Has VAT registration Ruined my business - Tradesman

so how exactly has VAT registration affected my business?
in the video I dive deep into how its potentially ruined my domestic electrical business
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This video is for entertainment purposes only and is in no way intended as a guide or 'how to'.

[@SquirreliciousMe]

VAT shouldn't be that tricky for any business. Managing what is owed is done by every accounts package with ease as it's not exactly new. Ways to reduce VAT bills ... if you're above threshold and under £150K, register for Flat Rate VAT scheme - it's 9.5% for an electrician with > 10% materials as turnover. That makes VAT returns trivial, and means you retain a good chunk of the money - and helps you essentially phase in being VAT registered... but also, if you are VAT registered work to build up a "VAT" account (another current account, a business savings, whatever) and put the VAT amount in a separate account when you're paid. Then you've always got the money and aren't caught out. Another great way to reduce this problem is to stop letting customers pay you on long terms - they don't need 28 days or whatever you offer - and whilst you might have time to pay your trade suppliers, you don't have extra time to pay VAT so work to get customers paying more promptly... cashflow is king.

[@jameskearney2699]

Unfortunately if you do do any subby work the main contractor now doesn't give you the vat( reverse vat charging ) but on the flat rate scheme you still lose 10% of what you do get in so its pretty unworkable:(

[@SquirreliciousMe]

@@jameskearney2699 fair enough but I think I’d question if I want to be doing subby work to begin with. Seems to be to my mind a poor earner anyhow.

[@chicagofleet7427]

flat rate is now 16.5% whatever the business so doesnt work either now as costs far out way the benefit of collecting the tax for HMRC!

[@SquirreliciousMe]

@@chicagofleet7427 Not sure why you think that - my understanding is electricans come under "General building or construction services" which is 9.5% on the revised list. Unless you are not buying materials to the point you're < 2% materials cost, as long as you're under £150K turnover I was of the understanding an electrician will qualify for the 9.5% rate. Worth an accountant checking *OR* a call to HMRC. Also, this notion you're simply collecting the tax for HMRC is a little simplified of reality. You're really just paying a difference in values, which often is beneficial to you.

[@John-pw7et]

I’d be more worried that I wasn’t turning over more than £85000 if I had the overheads you must have with unit to pay for a van apprentice etc

[@mikeselectricstuff]

You can voluntarily register if you're below the threshold - this can be an advantage if a lot of your clients are also registered, as they can claim back the VAT you charge, and you can claim the VAT back on everything you "buy for the business", if you know what I mean...;-)

[@UberAlphaSirus]

;D

[@bikerchrisukk]

😜

[@Robert-cu9bm]

Entertainment expenses

[@SquirreliciousMe]

(a) not "everything, and (b) I'd be careful about your smiley winky face...

[@deang5622]

@@Robert-cu9bm No. Entertainment expenses are not relevant here. Entertainment is about spending company money, you might be able to claim the VAT back but you still have an amount of money the company is paying which you would not normally have, and that reduces the profit in the business and means there is less profit to distribute in the form of salary, dividends.

[@stepbackandthink]

You think you have a good accountant, yet he didn’t advise you to start a separate media company to avoid being VAT registered…

[@Kieran-jq5kk]

I was thinking that.

[@anthonybragg]

@@Kieran-jq5kk Same here. could the KZbin income be separated?

[@Bacrenfencing]

Also did not advise that he could claim all the VAT back on tools, plant and machinery for the last 4 YEARS and all services for the past 6 months...........I would be getting another accountant pronto

[@kieranmccreedy271]

You shouldn't need to slap 20% on the whole invoice cost (a £170 job doesn't become £204). You will be getting your materials 20% cheaper... your van, laptop, tools etc are all 20% cheaper... I'd increase your labour only by 20% and take the VAT saving on the tools etc as a bonus/increase of profit. For example, if a job was £120 materials (inc VAT) + £50 labour = TOTAL £170... now it'll be £100 materials (because you will claim the VAT back) + £50 labour + £30 VAT = TOTAL £180 You'd probably save that £10 elsewhere by claiming the VAT on tools etc but if you can still get the job at a slightly higher price why not!

[@deang5622]

It is very important to keep the VAT separate from anything else. You may buy materials at prices which exclude or include VAT. When you are costing a job out, you need to understand if the supplier is charging you VAT or not and identify if they have provided or will provide you with a VAT invoice providing their VAT registration number. If the company you are buying from is not VAT registered, then the price they are charging you is the cost that you will include as the material cost in the job you are doing. If the company is VAT registered and has or will provide a VAT invoice with their VAT registration number and it lists the VAT amount, then the cost of the materials is the invoiced amount without VAT. That is how you have to cost the job. Add in your Labour cost, and other costs, total it all up. Then you have to add the VAT on top. Then you present an invoice to the client showing: (1) Total job cost excluding VAT (2) VAT amount and VAT rate (percentage) (3) The total invoice amount (total job cost plus VAT amount) (4) Your VAT registration number Doing it any other way is wrong.

