Series  |  Briefs  |  Quick tips  |  Basics  |  Other
Retail  |  Marketing  |  Products & Pricing  |  Other

VAT - A Blessing in Disguise?

Posted On - 15/01/2016 08:23:03


A Tax that's Good for Business?!

"In this world nothing can be said to be certain, except death and taxes": Benjamin Franklin 1789.

True: few things are definite.

True: the unavoidable can't side-stepped.

So, when it comes to paying tax if you're good at what you do true: VAT will come your way. But won't finding the money cripple your business? Absolutely not true.

To explain this, we staged a special small business VAT session at our 2015 Open Day. If you're already registered for VAT this session may not be for you. But if you're not or just interested to find out, read on…

Fear and loathing

A phobia is an anxiety disorder. It's a fear of something the sufferer tries to avoid, often at disproportionate cost. So much so, their behaviour is perceived as irrational.

So what? Well, if it existed, we'd coin the word Vatophobia. That's right, from the questions we get asked, the comments getting made and how people react when it gets mentioned, there's a phobia over VAT out there and it's alive and well.

Can't hear, won't hear

Phobophobia is an anxiety over the fear a phobia will create. And while we're not trying to scare you, could some of you have Alethephobia? It's a fear of the truth.

The truth about VAT is this: it's a tax you must pay if your VAT'able turnover exceeds £82,000 (VAT threshold Jan 2016). The truth is also: yes, it is a new cost you haven't had to pay before. But, the truth is also: you don't have to raise your prices 20% to cover it – in fact 12% may well be adequate. And it's also: becoming VAT registered opens the door to huge amounts of new business you couldn't get before.

Still Alethephobic? Better read on then.

To bring to life the real impact of VAT registration, we ran some numbers - it's the only way to get away from the rumours and guesses about VATDifferent perspectives on VAT

To bring to life the real impact of VAT registration, we ran some numbers - it's the only way to get away from the rumours and hearsay about it.

Using data on business mix and mark-ups across retail/services (thanks to those who helped) we calculated gross profit at the VAT threshold. In other words we worked out how much money a typical business makes at the point it must register. And that's an important number, because it's the baseline for comparisons. 

Once we had that we could work out the ‘cost' of VAT registration. We did this three different ways: increase prices 20%; take the hit (keep prices the same, no change); and change prices so profits after registration remain the same as before. Want to know the results? Watch the video.

Please tell us why you dislike this blog article?
Display Name:
Email Address:
Post comment?
I accept the terms and conditions set out here
Comments:
Post Cancel
Archives
February 2018 (1)
January 2018 (2)
December 2017 (2)
November 2017 (4)
Earlier (301)
Contact Us
Like what you've read? Then why not sign up to the Shop Talk newsletter?

Have ideas or want to discuss them further? Don't understand what's been written and need some explanation? If you want to talk, for whatever reason, we're happy to as well.

The best ways to find us are by email or by mobile:

01977 282 300 & choose option 5

Alternatively please call 01977 282 359 to speak to a member of our ShopTalk team


You have already signed up to the Shop Talk mailing list

Shop Talk: The only blog for small independent IT retailers and businesses

It's FREE. Join the Shop Talk community and get advice on how to build a better business.

Contact Name: *
Email Address: (privacy policy) *
What's your greatest Business Challenge?
New to Target?
Interested in our TRADE ONLY deals?
Yes No *
 
Please type the characters from the image shown



 

Thank-You!

You will receive a confirmation email, please click on the link to confirm your email address.

Thank-You!

You have now been added to the Shop Talk blog news mailing list.