I run a small design agency and have started to get more into the shop fitting/museum/graphics providing a complete service. I now need to look at going VAT registered pretty swiftly – any advice would be great.

Software advice please:-

Sage Instant Accounts
Quickbooks

Basically I need something enable me to easily sort out my finances and VAT, reconcile with the bank etc.

Looking into the various VAT schemes, Flat rate or paying VAT on only paid invoices, etc etc.

Flat rate will make accounting a lot easier and may well make money for you (depending on business sector rate and actual billing/expenditure).

With the latter… choosing between flat rate and paid invoices depends on how smooth your work/cashflow is.

I chose the latter as my margin, relative to the turnover, varies quite wildly from job to job. Some jobs have a large proportion of spend on vat deductable goods, some I’m only really buying in labour, sometimes I’m contracted labour only so have a very low spend relative to turnover. So quarter to quarter my vat liability might be a few hundred quid of £10k.

Its a bit more work each quarter, but its work you’ve need to do eventually for your tax return anyway.

yes check out the flat rate scheme, nearly changed to it myself but the 14.5% flat rate meant it would actually cost me more.
other than that, Sage are good but I use a very very old copy of Quicken (now Quickbooks). To be honest you ‘could’ just put everything into a spreadsheet or database and get the same result.

For software, try Kashflow – easy to set up and use, and then if you need to increase the complexity you can, or you can keep it simple…

Still looking for a good answer to this myself – been using excel for VAT reconciliation for the last two years.

I miss Quickbooks. Switched everything to Mac and transferred to MYOB, which became Accountedge. Quickbooks was much easier to use for many tasks and much more straightforward when it came to VAT.

Worth using an app like that – much more important to have a proper record of all your transactions once you’re VAT registered. I’m surprised flat rate doesn’t make sense if you’re design based.

Simon

I wouldn’t normally recommend contacting the Revenue :-), but i’d send them a email, and ask them what flat rate your business would be on (it varies based on what you do). My accountant put me on a rubbish rate. Colleagues who did similar work to me got told by the revenue to go on a much lower rate and have evidence of the recommendation, so they are sorted. Made quite a difference.

Personally, I’d use a simple spreadsheet, rather than any bespoke accounting software.

Well – all purchase bar a very few petty cash jobs are BACS or on the company credit card. Makes keeping track of things much easier. Will have a look at the options, cheers guys. Flat rate does seem to be the way to go, especially as with all my jobs over £1k I ask for 40% upfront. Been stung far too many times in the past.

BTW – not keen on all this subscription for software, would rather buy a license outright. Adobe Cloud, Autodesk Subscriptions, software costs are going crazy and I can see no reversal….

Another vote for flat rate. In my recent experience the revenue won’t tell you what catagory to use, only tell you if you choose the wrong one.You get a 1% discount for the first year so you nay well only pay 11% for the first year. I use quick books and it is pretty easy. Online version so can log on from any machine which for me is dead handy and your accountant can log on too. It also can download all transactions automatically from your online banking so really easy to reconcile to the bank.

Flat rate here, 10% reduced to 9 as its my first VAT year. Construction services catagoru

Great as most of my purchases are in labour by invoice and the blokes aren’t VAT registered.

It’s basically allowed me to become more competitive / make a bit more profit without increasing rates to my clients as all the companiesI do work for are VAT registered.

With Flat Rate your difference in VAT charged and paid to HMRC as percentage of gross sales is added back to sales which increases your profits and tax liability so take that into account too.
If you’re clients are slow payers think about cash accounting (accounting for VAT on the payments/receipts date instead of the invoice date) too as this can improve you cash flow. Also remember to look at your past purchases as you will be able to claim a lot of VAT back on these but your Accountant may need to amend your accounts for these too increasing your tax liability but again this can be improve your cash flow.
Software wise I recommend Sage if you have some accounting knowledge otherwise a spreadsheet can do the basics you require.

Flat rate here, and if you are canny you can get in a lower rate. For example ‘Business Consultancy’ is lower than ‘IT Consultancy’.

And you can still claim VAT back on big items – we did on a M/C a few years ago.

And tbh we just use the Excel sheet supplied by our Accountants – works great and has done for +10 years now.

Coolhandluke, you need to be careful as we’ve just lost an argument with HMRC following a VAT inspection that our client is “General building or construction services” as his material purchases were less than 10%. He is now frantically trying to find additional material purchases so that we may appeal the decision.

Br, as has been pointed out above, that sort of dodge may seem very clever until the day you get inspected. As my account tells me, ‘You don’t mess with the VAT man’

As my account tells me, ‘You don’t mess with the VAT man’

That’s an old saying, they have been merged for quite a while, and I think IR have all the power the VAT people had, so technically you don’t mess with either 🙁

Br, as has been pointed out above, that sort of dodge may seem very clever until the day you get inspected. As my account tells me, ‘You don’t mess with the VAT man’

Agree, which is why I didn’t suggest going for the best rate possible, but what is (or was) the difference between Business and IT Consultancy – about 1% 🙂

Cash accounting works best for me as a Business Consultant – the reason being that I occasionally use subcontract, VAT registered, resource and if I was on the flat rate I’d be losing ££’s on those jobs – flat rate is good if you don’t buy anything in (inc labour) in any volume, so if you are using independent designers, etc who are VAT registered, don’t do it! 😀

Knowing very well what designers earn I would say you won’t find many freelancers that need to be vat registered. All the small design outfits I know use flat rate if they are vat registered. Any purchases over about 2k like computers can still be claimed against vat seperately. If you run the fit out costs for jobs through your business flat rate may not be for you, not sure if this is the case from your post.