# Registering under the threshold



## D1983 (3 Jul 2008)

Howdy,virgin poster,go easy 
I've done a good bit of searching but nothing too similar to my situation.

Im starting off as a sole trader (mechanic).
I need to buy a van and say about 6-7k worth of equipment.
I also plan to sell some service/basic parts that i would be buying from a motorfactors or wholesaler,it would tie in with the work i do.

Question is do i register for vat and save myself some money at the beginning where i have to buy the equipment/parts etc?
I don't expect to go over the threshold,certainly in the first year.
I wasn't going to register at all but started thinking that maybe i should,im really confused,any help would be greatly appreciated,thanks.


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## Westgolf (3 Jul 2008)

*Re: Regeristing under the threshold*



D1983 said:


> Howdy,virgin poster,go easy
> I've done a good bit of searching but nothing too similar to my situation.
> 
> Im starting off as a sole trader (mechanic).
> ...



If you register when you start out then any vat you pay can be reclaimed. you probably dont realise the amount you will fork out starting up but try this : price of good van and fitout *plus* good set of tools *plus *opening stock of parts *plus* signwriting / advertising etc... you are probably thinking 18-25 k to be really good.
if you could reclaim 21% of this, (approximately 3780 to 5250 ) wouldnt you do it ?

regards 

westgolf


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## D1983 (3 Jul 2008)

*Re: Regeristing under the threshold*

Thanks for the reply
Your dead right about the start up cost,i have a lot of tools already but i need to get diagnostic equipment and more,all pricey stuff,but this is the decision i need to make.
Although it might help at the start will it benefit in the long run,if im trying to keep prices low and make profit at the same time?
For eg if there was a guy doing the same thing in a near by location except he wasn't registered for vat,would i struggle to compete? if that makes sense!!


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## extopia (3 Jul 2008)

*Re: Regeristing under the threshold*



D1983 said:


> For eg if there was a guy doing the same thing in a near by location except he wasn't registered for vat,would i struggle to compete? if that makes sense!!



Well you might. But the other guy wouldn't be able to reclaim the VAT on his purchases so his costs would be higher.


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## D1983 (3 Jul 2008)

Hmmmm so i guess its a case of weighing up the cost of purchases,i know initially it will be high but nearly all my customers would be the general public ie not vat registered


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## Graham_07 (4 Jul 2008)

Remember your inputs will largely be at 21% VAT, purchase of parts, expenses, the van, diesel etc. You outputs will be largely 13.5% as a mechanic ( qualified by the 21% having to still be applied on some certain supplies such as supply of tyres or supply of battery which are still 21% ) . The VAT registration threshold of €37,500 is €721 per week. How many auto services is that ? Even basic work what, one a day? Realistically how long before you think you will exceed it.


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## D1983 (4 Jul 2008)

Thanks Graham,thats goood advice,im leaning towards registering now i think.The thing that turns me off doing it is the fact my prices would be higher than first expected and afraid i might not attract the buisness i want!!!
Can i ask if im providing a service and goods in some cases how do i work the vat
EG; parts for a service cost 60euro and the labour was 55euro?

Thanks.


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## ubiquitous (4 Jul 2008)

You could decide to postpone registering until you reach the threshold and use a cheap secondhand van in the meantime.


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## Graham_07 (4 Jul 2008)

D1983 said:


> Can i ask if im providing a service and goods in some cases how do i work the vat
> EG; parts for a service cost 60euro and the labour was 55euro?
> 
> Thanks.


 
Say parts cost you 60+ 21%VAT and labour charge is 55 then charge out ( assuming no uplift on parts) would be :-
parts 60.00 
Labour 55.00
Total 115.00
VAT 13.5% 15.52
Total 130.52

The VAT position is
VAT owed to Revenue 15.52
VAT claim on parts 12.60
Net VAT payable 2.92

From a cash flow point of view you
receive 130.52
pay Revenue 2.92
pay supplier 72.60 ( 60+21%VAT)
Net into your hand 55.00 - being the net labour charge

Remember your labour charge has to cover not just your labour but your other running costs, premises, light/heat, phone, repairs, advertising, insurance, motor costs, etc.etc.etc. So when someone complains about garages charging €55 an hour for labour they don't realise that's where it's going.


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## D1983 (4 Jul 2008)

Thanks Graham,its a lot more clear now,you say 55 euro net profit,is this plus the vat i can claim back on the parts 12.60?


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## D1983 (4 Jul 2008)

ubiquitous said:


> You could decide to postpone registering until you reach the threshold and use a cheap secondhand van in the meantime.



I would be buying a second hand van anyway.
If i decide not to register immediately can i back claim vat on start up costs when i do register,or how does that work?


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## Graham_07 (7 Jul 2008)

D1983 said:


> Thanks Graham,its a lot more clear now,you say 55 euro net profit,is this plus the vat i can claim back on the parts 12.60?


 
The VAT has taken care of itself in the example. You end up with the 55.


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## CoService (7 Jul 2008)

Don't forget other setup costs - most of which would have VAT implications [apart from insurance]

we have a calculator here that might help "Business Startup Calculator"

http://companyservice.ie/form/calculators


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## Graham_07 (7 Jul 2008)

CoService said:


> we have a calculator here that might help "Business Startup Calculator"
> 
> http://companyservice.ie/form/calculators


 
Some interesting calculators there. Just a point, on the VAT calculator. While the 21% rate is mentioned on top, the VAT rates and registration thresholds below would appear to be UK ones. Might be a bit confusing on an Irish site with €uro amounts. Perhaps one could suggest changing them to the Irish ones?


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## CoService (7 Jul 2008)

opps apologies Graham, I see the problem now

There is 2 Vat calculators - 

http://companyservice.ie/calc/vat.php

This one lists the UK thresholds and is showing the UK Rates at the bottom. It's meant to be Irish thresholds - sorry for confusion, I'll have our coder fix it this week.


http://companyservice.ie/calc/vattax.php
this one lists the Irish tax rates

Thanks for the heads up


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## Graham_07 (7 Jul 2008)

CoService said:


> Thanks for the heads up


 
No prob. BTW just did the pensions calculator....depressing...depressing.


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## D1983 (7 Jul 2008)

Im thinking i might register down the line,is this wise?
If i spend the money now on setting up and decide to register in 6 months time can i get a back claim or not?


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## Graham_07 (8 Jul 2008)

D1983 said:


> Im thinking i might register down the line,is this wise?
> If i spend the money now on setting up and decide to register in 6 months time can i get a back claim or not?


 
Generally, expenditure incurred pre-registration is not VAT-claimable. Thats because your date of registration is whenever it is down the line and any expenditure now is deemed to be pre-registration. One can only claim VAT if one is registered at the time. Likewise one is only liable to charge VAT if one is registered ( or ought to have been registered by being over the limit and not being registered ).  Otherwise, think about it, we could all wait until it suited us then backdate claims. Registering while under the threshold is called an "Election to register" and is only available from the current time onwards, not backdated. Remember also, if one registers while under the threshold and gets back VAT and then de-registers again while still under the threshold, Revenue are entitled to the excess VAT claim back. 

As to whether it is wise or not to wait...only you can decide that I'm afraid.


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## D1983 (8 Jul 2008)

Right thats sorts that out then,im making progress now 
Thanks for your help.


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