[@ProfessionalPainterDecorator]

I've spoke on a recent YT short about this..... totally drop the £85k threshold... drop VAT from 20% to 10% and have all business' registered for VAT. then all us small 'trade' domestic workers are all charging VAT. We all pay VAT anyway, so 10% extra for a customer who didn't pay it before... it's hardly a deal breaker. It also makes you look more professional to some. Those who want cheap labour... let them search for those cash in hand workers on Market Place.

[@UplandsJack]

Not read other comments but sure someone must have suggested just open a 2nd business. (Legally) Keep original business as Sparks then simply have 2nd as Bundy Media etc.. Then take all earnings/payments from KZbin, endorsements etc through that business. That way with what you said you be back below threshold … Keep the vids coming Nick 👍🏻

[@SquirreliciousMe]

He can potentially do that but that might not be as simple as you make out - he may end up with cross company trading (perfectly legal, but as always has implications).

[@jamiebourne8047]

My thoughts exactly.

[@joebonthuys]

I wouldn’t entertain this, that’s one way to get royally fucked hard by the vat man not if but when they find out.

[@mrhaydon]

£650 for an RCBO board is still cheap in my opinion. Even still, the customer is already paying the VAT on the materials before you were vat registered so it's not quite as much of a price increase as you'd expect.

[@MartiA1973]

About average for a full RCBO in Bournemouth but cheap for the bigger cities IMO.

[@mrhaydon]

@@MartiA1973 I live in a smaller town and id still say it's cheap for my area too. 🤷🏻‍♂️

[@_chrisr_]

I've been VAT registered for best part of 20 years and it hasn't been that big a problem for me - I always keep my accounting software up to date with invoices and I always keep VAT receipts etc. For small items a VAT recipt isn't essential any more which is helpful but you still have to keep a record of the purchase in your accounting software. Some of these applications allow you to scan receipts/invoices easily with mobile app which makes it easier. I would always keep the receipts I can so that if there is an investigation I don't have a massive gap between the totals I am submitting and what I have physical evidence for. It is important to remember that although you have to charge 20% on top of your base price, you have to factor in the fact that your materials and other vatable expenditure doesn't have the VAT included so your costs are lower than the competition who isn't VAT registered - so the VAT is only really added to your own labour costs (and those of any employees/non vat registered subbies), therefore you can reduce the net price accordingly.

[@edc1569]

A re-wire has a lot of materials cost, you should be claiming that back? Also can you claim VAT on inputs like IT, telephones, fuel, etc, etc? You probably shouldn't be just slamming 20% onto the price of previous quotes?

[@joebonthuys]

I think they should lower the threshold to £20k to level it up. So many more advantages of being registered than not imo. It’s also a piece of piss to sort out, if tradify doesn’t do it get a proper accounts package like xero and it’s all done for you automatically. Literally 3 buttons and it’s submitted for you.

[@zoltrix7779]

In Australia, its $75,000 AUD. About 35,000GBP. There is basically zero businesses that are not regsitered for it (we call it GST). Its pretty simple to deal with for modern accounting software, do they have Xero in the UK? Bank feeds automaically inserted into the software day by day. GST is only 10%. Sounds like everything works the same way. Just keep you running your business properly. Sounds like they need to lower the registratio amount so some companies don't have an unfair advantage.

[@bspbme]

youve got a common misconception there, being vat registered doesnt mean your 20% more, your materials and expenses were allready vat, just you payed it, the only extra vat on your work now is your labour, when i quote for a new boiler (as a plumber), my quote is normaly about £100 more, on a £2.000 quote.

[@peterlogan706]

I was going to say that as well, I’m in Australia so we are only 10% GST, I’m claiming the 10% back on everything I’m buying adding markup then adding GST to the total parts+labour, so I’m only 10% more on the labour than someone that’s not registered for GST because they can’t claim the 10% back on the parts.

[@Dlc18139]

This is spot on, VAT has many more benefits if you are anywhere close to the threshold anyway.

[@Robert-cu9bm]

It means as a business you save 20% on many things.

[@ebebop]

@@peterlogan706 I was going to add the same. I’m a plumber vat registered and I found I had growth year on year.

[@pauljohncross]

VAT applies to both labour and materials…

[@mark_just_mark]

Why didn’t you register the KZbin business separately from the electrical business, surely one is a service and one is an entertainment business?

[@edc1569]

two sets of accounts for what benefit?

[@Kieran-jq5kk]

@@edc1569 to bring the income from both below the threshold

[@mark_just_mark]

@@edc1569 Not having to be VAT registered as an electrician…

[@adamdoherty1760]

Our vat rates in Ireland are a bit different but anyway, you shouldn’t be 20% higher than other contractors. Let’s say last year you did a job for £200. £100 of that was material cost and £100 was your labour. You’re now getting 20% back on the material so it’s only costing you £80. You still want your £100 pound labour so your quote is now £180 PLUS VAT @20% = £216 (total cost to customer) you then give this excess £36 to the government. You’re only £16 higher which is only 8%. But you could get this even lower, your labour rate could reduce to say £90 instead of £100 because you’re now getting VAT back on your fuel and tools and any business expenses. This would make your new quote £170 plus VAT = £204. Now you’re only 2% higher than last years quote. Hope this makes a bit of sense 🤘🏼

[@handycrowd]

Finally someone sees the benefits, spot on! Not registering for VAT introduces a glass ceiling for any business and they'll never grow :-)

[@pauljohnson4590]

But of course the guy who charges five grand, compared to your six grand has to pay more for his trips to the wholesaler - if you buy a grand's worth of stuff CEF, your competitor paid twelve hundred - because you have the VAT on those prices to claim back. Your fuel is less, and it means that to balance out, you're not 20% worse off - it's just the difference between the input and output tax. It depends but people often quote a 10-15% increase, so you can offset things. I think the one year you quoted to back date the VAT is actually 4?

