Guide To The Advantages And Disadvantages Of Being Vat Registered

By Author: vivek Choudhary
Total Articles: 21
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The advantages of not being vat registration include less administration; no VAT returns to complete each quarter, and more competitive hourly and daily rates for some markets, such as within the financial and not-for-profit sectors. However, contractors choosing not to register cannot reclaim the VAT element of their overheads and expenses and may be perceived by some potential clients as too small to do business with.

Administration advantages to remaining non-VAT registered
It is compulsory for any limited contractor company earning over the VAT threshold to register for VAT. Most contractor-limited companies register for VAT, even if they don’t earn over the threshold, and often opt for the flat rate scheme because of the financial benefits.

But there are some advantages to non-registration for VAT consultancy in Dubai businesses. The first is the reduction in administration. When a business is VAT registered, it must add VAT to its client invoices, display its VAT number on invoices, secure VAT invoices ...
... and receipts for company expenses, and submit a quarterly or annual VAT return.

Non-VAT registered companies do not have to add VAT to invoices, obtain VAT receipts for expenses, or file VAT returns. However, all businesses, including non-VAT registered contracting ones, still have to maintain detailed and accurate invoices and expenses.

Targeting non-VAT registered clients
Contractors who mainly target specific financial sector or charitable organization clients may also benefit from having more competitive rates. Some organizations cannot register for VAT, so they effectively pay 20% more for a contractor who is VAT registered than one who is not. Some organizations, such as charities, can make significant savings by hiring VAT tax consultant in Dubai.

Many of the organizations affected have found solutions to the VAT registration issue and use agencies with complex billing structures. However, others have commercial arms or other group companies that can be VAT registered so that this contractor advantage can be limited.

Processing expenses when non-VAT registered
Everyday contractor business expenses, such as computers, broadband, mobile phone, travel, and subsistence, are usually paid for by the contractor’s company at the gross cost, including VAT. VAT will also be charged on most expenses, apart from some travel and subsistence that is zero-rated.

Assuming they submit a quarterly return, VAT registered limited contractor companies would have invoiced some VAT during the quarter and would work out how much VAT was included in the expenses and deduct this amount from the money owed to HMRC.

A non-VAT registered company cannot claim VAT on expenses. So, if a laptop costs £299 inclusive of VAT, that’s how much the contractor’s company will pay. That is also the amount that will appear in the limited company’s accounts and the amount that will receive corporation tax relief (i.e., it will be deducted from its profits).

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