From 1st July 2018 David Savery Electrical Services will no longer be VAT registered. De-registering from VAT has a number of implications for clients and partner businesses.... at least, it does for those who want to reclaim it. Read on if that's you...
i) Turnover will be kept low which is fine by me; I’m trying not to work my way into a heart attack. This means some larger or commercial jobs that would have been undertaken previously may now be politely turned down. Large or ongoing projects already started will continue to be fully supported.
ii) Invoices issued up until the end of June will show the VAT component and can be used to reclaim VAT where eligible. June invoices remain payable in full, VAT warts an’ all. Invoices issued from July 2018 will have VAT factored into materials and other applicable items such as subcontracted services, but the VAT won’t be listed separately and cannot be reclaimed thereafter.
iii) Labour rates are not changing: VAT was absorbed into the rates after the business became VAT registered in 2016, so the rates will remain at their current advertised levels but without HMRC grabbing their 20%. This is also to prevent annoying any clients in June whose invoice may otherwise have been substantially cheaper if issued in July. Invoice bottom lines will therefore remain the same. See down the page for further details on why this is happening.
iv) Existing ongoing projects where VAT invoices have previously been issued will continue, however new invoices relating to those projects will not show VAT from July. From a domestic client's point of view, the invoice totals are likely to remain the same: the materials I supply will now be listed with VAT included, and as already mentioned the labour rates aren’t changing. The only difference is that the VATable portion will no longer be separately listed or reclaimable.
v) Estimates and quotes issued before 1st July 2018 will need to be reprocessed if requested, however the grand total figure will likely still apply as per points iii and iv above. It is not the case that the VATable portion of any existing estimate can be knocked-off from July. Although a pre-July estimate or quote may show a VAT breakdown, invoicing from July will not.
vi) Large ongoing projects that already have non-standard (discounted) labour rates will still be processed at that same rate going forward.
vii) David Savery Electrical Services Ltd. is to be discontinued on the British Gas Local Heroes scheme as VAT registration is a prerequisite. All work performed under that scheme is still covered by the British Gas warranty and independently by my 24-month no-quibble guarantee.
viii) The decision to deregister for VAT was taken at the start of June and was approved by HMRC on 13th June.
ix) Nobody is under any contractual obligation to continue to use my services, so if you’re not happy with the new VATless arrangements then do feel free to tell me where I can stick it.
x) Some fixed-price services will be reduced in price by 20% from 1st July now that the VATable component will no longer apply to them. This includes EICR and PAT testing prices. Labour rates will continue to be dictated by the market and may increase or decrease accordingly as time goes on.
VAT registration was originally required because of the increase in turnover after I expanded the business in late 2016, however to remain competitive and to keep repeat clients on side much of the VAT overhead was absorbed into the labour pricing at that time instead of being passed on as an extra. Despite this, many domestic clients see those three dreaded letters on their estimates and immediately shop around for non-VAT registered alternative installers who they feel may give better value for money, even if their bottom line prices match.
And that’s the problem with VAT: it jumps from zero to 20% which is crippling for a small business dealing with mainly domestic clients. Although flat rate schemes are available, they don’t suit tradespeople who are left unable to claim on most stock or capex items but who still have to charge a percentage to their clients.
Unfortunately I’ve had to make this change to keep the business in a healthy position, and HMRC taking 20% from every invoice means I cannot remain viable for domestic work when there are all sorts of non-accredited, non-registered, uninsured and dubiously qualified chancers competing with me for the public’s business!
If you require more information or have any questions about how this affects any ongoing work for you, or if you want to quickly book a job in before the end of June so that you can receive a VAT invoice for that work, then do please let me know.
AFF5