# Hi - I run a cafe and am coming up to VAT threshold but am worried



## greaseyspoon (Oct 11, 2016)

Hi hello everybody - I run a cafe and am coming up to VAT threshold but am worried

my main worry though is this

though we are about to hit the turnover threshold for VAT I foresee problems

e.g. if I take 20% out of the takings to pay VAT it will hit us big-time and suddenly I don't see how the operation is to be realistically described as solvent

on the other hand - I add 20% to the prices to cover it and drive off half the customers

who moan enough about the price of breakfasts as it is

any thoughts?


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## 4515 (Jan 30, 2013)

Probably best to speak to your accountant - difficult to model the difference without a view of the current accounts

Bear in mind that you will reclaim vat against many of your bills


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## greaseyspoon (Oct 11, 2016)

there's not that much to reclaim though - power suppliers, ice cream and coke cans

bit of fuel for business use

but that's about it


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## DavecUK (Aug 6, 2013)

Your other option might be the flat rate VAT scheme 12% of turnover, but you would need to go through your figures quite carefully to see which method minimises your costs. In the type of business you are in, purchasing of items you sell usually is a small part of your costs relative to turnover, so it might well be better for you and for purchases of 2k or more you can still reclaim VAT. Of course it does really depend on all your outgoings and whether you own the premises and equipment etc..

https://www.gov.uk/vat-flat-rate-scheme/overview


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## Coffeejon (Oct 10, 2014)

I hear you on this. There is no easy way around it, and it is the unfairness of the system to small business's. (just wait until business rates kick in maybe next year, many will be closing)

One way around it is to split the business into 2 separate parts, so each half is under the 82K. It has to be done legit, i.e roasting business vs cafe etc but might be worth a thought.


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## Obnic (Jan 14, 2014)

This is so hard. I feel for you.

VAT on catering is not my field but

1) I would want to be very clear about what product lines are zero-rated. This isn't a case of 20% added to everything.

2) I'd be religious about accounting for VAT you have been charged. Your net price increases should be much less than 20%

3) I'd go through my suppliers again and make sure I was squeezing costs out of my business as much as possible.

4) I would certainly have no bones about asking my suppliers for a deeper discount to help me keep my nose above water until I got bigger. I would certainly grant such a discount to keep a customer.

Having worked out what my Net increase in costs is going to be (let's say 11% on standard rate goods) I'd try to spread it over all my lines so it looked lower (say more like 7%).

I might even think about telling my customers what's going on to recruit their loyalty.

Finally, I know this is scary but do remember that it's a transition barrier. Once you get to the other side the economies of scale will take care of the VAT load. You built the business to this level, you must be good at what you're doing. Grit your teeth and hammer the numbers until you get to an answer you can live with.

Rooting for you.


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## Yes Row (Jan 23, 2013)

I believe if you cross the threshold during a year you will be ok. However you will need to be registered for the following year(s)

I am sure that happened to me

I appreciate that still leaves you with the issue for the future.

There isn't vat on takeaway food is there? Maybe this could help with dropping below the threshold

You need the advice of an accountant though


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## Dylan (Dec 5, 2011)

You can claim back expenses for anything you have bought as the director 'for the business' for the past few years, even before it was set up.

Think hard about anything you have bought that could be for the business, so long as you have a decent reason for claiming it, you can.

It's only a stop gap solution, and maybe not at all if your spending was frugal in any case, but worth mentioning I thought.

Edit: not sure this actually makes a difference to your VAT bill actually.... maybe just spouting off something I thought might be useful but actually not at all.


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