There are rules there, but I don’t see anything about companies house and sole traders – where is it?

https://www.rossmartin.co.uk/starting-in-business-77750/140-sole-trader-v-limited-company-key-tax-a-legal-differences

But where does it say a sole trader (which the OP’s wife is) has to go through any companies house related shenanigans?

You can even be a VAT registered sole-trader and still not have to go to companies house for anything.

frankconway – Member
And here we go again – uninformed posts

Medical treatments / diagnosis etc.. (either sole trader or a limited company) are zero vat rated but they have to provided by a clinician or a HCPC clinically registered professional. If your wife isn’t either then she won’t be vat zero rated once she passes the vat threshold. Also HMRC have lists of what they consider medical treatments. She could run a company with another “professional” (as above) with an approved treatment and be zero rated.

She’d only need to raise her prices 10% to maintain her financial position, given that she claims back the VAT on products bought, AND a nice bonus at the start with claiming back all the VAT she has spent in the last 3 years.

does a ride and pint with friends count

Not really, because they aren’t provided by someone from a suitable body i.e medical or dental profession!

I regularly ride and drink with GP, haemo consultant, education psychologist and dentist. How do I claim the cost?

She’d only need to raise her prices 10% to maintain her financial position, given that she claims back the VAT on products bought

She doesn’t though – her main stock items are non VAT items..

Medical treatments / diagnosis etc.. (either sole trader or a limited company) are zero vat rated but they have to provided by a clinician or a HCPC clinically registered professional. If your wife isn’t either then she won’t be vat zero rated once she passes the vat threshold. Also HMRC have lists of what they consider medical treatments. She could run a company with another “professional” (as above) with an approved treatment and be zero rated.

She IS a registered professional, so meets this criteria. It appears the general consensus from her industry is to consider each consult on a case by case basis, and as long as your records contain a detailed medical history etc etc, and your treatment will offer a perceived psychological improvement, then you wouldn’t charge VAT.
Thankfully, being a professional Dr (as opposed to a backstreet beautician offering botox – they exist! It’s not a regualted industry!), she keeps detailed records highlighting all this..

DrP

I regularly ride and drink with GP, haemo consultant, education psychologist and dentist. How do I claim the cost?

😀

I suppose they’d have to set up a business providing community wellbeing activities, and purchase the bikes through that company…
I genuinely imagine it could be done, TBH!

DrP

Did the accountant discuss whether limited company status might be more efficient? It’s not as much hassle or expense as people think.

And are you sure the customers would go elsewhere? A service like that is sold more on the person delivering it than on the product IMO. As you say, an actual doctor vs. a backstreet chancer.

Maybe find out who’s doing the accounting for more established providers in the same business and approach them?

I suppose they’d have to set up a business providing community wellbeing activities, and purchase the bikes through that company…
I genuinely imagine it could be done, TBH!

During the next round in the Tappit I shall propose it….!

I was in a similar position a few years back. I think your wife has three choices.

1. Go the whole hog. Register for VAT, charge more. Or the same but make less money.

2. Split the company on conflicting advice from all quarters. Have niggling worries about the VAT man calling.

3. Approach the threshold, be content that is a signal you’ve made a good wedge of cash, throttle back and work less.

I chose 3, sort of.
I work a three day week for a couple of months, then stop my regular business altogether for about 4-6 weeks and do some totally different self employed work at a local music festival.

* ponders about a prescription wood burning stove……

Yeah, but only cheap NHS one scotroutes, not some fancy pants Swedish one…

&DrP it sounds like – if she is keeping medical records and a registered professional then she should be getting her accountant to get an opinion from HMRC.

The thing is, her goods costs are about %40- 50 of her turnover, and most of the goods don’t have VAT on them: she does aesthetic treatments; botox and dermal fillers – both prescription medicines so VAT exempt.

In which case, it may be reasonable to split her charges – charge for the goods at cost (and exempt from VAT) and then the rest for the service element (VATable) and this doesn’t look like (because it isn’t) artificial for tax purposes, and then the amount of potentially VATable supply she makes will be 50=60% lower than total turnover and then should be well under the threshold? The key thing here is that VAT threshold is not based on total turnover, it’s based on VAT taxable turnover, so any exempt supply (i.e. the sale of exempt prescription medicine) won’t count towards the calculation.

