VAT registration for self employed book keepers - The Book-keepers Forum (UK)

pats · Newbie

VAT registration for self employed book keepers

Shamus · Forum Moderator & Expert

If your clients are VAT registered then there is no issue but if they are not then you will either be 20% more expensive than your competitors or make 20% less profit than your creditors.

The advantage is that things such as your annual software renewals will be 20% cheaper as will purchase of things like new computers but that needs to be weighed against what you can charge clients.

kind regards,

Shaun.

p.s. Welcome to the forum and good luck with IAB.

pats · Newbie

Hi Shamus - many thanks for your quick response. It makes me wonder how many clients are likely to be VAT versus non VAT registered. Also are most book keepers VAT registered or not VAT registered? I expect this can vary but any comments/views from contributors on their experience would be appreciated on these questions.

Shamus · Forum Moderator & Expert

I'm VAT registered but so are most of my clients.

I've lost some small clients on the back of needing to be more expensive than competition. (Never lost a client once they join me, only on initial quote).

The issue is that its a very cometitive market place out there with a lot of bookkeepers fighting for clients. Start up bookkeepers can often only negotiate on price so will on occassion be working for mch less than minimum wage. Taking a further 20% off that and there is no point working.

You have to look at your client base before making that decision. Who do you expect your clients to be? If you are doing the bookkeeping for mid range businesses that have an accountant then VAT registration may be viable.

If your client base is to be micro businesses where you are foing the accounts as well as the bookkeeping as they are too small to have both then the likelihood is that they will be looking for the cheapest, not necessarily best option and VAT registration will move you out of that category.

YLB-HO · Guru

I am not VAT registered, and as half of my clients aren't either so definitely for them it would be a disadvantage if I was too. I have restricted the growth in my practice, so I don't have to be. I do see being VAT registered as being a tax collector on behalf of Customs & Excise, as it certainly felt that that when I used to be. But the first chance I had I de-registered, and now I'd rather not have the extra turnover.

I only have one client who benefits from being registered - that is because they deal with EU VAT registered clients. But I do question the extra costs and hassles for having to do the VAT, as some quarters the VAT reclaim is not worth the amount of extra work required, even over the year its not much, especially as in many cases they struggle to actually get hold of VAT invoices. Not Invoice no VAT reclaimed.

I do have clients who actually go on holiday just before they reach the VAT limits so they don't have to register.

Why give an additional 20% of your income away, which is why you could be doing if you are VAT registered?

pats · Newbie

Thanks for your responses. This is most helpful.

RobH · Expert

I think both Shaun and Frauke make excellent points. I would just say keep it simple for the time being, no need to rush into vat registration at this stage of your career. Any capital items that you may buy, you can claim the vat back retrospectively (dependent on time limits). There is a school of thought that says that being VAT registered gives you credibility but I really don't think that is the case for a bookkeeper.

pats · Newbie

Hi Rob - You make a very good point about keeping things simple. My decision is whether to de register as I am currently VAT registered. However as you say there is no rush, since I am at the point of putting a plan together prior to taking the plunge and paying out for a course. When I looked at the charging scales and customer base potential I realised this needed to be taken into account.

RobH · Expert

Sorry Pats, I skim read your post. Are you registered under flat rate scheme for your present work? If so then the rate you use for that would apply when calculating your bookkeeping liability as long as the initial consulting work was the greater proportion of your income, so that may be a consideration.