[Closed] Setting up (or separating..) a business to remain below VAT threshold... doable?

Thoughts?

This is tax avoidance. Legal but morally questionable.

Business B - my wife treating the client, with the product they’ve just bought

Tax man might want a chat about IR35

Scotroutes + 1

Questions for the OP - assuming you work for the NHS, do you get paid by the tax payer? Is the NHS awash with so much money that it doesn't need any extra cash that VAT avoiding companies manage to hide?

Strongly advise speaking to an accountant.

Sounds dodgy but she may get away with it... but if HMRC look into it there could well be a penalty.

How do her prices compare with those of bigger (VAT registered) businesses? Does she charge the same (so effectively makes 20% more than they do) or less?

Would the Botox, or whatever, still not be zero VAT rated when she sells it on to the client, leaving only her services VATable?

Talk to her accountant though!

^^ interesting thought..
So essentially separating her sole trader business into ‘sales’ and ‘treatment’..Hmm...

DrP

I’m surprised that vanity products like Botox and fillers aren’t subject to VAT in the first place if I am honest. They are a luxury item after all.....

So essentially separating her sole trader business into ‘sales’ and ‘treatment’..Hmm...

Why not...?
Just like most other small businesses, builders, garages etc...

What if treating someone’s displeasure with their facial appearance was AS, or MORE effective in uplifting their mood and confidence as antidepressants...?!

Or.. Botox for migraines...

Each of the above scenarios would be VAT exempt..

DrP

It’s called artificial separation and is illegal, HMRC are pretty hot on it

https://www.gov.uk/government/publications/statement-of-practice-4-1983/statement-of-practice-4-1983

Would she inject whatever a customer brought along, or only what she supplied? If the answer is only her own supply, the businesses won't ever be separate enough to convince HMRC.

Used to be the laundromat scam in the 90s - set up a chain of laundromats and keep them all separate and under the VAT threshold, although owned by one person. Funnily enough, Customs and Excise as it was then worked it out...

She may get away with it but I wouldn't risk it - I like a quiet life.

Aren't the supplies (Botox etc) only VAT exempt if they are being used for medical treatments (improving health) by medical professionals who can get VAT exemption for the actual service? i.e a doctor to treat overly sweaty armpits.

Edit as DrP responded - Obviously you'd have to convince the taxman of that if they ever checked.

Could you not split the business between purely cosmetic / actual medical need?

You're best off speaking to a good accountant. Its pointless getting it wrong.

So the artificial separation thing DOES seem dodgy 😳

But...
Rather than charging (say) £250 for ‘3 areas of botox’ it could be reasonable to charge £100 for the prescribed botox (No VAT) and £150 for the labour and such (VATable)...

DrP

RE accountants..I had a meeting with a good one today, but this industry is fairly unique. You CAN claim your treatment if FULLY VAT exempt if it’s for medical purposes. As alluded to above, some clients genuinely DO have low mood or body dysmorphia type issues, that a squiz of filler really can help with...

How much of her stuff does she pay VAT on when she buys it?
If it’s no vat coming in it’s no vat going out.
Edit..never ever **** the VAT man off.

Aren't the supplies (Botox etc) only VAT exempt if they are being used for medical treatments (improving health) by medical professionals who can get VAT exemption for the actual service? i.e a doctor to treat overly sweaty armpits.

So as she’s a Dr, she prescribes the botox/filler for the clients, hence she doesn’t pay VAT on it from the pharmacy.

DrP

Edit:

Could you not split the business between purely cosmetic / actual medical need?

Yes, you could..
Researching it, it seems that HMRC accept that it’s a grey area, and that this is probably the route we’d go down.
Basically, if you keep adequate records highlighting a medical history, and document the psychological upset that whatever they want treatment for causes, and of course you’re a doctor/dentist/nurse, then your treatment CAN be deemed for medical purposes.

BTW as a sole trader it’s their total income from all trades that count towards the VAT threshold they wouldn’t be classed as separate.

What if treating someone’s displeasure with their facial appearance was AS, or MORE effective in uplifting their mood and confidence as antidepressants...?!

I don’t want to get into a slanging match, but......um......yeah, right-o 🙄

Presumably in my case my bike and a pint down the pub should be VAT exempt as they make [u]me[/u] feel better, yes?

If there was a proven medical need, then couldn’t the NHS prescribe the treatment and thus the ‘patient’ could get it free anyway?

Bear in mind that you are effectively asking about tax evasion (yes evasion not avoidance) here, so the moral high ground is not really attainable.

Presumably in my case my bike and a pint down the pub should be VAT exempt as they make me feel better, yes?

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

And RE the proven medical need and the NHS offering it... I get where you are coming from, I really do... but... if anything, these would be classed as low priority procedures.. I mean I have patients with eyelids that droop so much they can’t see, yet won’t be treated on the NHS..!!

Anyway...

DrP

If there was a proven medical need, then couldn’t the NHS prescribe the treatment and thus the ‘patient’ could get it free anyway?

Free prescriptions? There's a thought...

I'm not an accountant, but it might be worth looking at a 'flat rate vat' arrangement with hmrc.

The fact your wife is a doctor doesn’t have any bearing on the treatments being used for cosmetic services so are exempt from medical treatment and therefore would subject to VAT for both the purchase and sale, see 4.4.
https://www.gov.uk/government/publications/vat-notice-70157-health-professionals-and-pharmaceutical-products/vat-notice-70157-health-professionals-and-pharmaceutical-products

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

Presumably in my case my bike and a pint down the pub should be VAT exempt as they make me feel better, yes?

All you need is a medical degree and a pub and you could be quids in.

Sounds a bit questionable on both a tax and professional level to my untrained eye!