[@verlicht]

Just in hourly wages, working alone. I'm at 85.000 euro a year. My materials past 3 months were over 45.000. All residential. How on earth would you be able to stay below the 85k threshold if you are doing all your business legally?

[@kittsdiy]

idd unless you only work as subcontractor . only invoice your labour .. then turnover - costs = profit .. Don't get this also .. here in Belgium average house rewire it at least 5-10k or more ( prices are crazy now for cable etc ) not doing crazy ( domotic / smarthome ) . You can have a turnover of 100K .. and only earn 10k profit . lool ..

[@joe2395]

I found after having to go vat opened the gate for more customers who only wanted dealt with vat rated tradesmen,and if we got a biggish job it was no problem for them to buy the materials,as long as you have a good accountant then fine 👍

[@leshackett3687]

The thing you said about customer paying material bill is more important now the prices are soaring

[@Fluka5]

Could you register the KZbin and Electrician businesses as 2 separate Limited companies so that each company is below the VAT threshold?

[@dbc1702]

You can not do that to evade vat registration, if HMRC find the two business are viably linked they will take them both as being one and the same and both turnovers will count towards the 85k threshold

[@GoProGeeks]

This is called disaggregation. And in the example of Nick, I would suggest there is are two independent companies operating. An electicians business and a multimedia entertainment company. I would be happy them being two separate businesses, and I am an ex HMRC VAT inspector. If it was say a garden centre that sold plants and sheds, then you could not disaggregate that business to a plants business and a shed business. Things like customer base and where the businesses operate from come into play.

[@Robert-cu9bm]

@@GoProGeeks YT is advertising for his business, these are linked. If his YT was showing people the art of origami then yeah, you could claim them as separate businesses.

[@GoProGeeks]

@@Robert-cu9bm you would need to show a link between him receiving customers purely from seeing his videos. Yes there will be instances where this may occur. But A) it would not be the norm, and b) HMRC would need to prove that nick intends to use it to advertise for work which would be near on impossible to actually prove beyond all reasonable doubt.

[@Robert-cu9bm]

@@GoProGeeks do you really wanting to be fighting that in court. HMRC unlimited resources NB making a living not a killing

[@Bacrenfencing]

Good video ! VAT registration is not as bad as you make out though (a lot of contractors hold it up as some sort of blocker). You say that you are 20% dearer on all your jobs, this is where most get it wrong. You are saving 20% on your fuel, tools, materials, overheads etc etc, so by the time you do all that you are probably only around 7-8% more expensive being VAT registered. You can also claim back VAT for 4 YEARS worth of purchases (tools etc) when you first register, so that will mount up and give you a head start. If you want to grow, VAT registration is a goal worth aiming for, if you are happy staying small then all well and good but keeping an eye on rolling turnover can be a pain if you are always hovering around the 85k mark. All the best !

[@pengy5340]

this is it man after everything else it isnt 20%.

[@simonscott1148]

Just run 2 businesses so you kept below

[@sparkyhobo3844]

I'm a sole trader sparky, and have worked for myself for 14 years. I went VAT 8-9 years ago and haven't looked back. I opted to be registered even though my turn over was under the threshold, as the type of clients i wanted to attract ( quality higher end domestic , small commercial and industrial) were not keen to trade with businesses they can't claim back from. A good bookkeeper will help you, and as soon as you have a decent system setup, it will fall into place. What i claim back from tools / materials / vans etc is all worth it + you certainly attract clients where your not penny pinching on quotes!!!!

[@frankief7111]

Nick is a superhero helping ordinary people in his community, if he starts to cherry pick the the posh people (not sure how many there are in Stafford anyway) who takes care of our mums and dads with reasonable prices?

[@MOSSFEEN]

HOUSE BASHING is a waste of time and effort Served my time doing some small Commercial / Industrial jobs and work from there up. I do rakes of Pharmachem jobs now

[@kingofthetrowel1725]

Thanks for explaining nick 🙌🏻🙌🏻

[@NM-gr1iq]

You need to ditch your accoutant he is advising you badly

[@chrisardern4594]

Unfortunately adding 20% on top of your estimate can and ofter does lose you the job.

[@StuartJ]

You still have to do almost as much paperwork not being VAT registered. It's all computerised anyway. Keeps you disciplined, as now you have to get your books in order every quarter. Also, you dont need to charge 20% more. Only your labour, and markup, is 20% more. Your costs become less.

