sarahlou06
Well-Known Member
I've done various searches on this but I wanted a self employed geek to explain if in simple terms 
Taking VAT off commission earns?
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pkenzie
Active Member
Ok, if u are self employed you can claim back the vat on expences that you buy. Example; uniform, phone bill, equipment. You cannot claim back the vat on the servicea you provide. Eaxmple; when i do my tax form i will write everything i have earnt in the last year. I will then write every expense i have had (keep reciepts they sometimes ask for them). If you earn over the vat mark (i think is £70k not sure) you will have ti pay 20% vat.
Please ask another question if i have missed anythin x
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Please ask another question if i have missed anythin x
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pkenzie
Active Member
Same for other businesses. If a restaurant has to pay vat on their service they could not claim the vat back on it, but they could claim on food and other products.
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Lucy-Jayne
Well-Known Member
You can only claim back the VAT on expenses you have bought if you are VAT registered and therefore charging VAT on your services.
sarahlou06
Well-Known Member
Thank you so much. I don't think I'm going to be vat registered as I'm other one beauty room & I don't order much.
I'll do a tax return in Jan (as this is my first year starting out)
In Jan 2013 hopefully I won't have to pay much!
Is this correct?
I'll do a tax return in Jan (as this is my first year starting out)
In Jan 2013 hopefully I won't have to pay much!
Is this correct?
Lucy-Jayne
Well-Known Member
Here's an example:
If the salon treatment costs £120, take VAT off, leaves £100. Split it 60/40. She gets £60, you get £40.
If the salon treatment costs £120, you split is 60/40, she gets £72, you get £48. Are you saying she should then pay the VAT off of her £72 (which is £20) and your figure of £48 stays the same?
Regardless of what happens, VAT of £20 has to be paid. So you need to ask your employer, because lets face it you're not self employed based on the information given, if your split is on the total treatment cost or on the net figure after VAT is paid.
You need to clarify if you are in fact employed or self employed. Self employed usually provide all their products. Also, if you are employed, and you're 40% is meaning you earn minimum wage, she should be bumping your salary up.
pkenzie
Active Member
No you can plaim your expenses back if youre self employed because u have a personal allowance and the price will cone off your tax bill or you will get a rebait.
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Lucy-Jayne
Well-Known Member
You only have to be VAT registered if your business turnover is over £77,000 a year.
In the meantime, take your total sales from 6th April 2011 to 5th April 2012, minus your expenses from the same period, then you have your profit. Then you pay your tax (if over your personal allowance) and NI based on this figure.
Lucy-Jayne
Well-Known Member
I'm sorry, but this is completely incorrect. We are talking about VAT here not tax.
You don't 'CLAIM' expenses back.
You take your total sales, less expenses and you are left with your profit / loss. You don't physically claim the money back off of your tax bill! Your expenses are taken away from your turnover then if you have a profit, tax is paid on anything over your personal allowance.
Ir really does frustrate me that there are people on here trying to run businesses and yet they don't know any business fundamentals!
Expenses are something completely seperate to VAT.
Expenses = products, uniform, rent/commission, in fact anything you have to spend in order to run your business. This you can claim back (have removed) as personal expenses from your own tax return.
VAT = tax you pay on products purchased, and you can only claim this back if you are VAT registered.
To the OP, I think you need to clarify if you really are self employed or not. You need to call HMRC, they are in fact a pretty friendly, helpful bunch despite their reputation lol and get them to explain the rules to you.
Once you have that information I suggest you then go back to the owner and re-negotiate your deal as to me it doesnt sound right that you be essentially paying their VAT from your commission - surely it should be that they pay VAT on their income from you (the 60%)
pkenzie
Active Member
Well theres me told. As it happens i was talking about tax forms and writing down your expenses.. CLAIMIMG your expenses. Sorry if i wrote it wrong i didnt mean to boil you. Im not a business owner i am just registed selfe emplyed and have to write down my expenses which i thought i was claiming vat back. Thanks for explaining so nicely x
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Business Link is a fantastic web site which explains everything you need to know about legally running a business or being self employed - definitely worth reading
VAT | Business Link
VAT | Business Link
pkenzie
Active Member
Oh right thanks for explaining that hun. I thought i was claiming the vat back when i fill my expenses out on my tax form but obv not. I am self employed but in a salon that u dont own or run, im just on commision. So even though i have to pay vat, through the business not myself, i am not able to claim vat back? X
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If you are registered as self employed, but not VAT registered then no you cant claim it back.
Any commission that you hand over to the salon, if they are VAT registered is down to them to claim back.
Any commission that you hand over to the salon, if they are VAT registered is down to them to claim back.
pkenzie
Active Member
So how come when i did my tax return last year i was told to write down expenses such as unoform, training expenses etc. (things i had payed for)? And that the amount will co.e off my tac bill? Sorry just realy confised now lol xx
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Lucy-Jayne
Well-Known Member
Sorry, but I'm not going to sugercoat it! I'm a part qualified accountant so do know what I'm talking about.
Yes you have to write down all of your expenses, but your operating expenses have nothing to do with VAT. Claiming back and paying VAT is only applicable if your turnover is over £77,000.
The amount doesn't in effect 'come off' your tax bill.
As I've written before on this thread, you work out your total turnover (sales and retail sales), then you deduct all of your expenses (uniform, training expenses, stock etc) and that gives you your profit. If your profit is over the tax free personal allowance then you will have to pay tax on your profit. If it is under, you will not. You only have a tax bill if you earn over the personal allowance (around £8k a year).
sarahlou06
Well-Known Member
Thanks Lucy Jane & pure for your Innput. I guess vat & tax is scary!
Luckily I have a good accountant to hand & salon geeks to advice
Luckily I have a good accountant to hand & salon geeks to advice
As Lucy-Jayne said this is correct - but it still has nothing at all to do with VAT.
What you did was for pesonal Income Tax - a very different thing.
pkenzie
Active Member
Thanks for your help xx
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A lot of people seem very confused about their own employment and tax status! If you're not sure what VAT, expenses, tax, self employment etc means, I really recommend attending one of the HMRC courses.
They are free, and very informative.
If you don't have an accountant, it's pretty wise to make sure you understand what you are doing. If you make a mistake, ignorance is no defence, and not many of us could suddenly find the money for an unexpected tax bill.
I have been on two of the courses (being self employed and importing/exporting) and I found them really useful, and feel much more in control over what is happening to my own cashflow!
I also find their helpline very useful, and they have patiently explained about the four different types of National Insurance to me more than once. I finally understand them all!
They are free, and very informative.
If you don't have an accountant, it's pretty wise to make sure you understand what you are doing. If you make a mistake, ignorance is no defence, and not many of us could suddenly find the money for an unexpected tax bill.
I have been on two of the courses (being self employed and importing/exporting) and I found them really useful, and feel much more in control over what is happening to my own cashflow!
I also find their helpline very useful, and they have patiently explained about the four different types of National Insurance to me more than once. I finally understand them all!
