IE you have to charge your clients for your design services AND the products you re-sell to them with an additional 20% on top. It is unlikely that your retail/public client will be able to recoup any of that cost.
Of course most of your larger competitors will be in the same boat.
If you sell your services solely to other, larger businesses then they will almost certainly be themselves VAT registered and the VAT you charge to them is irrelevant – as those clients of yours can reclaim ALL the VAT back.
But of course if you DO register then immediately all the VAT you are charged by your suppliers can be reclaimed ie the stuff you buy will be cheaper.
What are the options?
- If your turnover (broadly) is £82,000.00 then you MUST register for VAT and charge it to your clients.
- As a small company you can get your client to purchase products directly from suppliers. Most companies, like us (KOTHEA), will do this if we know that we are supporting how the designer wants to bill the project. Whilst your client will still have to pay VAT for these goods you may be able to avoid charging them VAT on your interior design services.
- One problem with this is that you have to chase and manage your client’s payment for goods.
- Working on a cash basis with no documentation is illegal. You will eventually get found out and fined…a lot. Putting illegality to one side, you place yourself at greater risk with unscrupulous clients.
- If you are VAT registered and you export from the EU, with proof of export, then (broadly) no VAT is chargeable.
- If you are VAT registered and your client is based in the EU but not in the UK then you will (broadly) not charge them VAT if
- Delivery is to a non-UK address in the EU (YOU must organise the shipping to make the proof easier, if the client organises shipping then you must charge VAT and then refund it once proof of export is provided to you)
- The client can supply you with a valid EU VAT registration number – which you must validate.
- Register for VAT if you sell your services/products mostly to other organisations. You can recoup the VAT costs from ALL the things you buy for your business.