New restaurant business, register for VAT or not?

[JohnD_68]

Hello all.

I am newly self employed as a sole trader and I am starting a restaurant business.

I am opening next week and expect my monthly sales to be in the region of £6,000 to £8,000 (so projected first year sales of £72-£96K)

I was considering registering voluntarily for VAT but obviously the chances of getting a VAT number within a week are pretty slim I think.

My start up costs have been minimal and my major ongoing costs will mainly be VAT zero rated (food).

Do I have to register for VAT now?

If I don't register for VAT now, my current menu prices will obviously not include any VAT. So sale of an item costing £12 will show in my accounts as income of £12.

If say in month 10 I hit the registration threshold (say based on higher than expected average monthly sales of £9,000) or even decide to voluntarily register say in month 3, can I keep my menu prices the same (to then include VAT), so an item priced at £12 would then show in the accounts as income of £10 and the VAT collected as £2?

Would sales prior to VAT registration be retrospectively subject to VAT or is it only sales from the actual registration date?

Is there anything wrong with the way I am looking at this?

Any thoughts would be greatly appreciated, thank you in advance.

[robbob]

Normally you would be best to leave registration as long as possible providing you are not required to be registered from day one, if you have taken over an exiting business their turnover will be relevant for your registration calculations.

The only real exception to this would be if you have large vat on expenses to reclaim that will no longer be reclaimable a month or so later at say month 6,8 or 10 and that would benefit you to register early if you would soon be going over the threshold and inputs would outweigh outputs for the period before you need to register. You can go back 3 years on assets and 6 months on services to reclaim vat.

If say in month 10 I hit the registration threshold (say based on higher than expected average monthly sales of £9,000) or even decide to voluntarily register say in month 3, can I keep my menu prices the same (to then include VAT), so an item priced at £12 would then show in the accounts as income of £10 and the VAT collected as £2?

You can always charge whatever you want - your prices are decided by you - all you should do is make clear no vat is being charged when you are not vat registered and vat is charged when you are vat registered.

Would sales prior to VAT registration be retrospectively subject to VAT or is it only sales from the actual registration date?

You need to register for vat one month and one day after the month in which you cross the threshold - if you cross the threshold in February 2017 you will need to register from 1/4/2017

Is there anything wrong with the way I am looking at this?

No - Note unfortunately if your sales top out at slightly over the vat threshold you may be worse of operating at that level than just below, so try and ensure you avoid accidentally sneaking over due to one of peak type situations - projecting future rolling 12 month turnover levels here can help plan for when you go over and by how much, you will probably need to hit 90k sales just to get back to the same overall profit level that you would be at trading just under the vat threshold.

[JohnD_68]

Thank you so much for your detailed response and sharing your knowledge - your help is greatly appreciated.

Obviously forecasting sales isn't something I have had to do before but I think I have been reasonably cautious with my figures and if i do smash through the registration threshold in say month 4 or 5 then that will of course mean that business is going better than expected which won't be a bad thing at all.

Thanks once again for your help.