[@mickhooper3631]

I feel your pain Nick. I turned over approx £110 k in 2021, However after speaking to my accountant he said that If part of the turnover was a one off. ( for me it was I had two jobs worth 28K between them which would never ever be repeated) then I could apply for an exemption. My accountant done this on my behalf and Voilla, I am not paying VAT . Just a thought. The other thing you said about working four days a week, I have taken it a step further and now only work 3 day's but to be fair to our younger sparks I don't need to pay a mortgage anymore. Take your time guy's and pick your jobs carefully. Never turn down work. Over price it and if you get it then it is worth doing. Remember we have all done a lot of studying and now with the new A2 regs my New CU Installs have almost doubled in price just on materials alone. All the best everyone. Mick

[@chrisryan3770]

You are paying VAT. You’re paying VAT on absolutely everything you use and consume. The only person not paying VAT is your customer. If you’re VAT registered your customer pays VAT on your labour and materials and you don’t. I don’t understand why you’re choosing to pay your customer’s tax bill?

[@Mr.MFuckingYTchangedmyname]

So your materials have doubled, but there would be 20% VAT of that you could have claimed back! If, as you say, you are pricing high and picking your work, having to pay the VAT man shouldn't be an issue to you - you'll have figured that into your quote.

[@tonywebb9909]

Great job Nick as usual, but remember your private customers only pay vat on your labour/profit, you should be discounting the materials vat in your pricing

[@chrishughes9101]

Hi, can you elaborate on this please? Its a new one on me.

[@atkt62]

This tax burden seems unworkable for sole trader or small businesses. Just shows how out of touch hmrc are with the real world. I wonder how many have failed once they were forced to become vat registered?

[@scottstoker8613]

Thanks for the video Nick, I have been over the £85k in 2020 and claimed an anomaly, last year I was a couple hundred under. I have been daunted by the prospect of VAT, I just like to keep things simple so I can crack on with being on the tools. I think the comments from people more knowledgeable will be helpful to us all. Thanks Nick and everyone who comments useful info

[@thenullco]

Summed up my thoughts perfectly. I'm a freelance designer in the same position. Would rather keep things as they are knowing that I won't really gain much for being a few grand over the threshold.

[@MattyEngland]

VAT, Fuel tax, income tax, inheritance tax.... about time we just clubbed these politicians in.

[@radosaw4616]

Go work elsewhere then it pisses me off we have it easy here in the uk ecspeilly as electricians we earn good money even after taxes can support a family easily and have enough for ourselves not many countries a tradesman can make that possible

[@keithg1xfl]

Most of em dont pay tax (wll not the correct amount anyway)

[@edc1569]

You could try a lower tax country, but you'd be surprised by some alternative cost burdens on your business!

[@MattyEngland]

@@radosaw4616 Calm down twinkle! I'm not even an electrician 🙂👍

[@MattyEngland]

@@keithg1xfl Exactly, they make millions with dodgy dealings, don't pay a penny in tax, yet us normal people have to account for the last 10p. I'm sick and tired of being mugged off by those jokers.

[@retroclickmedia4422]

I can see a major problem coming up for one man bands, as a chippie the price of MDF has gone up aroung 60% in the last year, this does not make me any more profit but is pushes turnover up, it must be the same with other trades. I have started another business in a completly different sector (event catering) and intend to kep them both under the limit.

[@GreenHawkConstructionltd]

Yo nick vat for us is a given really with the main business for construction as people in my industry are expected to be vat but if you are a one man band definitely try and stay under vat Great video as usual chief 🤙

[@electrician247]

VAT registration will 100% help you grow a more successful and profitable business. But the hard yards are very much in the first 2 years or so. Keep it up mate you are doing awesome.

[@garnhamr]

I'd go for a 4 day week for sure! you could go fishing or something? work to live!

[@cputilitysolutions]

Definitely should be based on profits mate, just another way for the fat cats to line their pockets

[@oyleyhands1332]

I'm not sure how on a 5k job (your example)you should be 20% more than a competitor as when one is not registered you are still paying the vat to your supplier and then charging, though not itemised, the vat you paid out for materials. Surely it just the vat on the labour content more ? And, that is without taking into account the fact that as pre your vat registration, you are paying the vat on your vehicle,fuel, tools etc.. yet once registered you are able to claim the vat back on such items. I suspect your analogy and maths are flawed on this... I'm guessing that you must not make any profit on materials you supply as you advocate customers buying their own materials ? that is a great way to reduce your profits 🤔 I will add, your disclaimer was correct 😉 From someone who has operating under the threshold and also vat registered for many years.

[@capraniplumbingandheating]

Good video mate, Been VAT for 5 years now, headache but cant get away from it now 😟 The cost of expanding a businesses

[@karl212]

You will get more customers wanting to pay cash because they don't want the vat on top ..it's a win win 🤣

[@Lee-xs4dj]

Lol yeah and then what do you do with the cash when nowhere takes it anymore. Even banks here in the Netherlands don't take cash anymore

[@karl212]

@@Lee-xs4dj .yea there definitely trying to go that way in UK mate ....cash less society .....they want to keep a track on us at all times ...👍

[@Robert-cu9bm]

@@Lee-xs4dj Try giving them euros instead of pounds you might have better luck.

