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Sole Trader, multiple businesses and VAT?

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Hi,

New here and hoping you guys will be able to offer some advice.

I work full time for a local company and operate as a freelancer web designer and SEO in my spare time. I also have a web hosting business that I use as sort of an 'upsell' to clients. I operate them as two different businesses and combined they do not meet the VAT threshold so I know there is no requirement to register. However I am potentially in line for winning a project but they would want me to be VAT registered.

My freelance businesses are as much a hobby as they are work - I do it because I enjoy it, not because I need the money. So paying out 20% on VAT wouldn't really bother me and I know the VAT would be due on profits from both businesses. My question is in relation to keeping records. At the moment, both businesses share a bank account and I don't keep VAT records, both businesses invoice independently though.

I don't want to get bogged down in paperwork, most of my invoicing is automatically generated through two different bits of software I use (one for each business). So I was wondering if I could keep the businesses operating as they are, generating two separate sets of invoices (both charging VAT) but only keep one set of VAT records in something like Sage / Quickbooks etc?

If this isn't viable, could anyone suggest an alternative method that'll allow both businesses to continue as they are, but won't leave me bogged down in paperwork?

Replies (8)

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By Matrix
06th Sep 2019 19:18

VAT is charged on sales, not profits.

Provided you are operating below the VAT threshold and paying the correct amount of VAT, then you can keep the records as you wish.

Whether it is a good idea to register because one of your clients wants you to is a different issue, but maybe less so if all your other clients are VAT registered.

Your accountant should be able to suggest suitable packages.

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By Danderton
06th Sep 2019 19:24

Thanks for your reply! My mistake with the VAT being charged on sales, not profit.

I don't actually have an accountant. Not had the need for one till now as it was all fairly straight forward.

Registering for VAT would make some of my other clients happy I'm sure as the majority of them are also VAT registered.

If I kept things as is, would I not run into issues with sequential invoicing?

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Replying to Danderton:
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By Matrix
06th Sep 2019 19:34

Your VAT registered clients would probably be indifferent. Why would they be happy and why are you registering?

Just checking in case you have misunderstood something.

If you are busy and this is a sideline then I wouldn’t rush into registering, you will probably need an accountant to prepare your accounts/tax return. Sequential invoicing will be the least of your worries if you try and do it yourself.

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By Danderton
06th Sep 2019 19:54

Figured they'd be pleased as I probably wouldn't put my prices up to cover the VAT, so in theory they would get the same service for 20% less no? As I've said, I'm not really doing this for the money - it's much more because I enjoy it.

Only reason I'm considering registering is because I don't do it for the money, and the project on offer is something I'd really like to do. Not sure why they would want me to be VAT registered, but it's something they mentioned so I thought I'd look into it.

I already do my own self assessment (by I, I actually mean my partner haha). I probably already keep everything I would need for VAT (income and expenditure, invoices and reciepts etc etc), would there really be much more to it other than filling in the right form at the right time? Happy enough to get an accountant but just not entirely sure it's worth it? My sideline businesses in total have around £22k income and about £8k in outgoings.

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Replying to Danderton:
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By Matrix
06th Sep 2019 20:10

I would suggest FreeAgent over the ones you mention if you really want to do it yourself.

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By legerman
06th Sep 2019 23:06

I definitely wouldn't reduce my nett price to customers who are VAT registered already. If you invoice them £100 now, and after becoming VAT reg you invoice them £83.33 + VAT it has cost you £16.67 to do that. If you invoice them £100 + VAT they can claim the £20 back so it hasn't cost them any more.

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By Tax Dragon
07th Sep 2019 06:47

It's inevitable that registering for VAT will upscale the need for paperwork and recordkeeping, of course it will.

Just look at tbe VAT related threads on this forum over the past week for a flavour of the "do I need to...?" issues.

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By Trethi Teg
07th Sep 2019 12:01

Get an accountant and don't look for free advice.

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