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Why avoid it? You're just holding the business back, embrace it. Prices don't have to increase 20% anyway as you're getting VAT back on things. Also you'll be more attractive to commercials.
Ask your accountant?
I agree with your concerns about private clients. It's not only announcing you're suddenly 20% more expensive overnight, but also that your business has expanded to a level that they will lose sight of you and get trainees doing the work they used to pay you for as an expert.
It can be done, but needs managing carefully if you want to retain the existing client IMO. I've gone the other way, and stayed under the VAT limit and sold that as a benefit: the client gets me doing the work myself, and pays no VAT. You can raise the level you charge for that service, but obviously there's a limit you can earn.
Not sure re vat and partnerships, though if it's articially created to avoid vat, then I think best avoided.
I too was worried when I faced this situation; how would customers react? Hopw many would I lose?
Well many of them congratulated me on doing so well so soon - "must be doing something right". One even said well done the country needs the money!
Overall people accepted it well and I only lost a handfull of customers - 3% above the usual annual churn.
If people like you and your service, they will generally pay the extra. I passed the full 20% onto my customers, but did not raise base prices that season.
So embrace it as part of growing.
No, HMRC will view it as a single entify if formed as a Partnership or LLP to avoid tax. They are very hot on any attempt to exploit the vat threashold limits. You don't what extra scrutinity or investigation by HMRC VAT.If you go this way, it needs to be part of business plan to grow.
Some stay as ST / Single-staffed to keep below the limit, not wanting to run a business with a larger T/O, or cant/wont manage staff, others will go the other way and want to grow, employ staff etc.
I don't remember that we lost any major customers in the early days, other than the normal churn rate. It also allows you to be somewhat selective during that process.
It's a common fallacy that your prices grow by 20% as the "Input VAT" can be used to effectively offset, but it depends on your work type and goods/supplies you purchase to perform your business.
We grew by taking on experienced staff and looked carefully at our customer / work type. We have also supported a couple of younger staff (thru supervised work) go through college. I can't see a problem with 'trainees' working with clued-up collegues, their enthusiam is catching :). Most of our customers support this and are glad to see yougsters coming into this indusrty. I think this is a poor excuse/acceptance by some.
Utlimately it's what you want your business to be ...ie you need to know your goals & limits.
There's a lot going on at the moment with the EU & Mirco business VAT threashold limits (mainly in digital services), but what was interesting from the news I saw is that the UK is one of only a handful of EU Countries that does not have a 0% / £0.00 threashold.
Now that would be a good move. No VAT threshold. All businesses charge VAT. A level playing field. No snide comments about 'rogue traders'. Simplier (albeit dearer) for all customers .....
I have supported this view for years.
Yep. Would be a massive step forward.
It also encourages better record keeping as your books have to be up to date at least every 3 months. I'm sure many small enterprises just hand a carrier bag of receipts to an accountant once a year and have no real grip on proper financial information.
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