Moving from Sole Trader to Ltd Company

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mo3art

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Can anybody tell me what the impact would be for moving from a Sole Trader to a Ltd Company?

Sole trader has been in business for a number of years but there may be a need to move to Ltd Company shortly. The largest concern is the impact on prices for clients. Up until now clients have been invoiced an inclusive price, once the person sets up as a ltd company then VAT will have to be charged and then the clients will have to pay more?

It's a service based company whose clients would be semi-state or public bodies so will this make a difference to the treatment of VAT?
 
Surely as a sole trader earning over that VAT threshold then you are already charging VAT the same way as if you are Ltd compny. Have you spoken to your accountant about your VAT returns
 
Not if you're currently earning under the VAT threshold though.

Of course the trader has asked their accountant for advice, however sometimes it's far easier to understand the plain english on AAM!
 
VAT requirements are the same for sole traders and limited requirements. A limited company does not have to charge VAT.

But even if you have to add VAT onto your prices, if your clients are VAT registered they won't be concerned about this at all as they will be claiming it back against their own VAT liabilities.
 
Hi

You are right that in most cases , public companies / public sector cannot reclaim Vat on purchases, and if you go above the vat threshold, then you will have to add an additional 21% (or 13.5% depending on line of work) on to your invoices, and your prices may be considered uncompetitive as a result.

This, unfortunately, will happen whichever form of business organisation you follow i.e. Sole Trader, Partnership or Limited Company.

SM
 
mo3art said:
Of course the trader has asked their accountant for advice, however sometimes it's far easier to understand the plain english on AAM!
Click to expand...

Really? I didn't think there was that much jargon involved. If they don't understand the advice they've been given, then they probably need a new accountant.
 
Well of course. I only mentioned it because the OP implied seemed to think that moving from sole trader to limited company status would necessarily involve charging VAT.
 
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