Vat

[VirginiaW]

I know this is one for me to ask my accountant, but would like to get a general view on VAT within a beauty salon. I am currently just below the threshold. I would like to expand next year, which will definately take me over the VAT threshold.

Can you charge VAT on treatments? I have not come across and salon (not spa) that charges VAT on treatments.

For me it would mean increasing my prices by 15% which my clients would not be overjoyed with or... is there an alternative?

 

[shiningstar]

Not actually sure on the answer as i am way under the threshold but just to make u aware that VAT goes back up to 17.5% in January so it might even mean a bigger increase for your clients.

Kim x

 

[kimi1101]

The easiest way for you is to put your prices up by 15% and put at the bottom of your price list "all prices are inclusive of VAT" or if you don't want them to go up by that much you'll need to cushion the blow from somewhere else because basically all treatments and products you sell are VATable so you will be charged VAT on them in your VAT bill, whether you have charged extra to account for VAT or not. If you are expanding, you will be able to claim VAT back on all the alterations (if you are doing this) so you will have the upside of being VAT registered. Remember VAT goes back up to 17.5% in January.

Just know so much about this cos I'm looking into it myself just now.

Basically you'll be charged VAT in your bill for all treatments and products you sell, and can claim back for all purchases which you have been charged for (equipment, products etc). Remember to ask for a VAT receipt when buying these sort of things, you don't always automatically get it. Hope this helps xx

 

[dawn@nouvatan]

Blimey I didnt know the VAT goes back up in January. Thanks for letting me know Kim x.

 

[kimi1101]

As if we don't have enough bills to pay......I really don't know whether to go VAT registered cos I worry I might go over the threshold and apparently if you do the tax man comes after you with a big stick...well maybe not but they aren't happy about it anyway. But if you don't have the VAT receipts then you can't claim it back boo xx

 

[steve@nouvatan]

if you can avoid going vat registered do so:irked: people really begrudge paying it if they are not vat registered themselves and its basically 17.5 percent out of your profits unless you increase the prices to your customers who get no benefit from what they might see as a price hike due to your success

 

[VirginiaW]

Thank you for all your replies. Really might have to reconsider the expansion.

 

[kimi1101]

Talk to your accountant. They know all the ins and outs and may be able to help you more with all this. It shouldn't be something that stops you from expanding! xxx

 

[allyballybee]

Just to clarify, VAT is payable on turnover, not profit. Sometimes I wish I hadn't went over the threshold. Suppose it depends how much you want to expand. If it was just a little bit, then I would say no. I expanded, took on more therapists etc and have a lot more hassle that comes along with it, for not lots more money. And we are really busy. If I just kept things small with just me working just under threshold things would be a lot easier.

Don't want to put you off though...

 

[persianista]

Vat is the bane of my life. As hair and beauty salons, we are disproportionally hit by vat as our biggest cost is labour whish cant be offset.
If you can keep under the threshold, then do, otherwise you need to grow your business extremely quickly to a turnover of over a hundred k, just to make the same profit.
As we are all competing on price, its impossible to put your prices up by 15% ,as your clients could well migrate to the non-vat registered salon down the road.
Its usually the main reason why big, busy salons are more expensive than little ones, it adds an enormous overhead.

 

[shedunlop]

We went over the threshold with my husbands business with one big order which took us by surprise. The VAT man was great about this and we were able to register and backdate it. We ended up at the end of his first year by having an inspection and, again, the inspector was fab and gave us lots of good advice and let us know of things we could claim for that we thought we couldn't. As long as you can answer questions they ask and show documentation to back it up they are fine.

I would reconsider your expansion and work out how fast you can grow your business to make up the difference. Maybe a price increase now would soften the blow a bit next year. Look at suppliers and see if you can cut back there. I switched last year and save quite a bit now.

This could do you a big favour in the long run and let you look at your business again and make savings you wouldn't have made before.