I am an accountant, but not a tax specialist, so worth checking with someone who actually works in the field that I’m not talking rubbish. There might be a question that arises around that split – I suppose the answer might be determined by whether your wife would be able to sell the goods only, without the service element. If she could, then I think it would be okay.

Oh, hang on a minute, I’ve just read the bit about being a registered healthcare professional and being able to sell the service as (zero rated) medical treatment – if that is the case then I can’t see what the problem is – you may have to register if your taxable supply is above the threshold, but since it’s zero rated there’s no impact on what you need to charge to customers since the VAT you will be adding on ranges between zero and zero. So just register and start charging your customers VAT, at the relevant rate…

You’ll have some additional paperwork for the VAT return, but most of the numbers on it will be zeros so something that shouldn’t be overly onerous. You may even (check this one with a tax specialist as well) gain since you will be making taxable supplies (albeit the tax is at the rate of 0%) so could possibly look at recovering some input tax?

And just to add to others’ posts – frankconway is talking utter rubbish, sole traders do not have any interactions with Companies House (there’s a big clue in the name, Frank). If the business is growing you might want to consider the potential advantages of other structures, but that’s a completely separate matter and one that you should also take specialist advice on.

It wouldn’t matter Matt. My stress levels would reduce considerably if the Mrs would shut up about them.

Is that her sole source of income? Only asking because I didn’t think there would be enough money in that sort of thing for a qualified doctor to make it worthwhile, round here it’s all beuticians etc offering it.

The original proposal sounds a lot like artificial seperation to me – I think the classic example is the wet bar and food elements in a pub. Craigxxl’s link deals with this pretty clearly, but the specifics of your situation need to be applied to that.

The compounding factors seems to be the mixture of supplies in VAT and non VAT categories, as well as competing with Non-VAT/lower priced competitors? This would suggest flat rate to me – if you choose/need to register.

Like bedmaker says, I view VAT as a nice problem to have – congratulations on a successful business model. You/LadyDrP are basically at the point where you are deciding whether that’s sufficient evidence to push on (and accept the tax implications of that generally), or ease back to ensure your forecast turnover isn’t going to remain that high.

If you do press on, you might find that Ltd and a dividend model offer a more efficient means of transferring profit from the business to yourself – thereby making up for the (perceived) loss via VAT.

If you do press on, you might find that Ltd and a dividend model offer a more efficient means of transferring profit from the business to yourself – thereby making up for the (perceived) loss via VAT.

I’d be very nervous of taking general advice on this from the internet, there are so many factors that need to be considered that specialist and personal advice is needed – you need to consider long term plans (for you as private individuals / a family as well as the business itself) as well as short term tax implications. And none of that will have any meaningful impact on the VAT.

By the way

…means of transferring profit from the business to yourself…

FTFY..

And just to add to others’ posts – frankconway is talking utter rubbish, sole traders do not have any interactions with Companies House (there’s a big clue in the name, Frank). If the business is growing you might want to consider the potential advantages of other structures, but that’s a completely separate matter and one that you should also take specialist advice on.

Oh, I got that..! Just didn’t reply..

Is that her sole source of income? Only asking because I didn’t think there would be enough money in that sort of thing for a qualified doctor to make it worthwhile, round here it’s all beuticians etc offering it.

Yeah, it is.. She left NHS work several years ago and set this up as a ‘sideline to do something’. It started off loss making and really small, and now it’s grown naturally and comfortably to this point. Hence, I was doing the tax returns etc for her…
It’s a better work/life balance, and a better income that her previous NHS role.

We’re asking around others in the industry for advice too.

I appreciate the advice given above.
And…I understnd the view you might take of ‘you’re a tax dodging git’ – I really do.
However, If my question was “I bought a stethoscope for work – it cost £200. Should i offset that against my tax liability” you probably wouldn’t bat an eyelid.
Many of you use bike to work schemes…. 😕 Are the bikes REALLY jsut for work. or do you find the small print stating “as long as it’s used regularly for work” then you justify your Demo 8 DH bike on the scheme by riding it once a year to work etc etc!!!!

