Tax, vat, Ltd Company. I need help please!

[Ibrahim 0]

Hello guys and girls. I'm new to the forum so please take it easy on me! 

Ive been buying and selling from home (sole Trader) for 3 years now. Last year my sales went just over 120k. 

Obviously I would like to grow the business and make it more professional. 

So my questions are ... 

1. I have to to be vat registered? Even tho I don't know what the turnover would be this year? 

2. If I make £1000 profit then £200 would go to Hmrc? (20%) 

3. If I'm a limited company then do I pay corporation tax? So again from £1000 £200 to Hmrc? (20%) 

So total from £1000 profit I would be left with £600? 

4. Again if I'm a limited company which most prefer to be, if Hmrc was to investigate and found problems then is it true they can't come to my house? Or touch personal assets? 

Sorry for making it long but these are genuine questions and I really need your help as you guys are the experts. 

Thanks in advance and much appreciated. 

Ibrahim

[Phil H 124]

sounds to me like you've not been playing fairly and now you've got squeaky bum time. Best get advice from a good accountant

[Ibrahim 0]

18 minutes ago, Phil H said:

sounds to me like you've not been playing fairly and now you've got squeaky bum time. Best get advice from a good accountant

Sorry Phill what do you mean by playing fairly? 

Last 2 years my sales was under 80k and this year it's well over. 

Could you kindly help out on the other questions please? 

Thanks. 

[Phil H 124]

playing fairly means that paying all taxes when due, the law states that as soon as your turnover reaches £83000 in a financial year then by law you must register for vat, seeing as your turnover last year was by your admission just over £120k then 120000 - 83000 = 37000 so if this 37000 was gross profit between your purchase and sales price excluding refurbishment costs then your vat due on this amount would be 6166.66 so you need to register for vat and pay all sums due, then next year if your turnover falls below the threshold then you can deregister for vat. By making yourself a limited company it will not stop Hmrc investigating and seizing your personal assets as the offence was committed whilst you were a sole trader. Take my advice and seek the advice of a qualified accountant as a Vat investigation is one of the scariest things you can go through even if you've done nothing wrong. Can't answer the corporation tax one question as my accountant looks after all that but for every 1000 difference between your purchase price and sales price excluding auction buyers fees and refurbishment your vat liability is £166.66

[Ibrahim 0]

Thanks for your reply, when I say last year I mean 2015-2016. So I was just over 83k about 2 months ago. 

I'm happy to register for vat now. 

 

What about finance? Where is the best place to go as I buy and sell from home. 

Also warranty where is the best place, I've been doing my own as if something went wrong then I would pay for it but now I would like to have a company to deal and pay for it. 

[jimreidvehicle 255]

Ibrahim, Welcome to OUR World!

To help answer your questions:-

1. I have to to be vat registered? Even tho I don't know what the turnover would be this year? > As Phil has quite clearly stated once your turnover hits £83k in one year you MUST register for VAT, this is not an option, without doing this then you are breaking the law. ALL reputable Full Time car dealers are registered for VAT.

2. If I make £1000 profit then £200 would go to Hmrc? (20%) > If you Buy a car for £5000 then sell it for £6000 then you will pay £166.67 of Margin VAT to HMRC, however you will be able to reclaim the vat that you have spent on any reconditioning you have carried out on the car.

3. If I'm a limited company then do I pay corporation tax? So again from £1000 £200 to Hmrc? (20%) So total from £1000 profit I would be left with £600? > If you become a Limited Company then you will pay 20% coloration tax on your total annual profit, however it would be in your interest to get a reputable accountant involved at this stage , because there are advantages to running a limited company but likewise there are benefits to registering as a sole trader instead, seek advice!

 

4. Again if I'm a limited company which most prefer to be, if Hmrc was to investigate and found problems then is it true they can't come to my house? Or touch personal assets? > If you become a Limited Company then you will be a Director and Shareholder however your company will have a limited liability based on what shares you have. You will become a employee of your company, and once you start showing profit you can start drawing dividend, however again you need to get the proper advice. You HAVE to do things right, 3 years ago , completely out the blue we received a VAT & HMRC inspection which as Phil said above is not a pleasant experience, but if you do things right like we do, then you have nothing to worry about, keep all records and record everything, every penny spent and if in doubt don't reclaim the vat, you won't go far wrong.

Hope this helps

Jim

[Ibrahim 0]

Thank you Jim. Answered perfectly. 

 

 

Edited May 11, 2016 by Ibrahim
Off topic