Registering under the threshold

D

D1983

Registered User
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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.
 
Re: Regeristing under the threshold


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
 
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!!
 
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!!
Click to expand...

Well you might. But the other guy wouldn't be able to reclaim the VAT on his purchases so his costs would be higher.
 
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
 
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.
 
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.
 
You could decide to postpone registering until you reach the threshold and use a cheap secondhand van in the meantime.
 
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.
Click to expand...

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.
 
Last edited:
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?
 
ubiquitous said:
You could decide to postpone registering until you reach the threshold and use a cheap secondhand van in the meantime.
Click to expand...

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?
 
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?
Click to expand...

The VAT has taken care of itself in the example. You end up with the 55.
 
CoService said:
we have a calculator here that might help "Business Startup Calculator"

http://companyservice.ie/form/calculators
Click to expand...

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?
 
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?
 
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?
Click to expand...

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