Anyway!!

DrP

Edlong, I’m also an accountant and would never recommend what you had in regards to separating the business between supply and treatment. The OP has already stated that is to keep them below the VAT threshold so that they may profit more from doing so. Is there anything more artificial than that?
In regards to treating the supply and treatment as exempt you first need to consider if it is for medical or cosmetic purposes to it being exempt or vatable. If it is medical then just like going to your doctor with a problem and them writing you a prescription to treat it you will be examined, notes taken, alternative treatments considered and avoidance of situations that could be causing the problem. If the problem is psychological then the doctor would have to suitable qualified to recognise the problem and best course of action. This would no doubt need additional insurance cover than just cosmetic treatments. The Aesthetics Journal has already covered this.
https://aestheticsjournal.com/feature/should-i-be-vat-registered

Botox is a prescribed product. If the OP were to sell it direct to the person who was going to use it they wouldn’t be able to administer it as the chain of control had been broken. If anything went wrong with the treatment they would investigate and no doubt MrsDrP would be in serious trouble for selling prescribed products to the public.

Many of you use bike to work schemes…. Are the bikes REALLY jsut for work.

I’m not really sure you can compare the BTW scheme with VAT payment/non-payment.

As has already been said, you’re in a nice place with turnover being at a level whereby you need to charge VAT.

It seems you’ve both become comfortable with the healthy profit you’ve been making so far and don’t want to start paying what the law says you should – but the rules are there and apply to your wife’s ‘competition’ in the same way that they apply to her.

As has already been said – I think your choices are either to scale back to keep under the limit or suck it up like everyone else. Obviously you can do what you like, but if you pee off HMRC they will make your life pretty difficult.

glasgowdan – Member
She’d only need to raise her prices 10% to maintain her financial position, given that she claims back the VAT on products bought, AND a nice bonus at the start with claiming back all the VAT she has spent in the last 3 years.

You could only claim the VAT back on the unused stock at the point of registration and assets at their current market value.

The VAT Regulations SI 1995/2518, Reg 111 para 2(a)(i) states, “No VAT may be treated as input tax in respect of goods or services which had been supplied, or, in respect of goods, save as the Commissioners may otherwise allow, consumed by the taxable person before the date with effect from which the taxable person was, or was required to be, registered.”

In this case, HMRC have taken the view that the equipment purchased before the registration date has been partly consumed and that the consumption is equal to its depreciation to that date such that the amount on which the input tax is recoverable should be restricted to the market value of the equipment when it was registered.

The OP has already stated that is to keep them below the VAT threshold so that they may profit more from doing so.

Not 100% correct. Or if those words came out, then that’s not the intention.

Firstly, I’m not a charity. I like to earn money to buy stuff. I think we can all agreee that’s the common belief.

Secondly, I suppose I was asking IF/WHAT can I do to ensure that I am doing this properly.

Another example.

If I just assumed that when filling in the tax return that I put “she earnt £80,000 turnover” and simply didn’t know that I should be deducting business costs (i.e £40-50k of product, several £k of insurance and training etc etc) and was paying tax n the whole £80k, then someone would chip in and say “DrP you numpty, you should offset profit against losses..you should only pay tax on circa £35k net profit“

This is being asked in a similar light.

I’m not a business/VAT accountant – I am seeking professional advice as we speak, but I am asle checking to see if I’m running the business as finanically sensibly as possible.

DrP

it may be reasonable to split her charges – charge for the goods at cost (and exempt from VAT) and then the rest for the service element (VATable) and this doesn’t look like (because it isn’t) artificial for tax purposes, and then the amount of potentially VATable supply she makes

Why “at cost”?
Would adding a non pisstake markup, or even charging RRP, if there is one, remove the zero VAT status?

A valid way of separating the business would be to use separate legal entities. This would entail MrsDrP remaining a sole trader for the treatment and a Limited company set up for the supply. You would still need to show that financial. economic and organisational links were seperate which would mean the Limited company would need to owned, control and ran by someone else i.e. DrP. A lot of work and expense that wouldn’t be practical. It also wouldn’t get past the problem of a prescribed product being sold to the public.

