Soon to be redundant & setting up business

Hi All,

I am aware of the implications of setting up as a sole trader vs ltd company and have decided to choose the sole trader option. I intend to rent a premises in my local town and set up a retail store with clothing etc. I would like to employee 2-3 part time staff so therefore I must register for PAYE and PRSI. My question surrounds VAT. I expect my turnover to be approx €70k in year 1 so I must decide whether to register for VAT or not. Problem is, I cannot understand VAT and therefore I cannot figure out which is best to do. I know that should my turnover hit €75k then I must register for VAT. The more I read about VAT, the more I get confused. Please could anybody help me to understand?

PS Are there any other considerations which I should take in to account?

VAT is included in the price when you buy something. If you are business (registered for vat) you can claim it back from the government. Say ur buying a coffee, the price of the coffee for you is €2 but included in that €2 is 13.5% VAT which the seller pays but he/she can then claim that vat back at the end of the year. it wouldnt make sense not to register for vat cus then you will miss out on claiming it back! The reason there is a choice is because some business sell services/products that have 0% vat so they have no vat to claim so no need to register for vat.

its as eeasy as that!

There are 3 VAT rates 0%,13.5%, 21%. if you want to find the rate of vat on different products/services you can find them on revenues site under - taxes and duties - value added tax - rates - vat rate subject index

The seller of the coffee has to pay the vat over to the Revenue so only receives E1.76 for the coffee (in charlie-irl's example). The purchaser has to pay E2.
The seller could instead charge 1.76 for the coffee thereby undercutting his vat-charging competitors and getting more business. The catch is that he could not claim a vat rebate on inputs (coffee machines, electricity, coffee grounds, etc)

You will need to do your sums to work out whether it is beneficial to your business to charge vat or not.

At last, people who make sense when explaining things. Makes perfect sense now. Thank you both so much.

If you've never had your own business before, I would stronly recommend you go to see an accountant before setting up.

He/she will tell you the most cost-effective way of setting up the company (limited, partnership, sole trader) and will give you advice about set-up, VAT and tax, which in the long run will save you a lot of money.

Will definitely be taking your advice Delgirl, no point in running away with myself...