Do you automatically VAT register your clients?

VAT registering small under the limit clients

Didn't find your answer?

I've just taken over from another accountant who sent me the clients VAT schedules. Client is way under the limit. She is working as a contractor and as such there is no need to give the impression of being bigger than she is. When I queried why she was VAT registered the reply was that this was something they automatically did for all clients. I'm wondering - is this something you do automatically?

Of course it is a way of getting clients used to the quarterly submissions that are on their way! but I've never seen this 'automatic enrolment' before.

Replies (12)

Please login or register to join the discussion.

Euan's picture
By Euan MacLennan
19th Aug 2016 17:23

And some accountants automatically register directors for SA even though there is no legal requirement ....!

One argument in favour of VAT returns is that it forces the client to deal with book-keeping every quarter, rather than leaving it to after the end of the year.

Thanks (1)
Routemaster image
By tom123
19th Aug 2016 18:35

We run three small businesses from home, in conjunction with working elsewhere.

It depends on who the customers are.
If you incur significant material costs, and sell to vat registered customers, and don't register yourself, you are at a significant disadvantage to vat registered competitors, as the unrecoverable vat becomes locked in the value chain.

If you sell to private individuals, you have a bit of an advantage as you don't need to add vat to your labour.

Thanks (0)
Logo
By marks
20th Aug 2016 00:48

For contractors we would tend to advise them to register for VAT for the following reasons

1. They tend to deal with customers who are VAT registered and who are happy to pay them the the agreed rate plus 20% VAT as from the customers viewpoint they are no worse off as they can reclaim the VAT when the client invoices them.

2. If they have non-VATable turnover of say £50k then if they are VAT registered they will invoice their customers £60k (£50k + £10k VAT).

3. Then advise them to account for VAT under the flat rate scheme. As contractors they will probably be on a FRS of 13.5% so will have to pay over £8100 VAT to VATman (£60k x 13.5%). Also get a 1% deduction in first year.

4. So they charge £10k more being VAT registered, pay over £8100 VAT so are £1900 better off in cash terms purely being VAT registered under FRS with a £50k net turnover.

5. I quote them £1500 + VAT to do accounts, payroll, VAT etc so our fee is£1800 but as they are making £1900 more by being VAT registered then our fee effectively costs them nothing compared to them not being VAT registered.

They are happy as they are getting all their accounts done for effectively nothing.

We are happy as can charge them more than we would have if they hadnt been VAT registered.

Plus they act as our advocates when speaking to other people in the same position.

Most referrals tend to come from consultant/contractor clients. Picked up a referral for a consultant/contractor client today.

Thanks (1)
Replying to marks:
RLI
By lionofludesch
20th Aug 2016 09:32

marks wrote:

For contractors we would tend to advise them to register for VAT for the following reasons

1. They tend to deal with customers who are VAT registered and who are happy to pay them the the agreed rate plus 20% VAT as from the customers viewpoint they are no worse off as they can reclaim the VAT when the client invoices them.

Yes - but presumably you check that this is so and the customer isn't a bank or insurance company.

Nor do you register the client "automatically".

Thanks (0)
avatar
By johnthegood
20th Aug 2016 07:41

Golden Rule of VAT - if you can charge it on you should be registered, simple as that.

Thanks (0)
RLI
By lionofludesch
20th Aug 2016 09:15

Do automatically ?

I'm speechless.

Thanks (2)
avatar
By SKCOX
20th Aug 2016 09:23

"Automatically" sounds like "without thinking about it". I wouldn't register any client for VAT without thinking about it, let alone without discussing it with the client.

Thanks (1)
RLI
By lionofludesch
20th Aug 2016 09:25

SPT post

Thanks (0)
avatar
By SKCOX
20th Aug 2016 09:25

No.7.

Thanks (0)
avatar
By SKCOX
20th Aug 2016 09:26

Beat me to it Lion. SIFT, couldn't you at least fix this?

Thanks (0)
Replying to SKCOX:
Red Kite
By Red Kite
20th Aug 2016 09:52

At first glance I'm not at all sure that this is covered in the latest member update
https://www.accountingweb.co.uk/community/blogs/bensmithsift/accountingw...

Thanks (0)
7om
By Tom 7000
22nd Aug 2016 10:52

Register all of your business to business clients for vat
a. Under standard vat they get vat back on purchases
b. under flat rate ( minimum purchases) they make about 4%

if you dont and they find out they will be off to another aaccountant...

You cna charge them for the returns ans its usually less than the vat gain...so win win and happy clients

Come on... keep up ;)

Thanks (0)