DrP – Not 100% correct. Or if those words came out, then that’s not the intention.

From your OP

DrP –SO, she could either suck up the extra 20% VAT charges on TURNOVER as a loss of profit – this would equate to a significant loss in net profit..

Or…

When a client comes for treatment they are dealing with TWO businesses..
Business A – the supply of botox/filler
And
Business B – my wife treating the client, with the product they’ve just bought.

Yeah, it is.. She left NHS work several years ago and set this up as a ‘sideline to do something’. It started off loss making and really small, and now it’s grown naturally and comfortably to this point. Hence, I was doing the tax returns etc for her…
It’s a better work/life balance, and a better income that her previous NHS role.

And here’s where you’re at. On sites, the guys whinging about approaching the VAT threshold are really just sending coded boasts that they’re doing well. 😀

She is to be congratulated on developing a business over a few years that has now grown to the point of VAT registration, so she can either slow down a bit or say “**** it, let’s go for it and DrP can leave the NHS and be train to do nails. We’ll convert the garage and apply for change of use.”

craigxxl will know this too, but there’s a story which goes around about VAT registration being worked out over rolling periods – so it might be worth him commenting on whether this is true or not. I think it’s to stop people doing no turnover for 364 days and then one day’s work for £82999 on March 31st, etc. etc. I probably haven’t phrased that well, but craigxxl can clear it up perhaps? Maybe it’s just apocryphal.

I’m pretty sure there are clear notes about separating (multiple) business for VAT purposes and I think it would be interpreted that the two business are too connected.

I would say check out flat rate Vat rules and suck it up. Flat rate VAT was a great scheme until the tories **** it up recently.

You only pay VAT on your turnover depending on your category, it may be quite a bit less than 20%.

You are facing no more of a dilemma than many small business. Suck it up and grow.

We’ve been VAT registered for 25 years. Buy stuff – computers and things linked to your business.

I’ve been inspected twice by HMRC, luckily I’m whiter than white but they make your life problematic and actually make a lot of mistakes themselves.

Another example.

If I just assumed that when filling in the tax return that I put “she earnt £80,000 turnover” and simply didn’t know that I should be deducting business costs (i.e £40-50k of product, several £k of insurance and training etc etc) and was paying tax n the whole £80k, then someone would chip in and say “DrP you numpty, you should offset profit against losses..you should only pay tax on circa £35k net profit”

That is for your income tax calculation. If you have not previously been claiming these expenses then you should amend and resubmit her tax returns. Any losses in the first years would be carried forward and offset to future profits. The training expenses as a sole trader are more tricky to claim as acquiring a new skill to be able to trade is not normally allowable otherwise you would be able to claim all your expenses incurred to become a doctor.
Please note if you were VAT registered the income and expenses would be stated net of VAT on the tax return.

craigxxl will know this too, but there’s a story which goes around about VAT registration being worked out over rolling periods – so it might be worth him commenting on whether this is true or not. I think it’s to stop people doing no turnover for 364 days and then one day’s work for £82999 on March 31st, etc. etc. I probably haven’t phrased that well, but craigxxl can clear it up perhaps? Maybe it’s just apocryphal.

I think you’re referring to exemption from registration when you have gone over the threshold but it wouldn’t be sustainable so you would eventually de-register. You just need to write to HMRC explaining why you had gone over the threshold and that it isn’t regular income that has caused this to happen.

3.7 You’ve gone over the registration threshold temporarily
You may not have to register if, at the end of any month:

your taxable supplies went over the registration threshold in the last 12 months
you can show HMRC that your taxable supplies won’t go over the deregistration threshold in the next 12 months
This is called exception from registration.

You’ve still got to tell HMRC’s VAT Registration Service that you’ve reached the threshold within 30 days of the end of that month, but you won’t have to fill in any forms if we allow you exception from registration.

If we have allowed you exception from registration, this doesn’t mean you’ll never have to register. Keep on checking the value of your taxable supplies every month to see whether you’ve gone over the threshold again. Don’t leave out any supplies just because we’ve allowed you exception from registration since you made them. If you do become liable to register again, you can apply for exception again if you can show us that you meet the criteria.