[@Lee-xs4dj]

@@Robert-cu9bmI'm being serious, banks here don't accept cash. You cannot deposit cash at the bank anymore, which is causing most businesses to not accept it. There's a few deposit machines dotted around the country. My nearest city has one deposit machine that often isn't working. They're really pushing the cash less society

[@dac8939]

Electrician has gone to university and now an investment banker

[@Lewdacris916]

lol

[@paulcocker]

very interesting video Thanks Nick

[@joshallison92]

Hey Nick, 4 day week would actually be a healthy and comfortable lifestyle if it’s affordable. Also as others mentioned you should setup another Ltd for your KZbin revenue it’s a separate media/entertainment business. Also you should add 10-15% mark up on your materials than sell at cost.

[@Robert-cu9bm]

No 4 day weeks for people who run a business.

[@Bacrenfencing]

I can't understand why people would shrink their business model down to a 4 day working week..........just VAT register and then go hell for leather building your turnover and business. Each to their own but you should change your mindset regarding VAT - it is indeed a milestone - embrace it and BUILD the business.

[@Robert-cu9bm]

@@Bacrenfencing Some people don't want the stress of a big business. Many are happy to earn enough to live.

[@Bacrenfencing]

@@Robert-cu9bm Yes, I appreciate that but then your business is not really a business, just a job where you are working for yourself. Everyone is different but the whole point of setting up on your own should be to get some freedom in your life down the line (just my opinion) but if it works for you, then great.

[@HaroldBizzle]

You’ve got it wrong adding 20%, that’s why you’re losing work. Say as a sole trader you’re making 50% net profit, pre-tax, then you should only see a 10% increase in costs to the client. Because the 50% of your turnover that are running costs are now 20% cheaper. Obviously not everything is charged with VAT, but you get the idea. You shouldn’t be drastically more expensive.

[@Kyle-dk9qm]

Try competing with Amazon in retail where they don't pay any UK VAT....

[@Vass881234]

Quality of work gets you the work, don't undersell yourself. Problem with your business model and vat is, the labour, vat is not reclaimable on salaries, it will be your highest cost and so your income v outgoings will mean a vat payment due each qtr. It's tough for domestic work as public can't claim back your vat, commercial will claim this back so get you 20% cheaper, seems wrong doesn't it. Keep up the good work ;) 😉

[@125sm3]

Need to split your Electrical business and KZbin.

[@randomcamerajunk6977]

That's called disaggregation. I'm no expert but I'd say the businesses would be too closely linked and the revenue would happily destroy your life over it. If he owned a restaurant on the side then that would be a legit separation.

[@kentmccroskey3712]

Split the company up. N Bundy installations. N Bundy maintenance. N Bundy inspections. N Bundy lighting. N Bundy materials. and so on. charge the clients for the separate areas, sounds like a pain. but if you give them two invoices, 1 for parts and 1 for the labor, then you can still mark up things like fuse boards and cables and other parts. It can be done, but they have to be totally separate. check this accounts advice kzbin.info/www/bejne/i36tmWppe62SjNU

[@Xofttam]

I personally sell products I make online, when I started I was buying advertising and everything trying to get found. Now I am trying to hide myself a bit too keep under the VAT threshold

[@lukecaldwell7721]

Legal tax avoidance video well received. They need to sort this out though, it's encouraging people to work less. Not exactly a growth driver is it.

[@HootMaRoot]

I know of a group of tradesmen that build houses and big renovations but to keep below the threshold they worked as solo traders even tho they worked like a bigger company but just changed what person took the pay from a job to stay under threshold

[@Robert-cu9bm]

That makes no sense as the total pool of money would be the same. If that total pool goes higher at least one would have to register.

[@HootMaRoot]

@@Robert-cu9bm when you have a group of ppl that can earn 60k and a complete house is between 25 to 50k that 6+ houses they can build plus side jobs of extentions/renovations without having to be vat registered if it was under one business they could only do 3 houses and a couple of side jobs

[@paulreeve1434]

The only winner with vat is Hmrc , customer pays more and tradesmen have the hassle

[@WatchingTheo]

You can claim back 4 years of VAT from purchases (if the company still owns those goods), and 6 months back on any services.

[@Bacrenfencing]

Exactly right !

[@jayktee96]

Only your labour will be charged VAT extra on invoices, you will be reclaiming VAT on materials, and your markup need only be as before, plus you will get vat back on all other purchases. I'm retired now but was s/e spark for 52 years and VAT for about 40 of them. Worth staying registered in my opinion, not much extra book keeping,

[@Xlblaze1987]

If you adding 20% that's your problem. Remember you are claiming all your vat back on your purchases, so you can keep the same profit by adding less than 20%.

[@markbatch3828]

Exactly, there is no need to price yourself out of the market as you will be charging the same 5k and making the same margin. Simple maths..

[@SquirreliciousMe]

Indeed - and if he is between the threshold and £150K he can use Flat Rate schemes which reduces the VAT he pays to 9.5%. If you're adding 20% to your quotes, that makes no sense as the parts you bought already had VAT on, so you're not paying 20% again on top of the cost price.