Are prescriptions not between the patient and the pharmacy supplying them? So doctor provides prescription but patient needs to go and get the medicine. At that point VAT should be getting paid no?

She's effectively writing a prescription for someone, acquiring the drugs under their name, and then dispensing it to them. Surely there's a breach of some prescribing regulations there?

Merely intrigued as it seems a good way to have a side business selling opiod's that were prescribed to made up patients.

Sorry, DrP, I think I’ve been a bit heavy-handed here.

I am actually an accountant, but a (very lapsed) management accountant. Speak to someone who would know for sure, an ACCA accountant or maybe even float it with HMRC(?)

Anyway, in the spirit and all that.....

Consider what you are asking here and apply it to another sphere where the initial supply is not VATable but the business in question is enhancing the product (by using it in a service to the client). So, the company decides to bill its customers for just the raw materials, albeit at a huge markup. It then sells the service for a small nominal fee. What the taxman will see is a transaction that cannot make any sense unless something nefarious is going on. The client’s bill shows them paying (let’s just say) 3x the true worth of some raw materials. Why would anyone do this - unless they were really paying for a service, which is hidden.

I would wager that this was first tried approximately five minutes after the idea of VAT, variable chargeability and thresholds was first imposed(!)

Splitting the companies effectively achieves the same thing.

Splitting companies that would otherwise simply become liable to pay VAT on exactly the same services is the same thing (as in the launderette example above).

If a tax accountant advises you otherwise, then I’ll stand corrected, but if you take the specifics out of your example and overlay it onto something more obviously devious I think you can see it is the same thing......

Anyway - best of luck, but deffo seek advice, and sorry again for being bolshie with you......

This seems to sum it up,
[url= https://www.ukbusinessforums.co.uk/threads/avoiding-vat-threshold.75115/ ]VAT Advice[/url]

Seems like it is a bit of a challenge.
Maybe VAT register and start looking for anything you can claim the VAT back on, does she travel to the client or do they come to her? Does she rent space? Does she need to go to a Botox conference in Gastad?
Oh and accountants costs!

Pay tax

Two Dr's in the household and your asking how to save a few quid.

Get that tax paid you bourgeois rascal....

Or asking how to make a small business stay profitable and provide a popular service while staying within the law...and providing a person with a job.

Are prescriptions not between the patient and the pharmacy supplying them? So doctor provides prescription but patient needs to go and get the medicine. At that point VAT should be getting paid no?

She's effectively writing a prescription for someone, acquiring the drugs under their name, and then dispensing it to them. Surely there's a breach of some prescribing regulations there?

Nopedy nope... I’m afraid you’re not at all correct there, sorry..

And survivor - I don’t want to do anything illegal at all. Honestly! Just looking at the best way of maintaining family finances (I appreciate that sounds terrible! I”m not a bad person! Honest!)

By the same principles, no one should EVER use Quidco , ask for CRC vouchers, or use their BC discount in Halfords...

DrP

Put better by TheDTs...!

So . . . what treatments do you have, DrP?

because it’s simply not achievable to charge clients the current treatment costs PLUS vat - people would simply go elsewhere.

How are “elsewhere” managing to do it for less ?

she does aesthetic treatments; botox and dermal fillers - both prescription medicines so VAT exempt.

Is she not paying VAT on [b]any[/b] of her supplies of these currently then ?
That seems very odd to me.

How would it work if she wasn’t a doctor able to write a prescription for VAT free products for her clients?

scotroutes and andyl at the top of page 1 have summed it up.
As for not being registered with Companies House - rather you than me in managing the fallout.
Talk to your accountant about VAT registration, splitting business and setting up new company - your missus does have a business accountant?
Companies House take a dim view of dodging the rules and can impose substantial penalties - as can HMRC.
Are you saying your missus has been trading without a company registration? Illegal.
On what basis does she pay tax?

scotroutes and andyl at the top of page 1 have summed it up.
As for not being registered with Companies House - rather you than me in managing the fallout.
Talk to your accountant about VAT registration, splitting business and setting up new company - your missus does have a business accountant?
Companies House take a dim view of dodging the rules and can impose substantial penalties - as can HMRC.
Are you saying your missus has been trading without a company registration? Illegal.
On what basis does she pay tax?

Are you pissed? She is a sole trader. What the **** do Companies House have to do with it?

Are you saying your missus has been trading without a company registration? Illegal.
On what basis does she pay tax?

I’m in the shit then. I’ve been trading for 15 years and companies house know nothing about me. 😀

As for the OP, just listen to craigxxl if you listen to no one else. Splitting the business will attract unwanted attention from HMRC and if they go digging, they won’t stop digging until they can justify their digging with a bill (generally speaking).

Oh and FFS, if she’s gone over the VAT threshold, tell someone at HMRC as soon as possible. Generally they’re sticky enough about late income tax payments, corrections etc but they really like to have a poo on people that muck about with their VAT.

reuben - no, I'm not piseed you charmless scrote.
https://www.gov.uk/set-up-sole-trader

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!

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

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.

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 you[s]rself[/s]...

FTFY..

And just to add to others' posts - [b]frankconway is talking utter rubbish[/b], 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.

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.

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 [b]didn't know [/b] that I should be deducting business costs (i.e £40-50k of product, several £k of insurance and training etc etc) [b]and was paying tax n the whole £80k[/b], then someone would chip in and say "[i]DrP you numpty, you should offset profit against losses..you should only pay tax on circa £35k net profit[/i]"

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 -[b]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..[/b]

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 ****ed 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.

[quote=craigxxl ]Any losses in the first years would be carried forward and offset to future profits.

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 [b]all[/b] of your wife's clients?

Ignore me - I'd not read the post properly.

[quote=DrP ]You tax dodging bastard you.....

DrP

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.