hope its not to late to add my two-penn'rth-
all the above advice is sensible and It all depends where you are aiming to be (turnover-wise) in the future.
imho (and i stress the
imho bit) I would not bite the VAT bulllet until you have to. But here's my story of strife and woe vat and accountants....
We've a high street shop (literally, 1 high street is our address) and have been in the game for about fifteen years. Thirteen years dealing with VAT.
we've moved shops three times in that period.
Aside from the advantages/disadvantages of registering when you are below the threshold, which is where an accountant may help, here's some of the concomitant effects of VAT registration as I've found them:
more time doing paperwork/or paying accountants fees from now till the end of your days. You can do the VAT yourself, it isn't rocket science, but you have to do it right and on time. Sounds easy, but a simple mistake will cost you dearly.
I dont do my own VAT. Im no expert, and I reckon that my present accountants pay their own fees in the money they can save me. And the paperwork is watertight, I can sleep at night.
I've had three accountants in 15 years. I fired the first because he
poached a member of my staff (incredible isn't it) and I fired the second because he failed to file two VAT returns and then lost the books which eventually cost me arounfd £5,000 in VAT, Fees, VAT fines and another accountant to sort out.
So having a chartered accountant isn't necessarily a guarantee that VAT will all be plain sailing
the plus side of having an accountant and VAT- they know who to deal with at HMR&C, how to deal with them, and what information is required (and just as important what information is NOT required). And when it comes to VAT registration time, it wont come as a surprise to you.
I reckon on paying 1500 to 2000 a year for the accountancy. this deals with all the VAT, tax, Payroll, PAYE, NI etc, and leaves me free to make frames and cut mounts.
It sounds like a lot of money for the sake of not doing your paperwork, but in the great scheme of things the accountants can do in an hour what would take me a whole day, and you can make a lot of frames in a day - I know what I'd rather be doing
Turnover is vanity - profit is sanity. Never a truer word spoken.
Dont be in a hurry to break through the VAT threshold, but dont hover just above it. You'll need to jump from 60k to 100k to keep standing still.
We used to have 7 people working 7 days a week in our old workshops and shop, (this was 4 years ago). The madness was we had an impressive turnover, but huge wages bills, massive wastage, and to be frank, dubious quality sometimes because half of our business was scratching around at the bottom end of the market doing trade bulk orders in plastic mouldings and the cheapest mountboards (other cornish framers here will know what I mean when I say "for tourist galleries" and "St Ives")
Thank goodness the days of laser copies with "artists" signing the mounts are coming to a close....
The only advantage to it was that we were getting 20 or 30% off the factory price for mouldings, and had reps queuing up at the door offering us special terms -no names, no pack drill, but the five "big" suppliers of mouldings reps were all there withing days of us "falling out" with a well known firm who bill you for stuff you didnt have, and send you stuff you didn't order, and then slapped high court writs on you when you disputed the bill. We used to spend 20k a year with that one supplier alone, now we get the same products in half the quantities from the people who make it for
them -and a better service.
Now we turnover a half of what we used to. And we still keep the discounts
Now much of our work is quality, higher profit, and the workshops have three of us, one part time. And we make more money. I enjoy my work again, its not a "factory" any more, its a framers, which is why i got into this game in the first place. I never became self employed to flog my tripe out to pay massive amounts of wages and VAT and get nothing out of it for my self or family. But thats what the first 10 years was.
When we get too busy now, we dont take on more staff, we just put the prices up, and slow the work down that way. We always keep a bargain range (price wise) of mouldings and boards, so we always have a budget price alternative if the original quote makes the customer cry.
If I was to start again, and be in it just for the money, I would ignore the lower and middle end of the market, and could quite happily make a reasonable living under the VAT threshold but it would mean losing a lot of customers who ive got quite fond of. The little old ladies with their trapezoid tapestries, the hobby artists, and the "fun" customers who have birthday cards framed just for the heck of it.
As it is now, we can afford to pick and choose, because there is enough work for everybody in the area.
The customer you dont want, ever, is the "how much will you do it for cash -I dont want to pay VAT" merchants. for why? Because they are as well known to HMR&C as they are locally, and if
they get investigated then
you get investigated. You are tarred with the same brush. And unless you have insurance for a tax barrister, investigations are expensive and time consuming (we have insurance). This insurance wont "get you off" if you have been naughty. But it will make sure the penalties accurately reflect your misdemeanours. Unfortunately even when you play by the book, to the letter and in spirit, you might still get an investigation, so the VAT and the Tax papers have to be up to date and good records kept.
word on the street is that actually having the insurance in the first place may well keep HMR&C off your back in the first place, as they'll go for the softer targets, taking the route of least resistance. Thats obviously a rumour, and not a policy plucked from tony blair's magic hat.
so, in a nutshell my line of thought on VAT is - dont register till you have to, let someone else do the paperwork if you find it problematic, adjust any prices as necessary (be brave) and carry on doing what you do best -making frames, marketing your business, and enjoying your work. And remember turnover is vanity....profit is sanity. And thats how come I can close my shop saturday afternoons. Shame it took fifteen years to realise it