I have been asked to undertake general book-keeping duties for newly self employed designer.Designer will receive a 33% commission on sales of product he designed & manufacturer receives 67%. Designer pays for variety of services such as labour costs, office & administration, delivery & carriage, reasearch & development. Designer is considering forming a Limited company at a later date. Annual commission expected to be approx £150k gross (this is his only income) - should designer be VAT registered? I would have thought it advisable to register for VAT now but designer states he has been advised not to, as his earnings are 'commission'only. How does `Commission income` affect VAT registration ? All advice welcomed.
Angie M
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Registration should be beneficial
VAT registration should be beneficial to your client so he may wish to register at the earliest opportunity.
It is likely that the "manufacturer" is registered for VAT so can reclaim any VAT the Designer charges. VAT can therefore be added to the 33% rather than taken out of it. Registration will therefore allow the Designer to reclaim VAT on his expenses without reducing his income.
The "commission only" argument might be true if the manufacturer was overseas.
Incidentally, you needn't refer such clients to other accountants if you formed a working relationship with VAT (and other) advisers (such as VATease allowing you to provide the full range of services without losing control of the work.
Regards
Paul Taylor
VATease - VAT Advice
....hmm....
....I would not normally comment on an advertorial such as Paul Taylor's. Clearly the site is not prohibitive of such selling (and IMHO that's fine).
However inter alia he suggests that forming a clear and sensible professional relationship with a local accountant would run the risk of "losing control".
Self-evident poppycock on downside risk if you take proper care over the people you choose to deal with, and far more likely upside to deliver something reciprocal to your advantage.
Of course it is POSSIBLE that you make a mistake with the folk you select, and you may therefore lose control, but it is POSSIBLE VATease are shysters - anything is POSSIBLE. It's a question of what is likely (for example, I assume it is likely VATease are not shysters!!), achievable and most beneficial to you.
(p.s. as I said, in my experience there are LOADS of good accountants always looking for good bookkeepers with whom to share reciprocal local arrangements)
...mmm....hmmm...
In my experience the risk of losing clients or having to pass over control of some of the work, be it real or merely perceived, is a major factor in bookkeepers and small accountancy firms resistance to using other firms of accountants to provide additional services such as VAT advice.
I have worked for several accountancy firms who marketed VAT advice services to bookkeepers and sole prop and 1/2 partner accountancy firms so have first hand experience of that resistance.
Many of these firms don't consider the services that can be provided by truly independent VAT advisors (and/or other consultants). The single sentence comment in my answer was merely a suggestion of an alternative to the previous 2 posts insistence that Ms M needed to get an accountant involved in order to provide a satisfactory service to her clients.
Regards
Paul Taylor
VATease - VAT Advice
agree with Martin
How I agree with Martin.
So many comments from book-keepers on this site seem to indicate that they (the bookkeepers)are being left with a massive amount of responsibilty.
We have all had experince of clients coming to us 15 months after the year end with so
much damage having been done because the client has not taken advice.
I wonder what other members think, but do we do a dis service by answering queiries when we should be saying consult an accountant.
register when turnover reaches limit.
No question he has to register for vat when his turnover reaches the registration limit.
..an aside...
Angie.
Since you are clearly trying to give helpful input/advice to your client, should you try to introduce him to an accountant who can advice on such wider issues?
This is meant as a positive comment, NOT a negative "what are you doing" comment.
I absolutely do not think this will do you out of a job. There are LOADS of extremely good accountants who would be delighted for you to deal with bookkkeeping and routine matters, and have a "symbiotic" relationship (no, that's not a fetish!!) with you for cross - referral of work.
If VAT registration applies....
Your client may wish to consider registering at the outset under the Flat Rate Scheme. Dependant upon the percentage applicable to his/her taxable supplies, your client may be better off this way. Be aware however, that the upper threshold for operating the scheme isnt much higher than expected turnover.