[@danielgripton473]

I change car an van clutches, parts can be 70% of the bill, would a customer be happy paying the whole sale ? I'm not making a fortune an vat would complicate a simple, cost effective service I provide, they don't make this game easy, thanks for the video

[@callumrosindale3935]

Only draw back I've found from being vat registered is working for contractors with the vat reversal scheme that came in last year were you no longer receive the vat on your invoices. So we are paying all the vat on materials but not claiming it back until the vat return is due

[@craigdunn1642]

Create a second company

[@andrewwhite3793]

The Vat threshold has been the same for the past 15 years. So in reality forcing small businesses into VAT registration too early. I specialise in repairs that a lot of sparkies will not touch so as I say to my customers I do all the jobs most electricians are not interested in. Plus I don't do installation work so customers know I will put a light up or fix a storage heater but wil not fit a CU or rewire a kitchen. I also complete my spredsheets daily and file my paperwork so at the end of the year there is basically nothing I need to do with regards to my tax return. Basically you ar caught in the VAT trap of being too big for existing customers and too small for new commercial customers. Your are right about how you present yourself and turn up on time plus respect your customer. Also its what you want out of life I am happy doing what I do and at my age don't need the hassle of employing people and yes if it came to it I would take a month off

[@peteryoung9128]

I've been VAT registered for 20 years, never had a problem with it. Yes, a bit more paper work every 3 months, but I have used cashflow manager software supplied by my accountant. At the year end, I send them a copy of the year and from that they sort out my return. The reverse charge took a little time to get used to, but that is only for one customer that I have to do that for. 20% off tools, fuel and vehicles is an advantage for me. I'm a sole trader that has one employee. My best turn over was 102K a few years back. Most years its between 70 to 90K.

[@lovaboydirtysouf655]

U can be limited company and have a sole trader account both without vat leaving you with 2x 85,000 turnovers. Use limited company for big jobs, rewires, board changes etc and the sole trader for small jobs. So my accountant said…lol (south London Spark)

[@adamdavis3735]

I have a vat registered Ltd company that I put all my commercial and b2b work through and all domestic is done as a sole trader. Obviously the Ltd buys all the materials, diesel etc!!! Shhhh

[@Jamo20243]

Ok so here’s where it’s not so helpful. I predominately do maintenance electrics now. This can involve emergency light test, EICR, fire alarm tests etc. all labour costed only. So for example if I was £100 call out before Vat, now I’m £120. What have I gained? Not a lot. I can’t claim Vat back on materials (there aren’t any) Although I’m still earning my £100, I’m now £20 more expensive. I might be now up against another spark who isn’t Vat registered and charges £100 call out also. Who’s getting that job? Then there’s my Quarterly cost to accountant for doing my Vat. There’s two of us as a family run company covering on average 4 sites each a day. Mostly labour intensive. As a result our turn over goes well above the threshold very quickly. Although VAT might benefit some, it doesn’t benefit all, and this is just one reason why !!

[@philmcmillan72]

Without seeing all of your invoices, it is a hard one to comment on, but if around half of your invoices are for parts and half for labour, then your customers were already paying 10% VAT. As you can claim back VAT on tools and business essentials, then you should be able to trim your daily rate slightly as you overhead costs should be lower. Or go the other way and aim for a premium market (high end stuff that low cost sparks are not interested in). I generally favour trades people that are VAT registered as it shows that they have a thriving business that does not cut corners.

[@dazthedoubleglazier]

Correct me if I’m wrong but you don’t add 20% on top. In my business we get the parts price, ex vat, add our mark ups, profit margin labour costs etc then add the vat and that’s your quote all in. It doesn’t automatically make you 20% more expensive. In my experience being vat registered has helped me to grow my business, and opened up doors.

[@kittsdiy]

Exacly ..you need take prices excluding vat from wholesaler ad you profit and THEN add the 20% VAT . Value added tax .. tax on the profit you make .. for the goverment :-) The price will increase a little tiny bit but not the full 20% . Other thing for labout by the hour .. then the cost will go up 20% idd .

[@deang5622]

@@kittsdiy No, VAT is not tax on the profits you make, it's a tax paid by consumers when they buy things. When you as a business pay VAT to HMRC, you are simply paying the VAT that has been paid to you by the end consumer. It is in no way linked to profit, it doesn't come out of your business's profits (that's corporation tax if you are a limited company). There is a concept of input and output VAT, and the VAT you pay to HMRC (if not on a flat rate scheme) is the difference between them. So as a business you may pay for supplies which include VAT but you obtain the suppliers VAT registration number so you can claim the VAT back. And then you charge VAT to other businesses and consumers. The overall effect is, that you as business do not pay any VAT, you are simply collecting the VAT from Joe Public, the consumer, and paying that to HMRC. It's quite clever the way it works. The company is not losing money by paying VAT to HMRC.

