Firm closing

[The Phantom]

8 minutes ago, WTF said:

so why don't these food outlet owners set up numerous companies on paper to deal with things so no individual company ever exceeds 85k ?

I believe that is tax evasion.  HMRC really don't like that.  If you're going to dodge tax, don't dodge VAT, you'll go to prison.  You don't usually go to prison for dodging other taxes. 

If they are fundamentally different businesses, it might work.  But if you're essentially doing the same thing through different companies, they'll look straight through it. 

Plus these food vendors aren't generally tax savvy businessmen.  One random change can shift your company from being under the threshold to being over.  Could be increases in costs on ingredients, energy or just having a really good year.  This might happen between two accounting/calendar years, so you might not notice it until it's too late. 

As for Meximann, it was selling loads of takeaways during Covid that bumped them over the threshold.  

Edited March 27, 2023 by The Phantom

[John Wright]

5 minutes ago, WTF said:

so why don't these food outlet owners set up numerous companies on paper to deal with things so no individual company ever exceeds 85k ?

There are aggregation rules for associated businesses that turn them into a group for VAT purposes.

I remember when VAT was introduced. Lots tried that. YHA treated their smaller youth hostels as separate businesses to avoid VAT registration limits and keep prices low in basic hostels.  They soon found that the extra paper work wasn’t worth it.

[Andy Onchan]

The VAT threshold should probably be reviewed in light of what's gone on in recent years:

 

VAT Notice 700_1_ supplement - GOV.UK - www.gov.uk.pdf

[John Wright]

7 minutes ago, Andy Onchan said:

The VAT threshold should probably be reviewed in light of what's gone on in recent years:

 

VAT Notice 700_1_ supplement - GOV.UK - www.gov.uk.pdf 185.31 kB · 2 downloads

Or reduced?

The 1990 figure equates to £58,150 and the 1991 figure equates to £74,500

[Andy Onchan]

5 minutes ago, John Wright said:

Or reduced?

The 1990 figure equates to £58,150 and the 1991 figure equates to £74,500

How does that compare with things like unit labour costs and minimum wage levels at those times?

[John Wright]

1 minute ago, Andy Onchan said:

How does that compare with things like unit labour costs and minimum wage levels at those times?

They’re all inextricably linked into RPI or CPI, and as VAT ultimately is based on consumer spend on good and services that seems the fairest way of comparing the registration limit.

However, on the basis it was thought appropriate to increase above the rate of inflation historically, and it’s now 5 years since the last increase, there is an argument for £100,000, but equally for a lower ffigure. It’s a political decision and not an economic statistical exercise.

[Passing Time]

3 hours ago, Gladys said:

Which prepared food, the food they buy in or sell?  If they aren't registered for VAT they cannot charge it on the food they sell, nor recover it if charged on anything they buy. 

Correct for the reasons John has outlined. However whilst you don't pay VAT on quite a lot of ingredients, once you combine/cook/sell they then become subject to VAT. 0% if cold take away food and 20% for hot food that's if they are VAT registered

[Passing Time]

1 hour ago, John Wright said:

They’re all inextricably linked into RPI or CPI, and as VAT ultimately is based on consumer spend on good and services that seems the fairest way of comparing the registration limit.

However, on the basis it was thought appropriate to increase above the rate of inflation historically, and it’s now 5 years since the last increase, there is an argument for £100,000, but equally for a lower ffigure. It’s a political decision and not an economic statistical exercise.

Lower figures wouldn't be popular with a lot of businesses whereas an increase to over 100,000 would help quite a lot of small businesses

[The Phantom]

13 minutes ago, Passing Time said:

Lower figures wouldn't be popular with a lot of businesses whereas an increase to over 100,000 would help quite a lot of small businesses

Wouldn't help Govt coffers though.   

[Happier diner]

15 minutes ago, The Phantom said:

Wouldn't help Govt coffers though.   

it doesn't go into government coffers does it?

[The Phantom]

5 minutes ago, Happier diner said:

it doesn't go into government coffers does it?

Well in the end it does once pooled and shared between us and the UK under the flexible agreement. 

It's not actually a bitch about the IOM Govt, as I'm aware we couldn't set it independent of the UK.  In light of inflation and the fact that it's not gone up in 5 years, it definitely would be good for the plebs in business if it was raised. 

Edited March 27, 2023 by The Phantom

[Passing Time]

1 minute ago, The Phantom said:

Well in the end it does once pooled and shared between us and the UK under the flexible agreement. 

It's not actually a bitch about the IOM Govt, as I'm aware we couldn't set it independent of the UK.  In light of inflation and the fact that it's not gone up in 5 years, it definitely would be good for the plebs in business if it was raised. 

Nice...

[The Phantom]

2 minutes ago, Passing Time said:

Nice...

I bet the Tories have a secret PIBs department.

But you know what I mean.  Big business, it wouldn't make much of a difference.  But the little traders, it would. 

[Happier diner]

1 hour ago, The Phantom said:

Well in the end it does once pooled and shared between us and the UK under the flexible agreement. 

It's not actually a bitch about the IOM Govt, as I'm aware we couldn't set it independent of the UK.  In light of inflation and the fact that it's not gone up in 5 years, it definitely would be good for the plebs in business if it was raised. 

I thought we get a fixed share whatever. 

 

 

[CallMeCurious]

4 hours ago, The Phantom said:

I believe that is tax evasion.  HMRC really don't like that.  If you're going to dodge tax, don't dodge VAT, you'll go to prison.  You don't usually go to prison for dodging other taxes. 

If they are fundamentally different businesses, it might work.  But if you're essentially doing the same thing through different companies, they'll look straight through it. 

Plus these food vendors aren't generally tax savvy businessmen.  One random change can shift your company from being under the threshold to being over.  Could be increases in costs on ingredients, energy or just having a really good year.  This might happen between two accounting/calendar years, so you might not notice it until it's too late. 

As for Meximann, it was selling loads of takeaways during Covid that bumped them over the threshold.  

You can register and volunteer to pay VAT at any point, the £85k is just the threshold for having to. On the plus side you also get to reclaim the VAT on your purchases so what you pay HMRC is determined between what you pay out and what you collect. You do this quarterly.

Alternatively, there are flat rate and annual schemes.

It's not rocket science if your accountant and bookkeeping are up to scratch and if your ambition is to grow the business then you could start at £50k. By the time you 'suddenly' find yourself owing VAT at £85k, then it's already a sh-tstorm probabl;y at the same time you are dealing with a lot of other things like hiring staff and extra equipment. 

At very least, the accounts should give a good indicator where you are heading.