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    Default VAT registration threshold - what is taxable turnover?

    Can anyone please confirm or otherwise my understanding of turnover? I've always taken it to mean income, i.e. buy 10k of widgits, sell for 15k - profit 5k, turnover 15k; repeat process in same year - profit 10k, turnover 30k. So in the world of contracting, if you're invoicing less that 64k a year you shouldn't need to register for VAT (flat rate advantages aside) no matter what your spending is?

    If so, can anyone make any sense of the following from HMRC : "If you receive certain services from abroad, for example advertising, data processing, consultancy or legal, accounting or professional services, these will be treated as if you supplied them and you must include the value in your taxable turnover"?

    This seems to imply that if I subcontract some work abroad I should be adding some spending to my income in order to calculate turnover, i.e. invoice 60k, spend 10k on data processing in India - turnover 70k. This can't be right surely?

    Thanks all, T.

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    Question

    why wouldn't you want to register for VAT ?
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    Quote Originally Posted by ittony View Post
    Can anyone please confirm or otherwise my understanding of turnover? I've always taken it to mean income, i.e. buy 10k of widgits, sell for 15k - profit 5k, turnover 15k; repeat process in same year - profit 10k, turnover 30k. So in the world of contracting, if you're invoicing less that 64k a year you shouldn't need to register for VAT (flat rate advantages aside) no matter what your spending is?

    If so, can anyone make any sense of the following from HMRC : "If you receive certain services from abroad, for example advertising, data processing, consultancy or legal, accounting or professional services, these will be treated as if you supplied them and you must include the value in your taxable turnover"?

    This seems to imply that if I subcontract some work abroad I should be adding some spending to my income in order to calculate turnover, i.e. invoice 60k, spend 10k on data processing in India - turnover 70k. This can't be right surely?

    Thanks all, T.
    Gross turnover is the measure. Any income (not loans) you receive from whatever source that reaches your UK-registered company's account in any given trading year - so that's mostly invoices but also interest earned, dividends received, bonuses, legal payments, whatever. Once that hits the threshold of 64k (? I think...), you have to be VAT registered.

    Don't really follow your exmaple - if you do 60k of work and put 10k of it overseas, your gross is 50k, but if you sell someone 60k of your effort and 10k of someone else's then it's 70k.

    And VAT is not your money anyway. There's no reason at all to try and avoid it and a lot of reasons why you shouldn't.
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    Quote Originally Posted by malvolio View Post
    Don't really follow your exmaple - if you do 60k of work and put 10k of it overseas, your gross is 50k, but if you sell someone 60k of your effort and 10k of someone else's then it's 70k.
    Eh? Surely if I do 60k of work and put and "put 10k of it abroad" i.e. have to buy 10k worth of services from abroad in order to deliver my 60k, then my gross turnover is 60k, not 50?

    Quote Originally Posted by malvolio View Post
    And VAT is not your money anyway. There's no reason at all to try and avoid it and a lot of reasons why you shouldn't.
    It's not anybody's money if it's not applicable. No reason at all? How about not having to put your prices up 17.5% for non-business customers?

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    Quote Originally Posted by ittony View Post
    Eh? Surely if I do 60k of work and put and "put 10k of it abroad" i.e. have to buy 10k worth of services from abroad in order to deliver my 60k, then my gross turnover is 60k, not 50?


    It's not anybody's money if it's not applicable. No reason at all? How about not having to put your prices up 17.5% for non-business customers?
    Still don't get your point. What are going to invoice your client? Is the 10k for work that you are paying to have done and not passing on, which seems pretty silly, but yes your turnover would then be 60k. Crap business management though, if you ask me though.

    As for putting up your costs for non-VAT registered customers - well that's how it works. Someone's got to pay the VAT and gosh, it's the end consumer.

