Is it worth it?
To know this you have to look at your client base (are they Vat registered and expect a Vat invoice)? What purchases your business makes? And whether you want the additional work of preparing a Vat return?
In short I would feel that it is not really worth it if you are making a profit (and if you are not making a profit is what you are doing really worth it?)
Let me give you an example of why this is with a product you retail on to a client.
Product X's RRP is £24.50 and its cost price is £12.51+vat, meaning it costs you £14.70. This means you make a profit of £9.80 if you are not Vat registered. If you are Vat registered then you effectively sell the product for £20.85 (20.85+17.5%=£24.50), so the profit you make is £8.34 (20.85-12.51).
This is even worse with treatments - on a £30 facial you would only get £25.53 and the Vat-Man/Woman would take £4.47. I am sure you are thinking 'but wouldn't I claim back the Vat from the cost of my treatment products' and yes, you would but how many treatments do you get out of those products. The majority cost in a treatment is your time which you can not claim any Vat back on.
There are clever ways of doing your books to reduce your tax liability, payment by dividend instead of PAYE, you may be able to offset the cost of a washing machine against tax (or a proportion of the cost of it) because you use it for your business (washing towels etc)and contractual obligations to name a few. However, I would recommend you speak to a friendly accountant about this as you don't want to be done for tax evasion.
If you would like some more advice on this type of thing please feel free to drop me a line.
Jo
Beauty products | Beauty Therapy | Professional Treatments | Beauty Supplies- Moorspa.co.uk
