Sole trader for VAT if under threshold, beneficial or not?

[Linden]

Hi,

I have simple VAT query that I need help on please.

I am due to set up as a sole trader and appreciate that I don't have to register for VAT if I think I will be under the VAT threshold, but I think it may be more beneficial to do so. If I charge VAT to my clients and pass it onto the Revenue then it means I can claim my VAT back on my costs. So, because I can them claim my VAT back surely this would be more beneficial to me?

Thanks,

Linden

 

[Graham_07]

If all of your clients are VAT registered and if you have a reasonable level of VATable costs then even if under the threshold ( €35,000 services and €70,000 sale of goods ) it may be worthwhile registering for VAT. You need to look at what costs you will have, if its a service then costs such as Light/Heat, Phone, stationery , etc. will all have VAT on them. If its sale of goods then your suppliers will most likely be charging you VAT on the goods. If you have done a projected P & L account for set-up purposes it's simble to run down this and extract what the VAT would be likely to be.

If youre clients are not VAT registered ( eg the general public mainly ) then registering for VAT while under the threshold may make your charges less competitive to other similar traders who have not registered for VAT

 

[Dearg Doom]

Another thing to consider is the impression given by not being registered - does it give the impression of being small time, a side line and not something you are fully committed to? If you're customers are generally VAT registered and are accustomed to being charged VAT and reclaiming it, then not being charged VAT will make your invoices stand out. Before I was VAT registered when I was starting my business I was quizzed on this issue a couple of times.