is a same day service for £50, which may be worth considering if time is particularly critical.
On the change of name, a new certification of incorporation will also be issued.
I know it’s a cliche but time management is even more important when working from home to avoid an unproductive merging of work/home/family. Here are just a few blogs on work/time management sites:
I’ve recently been in the position of choosing accounting software, so this has been forefront of my mind. This is a (by no means exhaustive) list of things to consider (in no particular order).
- ease of use/user friendliness
- accounting knowledge
- upgrade cost
- ongoing support costs
- does it meet your legal obligations