VAT registration and the implications on your business if you’re not
Today I want to bring up the question of VAT registration and the implications on your business if you’re not.
If you’re already registered for VAT, congratulations. But if you haven’t and you’re not even sure whether you should be even thinking about this, then this video is for you.
Today I want to bring up the question of VAT registration and the implications on your business growth if you’re not. So if you’re registered for VAT already, congratulations. But if you haven’t and you’re not even sure whether you should even be thinking about this just yet, then this video is for you. Do Less. Be More. Play Bigger.
Posted by Karen Skidmore – True Profit Business on Wednesday, February 7, 2018
First of all, I must make clear I am not an accountant so before you decide whether to proceed with VAT registration, please ensure you’ve talked your decision through with your Accountant and know the legal requirements of what happens when you do.
What I want to focus on today is your thinking on being VAT registered.
I’m all for keeping business as simple as possible. So not registering for VAT when you don’t need to, is certainly one way of keeping your life simpler.
However, let me share with you my VAT story.
I became VAT registered in 2016. For 2 years previously, my turnover bubbled just under the VAT threshold. I never found I had to make the decision … I always made just enough to stay under the threshold.
VAT threshold back then was £82,000 I believe so for 2 years on the run, my business did £78,000 or there’s about. Back then I had a real hang-up about VAT. Because of course, by registering for VAT, my prices had to go up by 20%. I started to think that I could absorb that 20% – just make all my prices inclusive of VAT and I’d take the hit. Because I had convinced myself that my clients just wouldn’t stand for the price increase. I was charging £1,500 for one programme which meant with VAT, that would go up to £1,800 – that was a lot of money.
Now the problem with this thinking was that I was getting caught up with ME. I was getting caught with the rejection of someone thinking I was too expensive. I was making assumptions that my clients would care so much about paying VAT that they simply wouldn’t buy from me.
This went on for the best part of two years. Crazy!
All it was doing was creating an invisible glass ceiling on my growth. What was happening was that – although I wasn’t turning business away – I was certainly giving out invisible signals that I didn’t want any more than £80,000 worth of business because I simply couldn’t charge VAT.
I was restricting my growth. It had to change.
Once I decided enough was enough, the actual process was simple. Apart from messing up with one particular client – she simply slipped through the net when it came to communicating about the VAT changes – no one batted an eyelid. I didn’t drop my prices because of the VAT increase and it made absolutely no impact on my sales.
In fact, of course, it opened up the door to receiving more because I wasn’t capping my revenue potential.
So why tell you this story. If I had my time again, I would have gone VAT a very long time ago. I should have gone VAT registered when I become a limited company.
VAT simply means that the government sees you as a business that’s adding value to the economy. You’ve grown so that you are more than simply a self-employed freelancer just making an income. And when you consider that we pay VAT on almost all other goods and services, why is it any different to what you provide?
Our thinking about a growth problem such as VAT can create a huge bottleneck. And by sharing my story with you today, I want you to consider whether you are doing the same.
VAT registration is more than simply more than meeting a revenue threshold. It’s your thinking about your growth. It’s your thinking about your positioning and what NOT being VAT registered says to your audience.
So don’t let VAT be your bottleneck. And don’t wait to be forced into it. Because either you could land yourself with a huge VAT bill by not be prepared, having not charged VAT for your last 3 months or so of client work. And in my experience, it just didn’t happen – I held myself back by not opening up that possibility of making more than £80,000.
Of course, please speak to your Accountant and make sure you get professional advice in this. But don’t let your thinking about VAT hold you and your business growth back.
Thank you for reading. Until next time, do less, be more, play bigger.