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Where Taxpayers and Advisers Meet

New business advantages/disadvantages to do from residential home? and question about VAT

harmonypersechino5348
Posts:2
Joined:Mon Oct 26, 2020 4:41 pm
New business advantages/disadvantages to do from residential home? and question about VAT

Postby harmonypersechino5348 » Mon Oct 26, 2020 4:52 pm

So I have recently started offering digital services and my business is starting to slowly take off.

I am currently living with my parents so the household is not in my name. I want to know what are some of the benefits/disadvantages of registering my business with my current residence.

I have heard I can claim back pretty much any household expenditures but as the house is not in my name does this still apply?

What are some of the disadvantages for my parents? I know when paying for home insurance for example they ask if you are running a business from the property.

My next set of questions is regarding VAT.

https://www.gov.uk/vat-registration/registering-vat-eu-countries
My service would come under "digital services"
"If in a calendar year (January to December) they go over £8,818 before VAT, you must either:"

My only question regarding this is does the £8,818 limit apply to customers only from within the UK/EU? For example if I take in £6,000 from the US and another £6,000 from the EU then do I need to start charging VAT?

Also my other general question regarding VAT what are the requirements for me to claim back my VAT expenditures? do I first need to be charging VAT or earning a certain threshold before I can claim that back or give my VAT ID to remove the extra 20% from my digital purchases.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: New business advantages/disadvantages to do from residential home? and question about VAT

Postby bd6759 » Tue Oct 27, 2020 9:58 pm

You didn’t hear “can claim back pretty much any household expenditures” from a reliable source!

You can only deduct expenses that you incur solely for the purposes of your trade. Emphasis on ‘incur’ and ‘solely’.

Your parents insurance should be told, but if it is just digital services (no stock or customers at home) it shouldn't’ affect it.

The VAT threshold is £85,000. You can voluntarily register below that, but you’d need to do sums to see if it would be worth the extra hassle.

harmonypersechino5348
Posts:2
Joined:Mon Oct 26, 2020 4:41 pm

Re: New business advantages/disadvantages to do from residential home? and question about VAT

Postby harmonypersechino5348 » Wed Oct 28, 2020 12:37 am

Ok thanks for the reply.

The biggest benefit I really want for now for my business is to avoid paying VAT myself. Are there any thresholds?

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: New business advantages/disadvantages to do from residential home? and question about VAT

Postby robbob » Wed Oct 28, 2020 9:18 am

The biggest benefit I really want for now for my business is to avoid paying VAT myself. Are there any thresholds?
do you mean on sales ? if you do bd6759 confiremd thatThe VAT threshold is £85,000.
Note added to your sales for this calculation is value of services you buy in from abroad - saleas to overseas customers may or may not be included in calcs depending on various factors.

https://www.gov.uk/vat-registration/when-to-register

Note if you sell certain digital items to eu customers you may be obliged to pay eu vat if your total sales in calendar year exceed 8818 - this vat would be accounted for under vat moss and you would have quite a bit of paperwork to complete in that regard.

https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers

do you mean on reclaim vat on expenses ?
If you are not vat registered you can't claim back vat on expenses - albeit if you later register there is ability claim vat on limited pre reg items.

General rule is if you sell to customers who are generally not vat registered and are making a profit and would need to account for vat on your sales if you were vat registered you would normally want to delay vat registration as long as posisble as you will pay more across on sales than you can reclaim on expenses.

Note to add to the complication certain sales are zero rated - so if you predominantly sell zero rated items like e-books there could be a benefit being vat registered.
https://www.gov.uk/guidance/zero-rate-of-vat-for-electronic-publications

Warning vat is complicated for e sales and there can be a cost to working out what to do where and when in that regard if you need to enagge someone to advise you and do the paperwork - i would ecrtainly recommend doing lots of background reading in this area so you don't do something wrong due to ignorance - as you are in business you are meant to know these ridiculously complicated vat issues inside out .

Nore its likely to be all change on these rules come 1st January next year - hey ho.


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