[@kittsdiy]

​@@deang5622 Value Added Tax .. rings a bell ? The consumer pays the VAT .. and the VAT goes up when you take profit . Eg. you buy a fuse board for 100 pound excl vat. ( including vat = 120 pound = 20 VAT the the wholesaler needs to pass trough to VAT admin ) You take a profit of 30 pound on the fuse board you sell to the consumer . So 100 + 30 = 130 pound excluding VAT for the constumer = 156 pound .. the VAT had raised from 20 pound to 26 pound . because you addes some value (profit ) . This is with everyting you buy as consumer .. But as a business ( B 2 B ) you can detuct VAT . Altough you have to pay it at front . In the case here .. when you are VAT registred or not .. the consumer always pays some kind of VAT .. but little less because the profit/margin is added on the price including vat . At least this is how it works in Belgium . Here we have 21% procent vat on most luxery products . In case of house rewiring buy a contractor ( electrician ) in some cases 6% . ( the electrician pays 21% on all the stuff at wholesaler and charges 6% to the customer and the differnce he gets back from the VAT administration ) . In cases of B2B electricial work to buildings we also have a 0% procent rule . In this case the customer doenst have to pay VAT in advance ( and ask back to the VAT administration ) .

[@deang5622]

@@kittsdiy I know how VAT works in the UK. I have run two VAT registered limited companies for over 20 years. As the directors of those companies it is me that signs the forms which are submitted to HMRC in the UK and I literally write the cheques (or did when we used to make payment that way). In other replies I explain how VAT works, though I have purposefully left out a little detail around the concept and calculations around input and output VAT. What I have said about VAT in the UK isn't up for discussion: because it is fact and 100% accurate.

[@TheCod3r]

This is the one thing that scares me,as a small business it's very scary knowing I'll eventually have to pay VAT on my earnings. As if the government don't take enough 🙄

[@gkelectrical1]

Welcome to the system… u ain’t going to grow if u don’t register for vat

[@zoltrix7779]

What? You don't "pay VAT" you collect it and pass it along to the tax department.

[@pseudonymity0000]

Its meant to be complicated. That is the point. the UK is business friendly, and what that actually means is BIG business friendly. Big business hate competition. Putting in road blocks like this on the way up is meant to stumble competition that is cheaper, yet able to do the same quality work. Big business can play the tax system like a violin and make it so the rules don't affect their bottom line. But to the small guy, the amount of busy work, nitpicking and risk (Being able to butt heads with HMRC over the legality's of tax codes as written) needed to make the claim backs balance the charges is monumental.

[@markeskriett8102]

When I was working as a sparky and was V A T REG I ONYLY PAID THE VAT ON THE INVOICES WHICH WAS PAID THINK IT WAS CALL CASH ACCOUNTING ASK YOUR ACCOUNTEN MY KNOW

[@brianoneill350]

Spilt out the media business and maybe commercial. Your 650 example is incorrect. Your vat output is plus 20%, your vat input is on materials. Your excess cost is the difference. Not the 20%. Get a proper accountant for tax

[@marcusstonham]

You are only 20% more on your labour. You've been charging vat on materials. Your 5k example isn't strictly true. The other quotes still are charging vat on the materials they supply. When I went vat registered my business grew and I have never lost work.

[@mr4kids.866]

Could you not split your businesses and run the KZbin side as a separate company. You could pay the “KZbin” side as a marketing budget. From the electrical side. Split some of the earnings?? I’d seriously consider it, see if it’s legal etc.

[@reubenbacon9156]

Your really at the point where you need to expand, when your near the threshold your not really getting the benefit of being vat registered

[@Chris_In_Texas]

I thought our tax laws were screwed up in the US, I wonder why all business aren't required to collect VAT, sure does seem like an unfair disadvantage.

[@Robert-cu9bm]

It's a advantage for many businesses. Most advantageous to B2B.

[@Chris_In_Texas]

@@Robert-cu9bm Yeah I would think that the tax people there would want all size businesses to charge VAT, more money for them. Here in the US we just have sales tax which is charged on just about every sale, there are some sales tax exempt things, but all business from the kid mowing a yard to Pepsi corp, they are all treated the same way for the most part. Just just get into larger tax brackets at the end of the year, but sales wise they are the same from sales tax.

[@markkemp5524]

Nick, I feel your pain, been VAT registered for 10 years now, you could always do work for Cash!!

[@chrisardern4594]

Been sparking for 30 years i pay vat on the materials i buy obviously but i dont change vat on my labour i just issue the invoice of whatever the material cost and add on my rate of pay. I personally dont see how being vat reg would have helped my business it would have made my prices 20% more and in the domestic market that will loose you the job. PS cash is king

[@AmauryJacquot]

something doesn't add up... if you're not registered, you have to pay that VAT on whatever you buy for the jobs, so those 20% have to be on the bill somehow

[@joshjames8007]

in exact same boat as you. people say about claiming stuff back. nope. all you are doing is putting 20% ontop of your profit and giving it to hmrc. the materials allready have vat on, so nothing changes there, if you put profit on materials that has to have vat added to the profit obviously. All it does for me is makes me more expensive and costs me more money to operate. my materials bill last year was 115k wish every tradesperson was vat registered. to make it fair for us all. i feel from you from a joiner in the same situation.