If we’re not satisfied that you meet the criteria for exception from registration, we’ll register you for VAT from the day you were liable to be registered (see paragraph 3.3), and you’ll need to account for VAT from that date. So it’s in your own interests to send us your application, with a full explanation, as early as possible.

Cheers, that was it.

Not a worry for me anyway. 🙂

Anything over £83k is cash.

Nothing to do with VAT, but thanks for that info – I’m sure we’ll sort this out properly, but it’s useful to know that it is worth collecting receipts at the moment (it’s unlikely our business will even have any income this tax year, let alone make a profit, but we are spending money on stuff which is legitimate expenses). VAT may come some time later, but this thread is a useful reminder that we should allow for it when setting our pricing (we’re a partnership, so turnover above the VAT threshold doesn’t exactly mean we’ll be rich – though our business model means we probably can just suck up the VAT if and when it happens).

Nothing to do with VAT, but thanks for that info – I’m sure we’ll sort this out properly, but it’s useful to know that it is worth collecting receipts at the moment (it’s unlikely our business will even have any income this tax year, let alone make a profit, but we are spending money on stuff which is legitimate expenses). VAT may come some time later, but this thread is a useful reminder that we should allow for it when setting our pricing (we’re a partnership, so turnover above the VAT threshold doesn’t exactly mean we’ll be rich – though our business model means we probably can just suck up the VAT if and when it happens).

You tax dodging bastard you…..
😉

DrP

Edlong, I’m also an accountant and would never recommend what you had in regards to separating the business between supply and treatment.

Hi craig – I think you misunderstood – I wasn’t suggesting splitting the business at all, I was just suggesting charging and accounting separately for the supply of goods, and of services – just like when you get a bill from the garage and the parts and labour are listed and charged separately, just that in this case the different components of the supply would have different VAT treatment. So one invoice, from one business, with two line items, one for the supply of services, one for the supply of goods.

My doubt on the applicability wasn’t about the legitimacy of that accounting treatment (as per my example, lots of businesses supply goods and services invoiced together, and sometimes with different VAT applying to different elements) but whether or not it was okay to have supply of these particular items as a distinct sale, as opposed to it being absorbed within the overall service. The rest of your post seems to be comprehensively answer that one – and it’s a no, so many thanks for putting that one to bed.

What I’d be really interested to hear (since it seems to have been met with silence all round) is if I’m barking up the wrong tree or missing something fundamental with my other suggestion in response to this…

She IS a registered professional, so meets this criteria. It appears the general consensus from her industry is to consider each consult on a case by case basis, and as long as your records contain a detailed medical history etc etc, and your treatment will offer a perceived psychological improvement, then you wouldn’t charge VAT.

which was in summary: cool – register for VAT and crack on – you’ll now be making taxable supplies, but the prevailing rate of the tax will be 0% so you won’t be charging more, or losing income to the tax man.

Am I missing something, or is that the answer? Dr P – would the above criteria apply to all of your wife’s clients?

Ignore me – I’d not read the post properly.

It’s only tax dodging when somebody else is doing it 😉

Am I missing something, or is that the answer? Dr P – would the above criteria apply to all of your wife’s clients?

That’s probably the answer here…
She meets the first criteria: trained professional in the right professional body etc etc
The second criteria requires assessment (by her) and adequate notes – this is also met for the vast majority of clients….

We’re just asking about other clinics what their advice is..

Cheers for the sensible and useful answer above.
I appreciate the ‘concerns’ raised by others – both for our own legal stance, and also for the general tax benefits of the nation….

I’m certainly NOT naieve that my paycheck comes from that pot of cash!!
However, I’m also aware that tehre’s no need to overpay for anything if you have the right approach and knowledge…
Be that adequate accounting advice, a BC discount code for Halfords, or knowing that Heinze beans are cheaper in Asda than Tesco…..

DrP

So she buys not vat-able items, they have a bit of markup then account for 50% of what she charges her clients. Obviously there’s no VAT element to the client on this 50% of their bill. Her service is charged at 20% of the other 50%…or 10% on the total bill.