With a VAT cut due today it seems sensible to talk about VAT when running a marquee hire business
On a personal note I’m not sure a ‘2.5% sale’ on everything in the UK is going to make much difference but apparently we’re not allowed by our EU friends to go lower than 15%. Thanks. For. That.
If your turnover is under a set figure (I don’t know the exact figure but it’s around 67k at the moment though there’s also a quarterly limit that affects hire companies more) then you don’t have to register for VAT, if you don’t have to register then don’t. I’ve heard some people think it makes their company appear bigger than it is, and it does mean you can claim the VAT back from any purchases. However, if you’re not registered then you don’t have to charge VAT on your hire prices so you’ve automatically got a sizeable and vital discount on your competitors.
For those charging VAT make sure you put in your terms and conditions ‘VAT charged at current rate’. This covers you if the VAT goes up between taking the booking and your customer paying the balance. Generally we’d have advance notice of any increase (this 2.5% cut is only temporary remember) so any customer who’s paid you a deposit can opt to pay in full in advance and take the lower rate applicable at time of payment. Does that make sense?
Here’s an example:
Jane Jones is marrying John Smith in June 2010. They book a marquee with you that’s priced at £5k + VAT by paying a 20% deposit in November 2009 (£1000 + VAT at 15% = £1150). It’s announced that VAT will go back up to 17.5% from 1st January 2010 onwards.
You write to Jane & John saying they can either pay the balance before 1st January 2010 and pay VAT at 15%, or they can wait until their wedding and pay VAT at 17.5% (you see how adding that note about ‘current rate of VAT’ in your terms and conditions has covered you here?).
either a) pay £4000 + 15% VAT = £4600 before 1st January 2010
or b) pay £4000 + 17.5% VAT = £4700 at the time of their wedding. Writing to your customer with this gives you goodwill and might help your cashflow while also helping the customer. Win-win 🙂
As it’s the VAT man you’re evading I think this is worth mentioning here. No matter who you are you’ll be offered to drop the VAT for cash. We used to lose around 8% of our business by not accepting cash jobs.
You save by not paying income tax & national insurance but personally I prefer to sleep at night and not worry about VAT inspections (which are unpleasant even when you’ve got nothing to hide). It’s up to you.
Geoff from www.roustabout.info has been in touch in case anyone wants to hire or buy big top style tents. Always worth remembering in case you have a customer who wants something different to clearspans.