    Seriously, if you haven't grasped such basics, get an accountant to do your book-keeping, since you will be making big - and potentially illegal - mistakes. We can play games with Hector but never ever mess with the VATMan, he has a long reach and big teeth.
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    Quote Originally Posted by malvolio View Post
    Still don't get your point. What are going to invoice your client? Is the 10k for work that you are paying to have done and not passing on, which seems pretty silly, but yes your turnover would then be 60k. carp business management though, if you ask me though.
    Are you deliberately trying to confuse matters for comic effect? In a given year a company invoices its clients 60k, during the same year the company buys 10k of services from abroad. It's pretty simple stuff. You initially claimed this resulted in a turnover of 50k, which I'm pretty sure is wrong. I think it's 60k but the paragraph from the HMRC appears to imply that it should be 70k. Is anybody able to shed any light of the discrepancy without putting on a pathetic BOFH act?

    Quote Originally Posted by malvolio View Post
    As for putting up your costs for non-VAT registered customers - well that's how it works. Someone's got to pay the VAT and gosh, it's the end consumer.
    What sort of ridiculous attitude is that? If you were running a business selling services to private individuals and were clearly under the VAT threshold, you'd put your prices up 17.5% out of sheer bloodymindedness?

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    Quote Originally Posted by ittony View Post


    What sort of ridiculous attitude is that? If you were running a business selling services to private individuals and were clearly under the VAT threshold, you'd put your prices up 17.5% out of sheer bloodymindedness?
    I'd put my prices up by 17.5% because they would'nt know the difference

    ....

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    Quote Originally Posted by ittony View Post
    Are you deliberately trying to confuse matters for comic effect? In a given year a company invoices its clients 60k, during the same year the company buys 10k of services from abroad. It's pretty simple stuff. You initially claimed this resulted in a turnover of 50k, which I'm pretty sure is wrong. I think it's 60k but the paragraph from the HMRC appears to imply that it should be 70k. Is anybody able to shed any light of the discrepancy without putting on a pathetic BOFH act?


    What sort of ridiculous attitude is that? If you were running a business selling services to private individuals and were clearly under the VAT threshold, you'd put your prices up 17.5% out of sheer bloodymindedness?
    OK, now you've explained the point properly, your gross income is 60k, your expenditure is 10k your net profit is 50k. The 60k is the bit that counts towards the VAT threshold.

    And once you go over gross turnover threshold, you charge VAT. You can't therefore get out of VAT by pushing up your expenditure to compensate. You could of course simply lower your prices by 14.9% to cancel out the VAT or simply stop charging once you get to 63,99.99p in a year. That would not make any kind of commercial sense, but that's not my problem.

    Like I said, get an accountant.
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    Quote Originally Posted by ittony View Post
    What sort of ridiculous attitude is that? If you were running a business selling services to private individuals and were clearly under the VAT threshold, you'd put your prices up 17.5% out of sheer bloodymindedness?
    I've never understood Ms attitude of being narky just for the sake of it either. He knows things so is worth listening to, but I wouldn't want to be stuck in a lift with him. PCG personified.

    Personally I agree that if you were under the VAT threshold and so had the option of being VAT registered or not it would make sense not to be VAT registered if your clients were also not VAT registered (typically the general public). Your pricing could then be more competitive.

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    Quote Originally Posted by shoes View Post
    I've never understood Ms attitude of being narky just for the sake of it either.
    It's not simply for the sake of it. Lost in the mists of the original boards I explained why...

    Firstly, most of the time it's reserved for people asking dumb questions to which the answers are easily obtainable. Those of us who know the answers just occasionally get narked that others, especially newbies, can't be arsed to do some basic research into absolute basics. It's like turning 17 and asking everyone you meet to explain each page of the highway code rather than simply reading the damn thing yourself.

    Secondly, and especially for newbies, if you can't take a bit of ragging from your peers, you're going to make a pretty poor contractor. Real clients are way worse than anything you'll get on here

    Thirdly, it's my well known aversion to suffering fools (although I hasten to add ittony doesn't fall in to that category!), which is me in real life as well.

    And finally it started as an experiment in running a persona completely different to my own, and I kind of got stuck with it. People actuially complain if I'm nice now...

    So that's enough of the reasonable answers. Now f*** off...
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