I wouldnt recomend that they look at profits or increase the barrier for VAT registration... They should look at the labour costs because for example a programmer doesnt have practicaly any other costs than labour but trades people ofter have a lot in materials because people are more comfortable if they buy products.

[@faisalhussain589]

Open a sister company ;)

[@RichardArblaster]

Is this making you look towards more industrial/commercial jobs?

[@desmondyoung5963]

Vat threshold has been at £85,000 for a number of years. I do not expect the goverment will increase it so gradually everybody will have it to pay

[@effervescence5664]

VAT was brilliant for us but we're bigger than you and carry out commercial and industrial works. Sadly VAT should either be upwards of £100k especially given inflation now, or any business turnover greater than £40k otherwise if you're a decent sole trader/ small family size business you're always going to be near the threshold and competing against people that never buy the materials etc etc.

[@kevob6800]

I love vat too, everything is 20% cheaper, I can't imagine a customer would shop around for a bit of electrical work so should not make a lot of difference

[@syproful]

So in the UK as a costumer you can escape VAT by choosing the “right” person ?! Only on labor I assume. That is crazy.

[@therealdojj]

Pay cash, get it even cheaper

[@Paul_Holmes]

If you do get a fine they are normally quite understanding and if you keep in order for the next few months they do give it back. I believe it's surcharge rather than a fine, but it's been a few years now.

[@rs200dan]

But it's not 20% on top of the whole job it's only 20% extra on labour, you already charge the vat on materials 🤷

[@brianoneill350]

Get a better accountant. Don't forget to get vat input on material

[@dimitar4y]

I don't think VAT registration can kill a business. All it does is make you spend extra time to reclaim taxes, no?

[@kevinisaac9139]

I get my customers to pay for the materials as being a heating engineer oil boilers £2000.00 plus soon push you over the vat limit

[@GaryB007]

My brother runs his own upholstery business. He gradually expanded and took on a member of staff, but went over the limit and then had to register for VAT. He did it for a year and then decided it wasn't worth all the hassle, which was exactly as you described. He then scaled back down and stayed under the limit. It is a massive obstacle to the expansion of small businesses. The government should realise this and take on board your suggestions.

[@UberAlphaSirus]

I was in that trade too, the margins are shit and the fabric houses make absolute bundles on the margins from india and tiwan etc. By the time the disigner has put their 100% on your labour and £20 worth of silk from asia has had its comision and fees put up to £1600. a pair of curtains has hit 3k to the customer and your the lucky cunt to measure , make and fit and supply the linings and interlinings for £400-600. Glad I am out out of that crap.

[@Robert-cu9bm]

No it's not, it's simple. If it's that difficult get your accountant to do it.

[@deepmystic5850]

@@Robert-cu9bm Never have I in my life heard anyone refer to VAT as simple Even the VAT experts I worked with understood there was a lot of complexities especially when importing from overseas

[@Robert-cu9bm]

@@deepmystic5850 But he's not importing. It is simply adding vat to invoices, making vat deductions on expenses (it's written on all vat receipts). Then add and subtract every quarter.

[@deepmystic5850]

@@Robert-cu9bm It's not that simple transitioning from non paying VAT to paying VAT There are numerous laws, rules that the layman may not understand I was billed 18,000 for VAT despite me keeping a tab on my rolling turnover, I experienced some bug with my sales report on my online website Despite this HMRC was sure I owed the money It was only when I hired a VAT specialist team they were able to drop this bill to £2500 Why? Because of a few rules I didn't know applied to me You are one a million if you call VAT simple It's one of the ongoing problems with it It was meant to be simple It isn't

[@steve11211]

Thats your only suit isnt it...? If the electrical business ever gets too much you look just like an estate agent with the tie...

[@therealdojj]

when i was considering going self employed the only advice which was repeated over and over and over again was to find an accountant that would save me more money than i was paying him in the end it was too much of a change but i know folks who are happy and i know folks who are stressed out so you have to find something that will work for you beacuse the last thing you want to do is have your life ruined by the tax man

[@lh6804]

That's an easy fix. Deregister the VAT. Let's say you turnover 100k. Open another company and put 50k through each company. Simples

[@makg4655]

That’s why Adam went self employed to take him off your books and help keep the top £ down 😉😉🤣

[@leemufc7652]

But aren’t you getting you materials 20% cheaper than a non vat register spark plus anything else your saving 20% on so you price won’t be 20% more …?

[@Robert-cu9bm]

Government takes their money no matter what. I'm taking it you're not vat registered, but you have to pay vat on McDonalds. He should be getting a trade discount though.

[@rowles13]

Great video nick.. You are bang on!.

[@mathewjones5520]

Im not even in the trade, just stumbled across a video one day and find it quite interesting, just thought I'd get that out there, keep up the good work 👍🏻

[@russellpetrie119]

you have to ask yourself what you want to earn a year and thats it if you can stay under the trhreshhold and live life you dont need this shit in your life

[@PaulAllen.66]

Tradify is awful. Try service m8 👍👍👍

[@C20185]

Dissolve and start again 😂

[@michaelduddy320]

What about if u hav to 2 buiness 1 utube 1 electrical work

[@cainzach1]

Hi nick I think you gotta put it down to experience it happens.