Quick VAT query

NoQuarter

Hi all
I run a guesthouse/bnb through an Irish company. Gross earnings are approaching the VAT threshold soon but there isn't that much scope to earn too much more than that anyway. I think at max I would earn around 40k - 42k.
I can easily just stop accepting bookings and stay just under the threshold.
My questions are:
1. Is that allowed? I can't see how it wouldn't be as I am entitled to open and close my guesthouse as I see fit presumably.
2. If I do go over the VAT threshold - does the 9% VAT then become payable on my whole years' earnings? I can't really build this extra cost in to my price as that would make it less competitive. So I would have to absorb the cost and if I pay the 9% VAT @ 40k I'm worse off than if I stop just under the threshold.
3. If lets lay I could earn 42-45k, would those extra earnings we worth having to deal with VAT all the time? I think I would have to pay bi-annually but I've never had to deal with this before so is it much of a hassle?
Thanks

Paddy001

NoQuarter wrote: »

Hi all
I run a guesthouse/bnb through an Irish company. Gross earnings are approaching the VAT threshold soon but there isn't that much scope to earn too much more than that anyway. I think at max I would earn around 40k - 42k.
I can easily just stop accepting bookings and stay just under the threshold.
My questions are:
1. Is that allowed? I can't see how it wouldn't be as I am entitled to open and close my guesthouse as I see fit presumably.
2. If I do go over the VAT threshold - does the 9% VAT then become payable on my whole years' earnings? I can't really build this extra cost in to my price as that would make it less competitive. So I would have to absorb the cost and if I pay the 9% VAT @ 40k I'm worse off than if I stop just under the threshold.
3. If lets lay I could earn 42-45k, would those extra earnings we worth having to deal with VAT all the time? I think I would have to pay bi-annually but I've never had to deal with this before so is it much of a hassle?
Thanks

1. Yes there is no issue with doing this.

2. You pay VAT from the date you register. You should register once you start to breach the threshold or once you can see you will breach it over a one year period. Ie, a one off €20k sale in a month would be okay as long as it's one off but if your monthly income was say over €3k on average you'd need to keep a close eye on it to see if you should register. It is likely the point at which you should register will be obvious to you.

3. A gross income in excess of €41,200 will net at over €37,500 so if you can achieve €45k gross it would be beneficial to register and drive the business.

Your sales VAT on €45k would be circa €3,700 and you will be entitled to some input credits. If your VAT liability is less than €3k annually, you can file and pay every 6 months. You could also estimate the annual liability and pay by DD, then file an annual return.

NoQuarter

Thanks, that was very helpful. Just some follow-ups...
With my business, the calendar fills up throughout the year so I will know what I am earning for the year months in advance. There would never be a one-off payment for 20k but the average monthly will be around 3.5-4k. So should I pay as soon as my calendar says I will turnover 37.5 for the year (which would be soon) or wait until I have actually received that 37.5k, which wouldn't be until October or November?
Am I taking a gamble if I let it go over 37.5k because I am in the danger zone until (and if) I reach 41.2k? Or if I let it go over now and basically think I will be earning more than 3,125k per month, that I just pay the 9% every month (or 6 months as the case may be) via direct debit?
Is that how it works?
Appreciate your time!

relax carry on

NoQuarter wrote: »

Thanks, that was very helpful. Just some follow-ups...
With my business, the calendar fills up throughout the year so I will know what I am earning for the year months in advance. There would never be a one-off payment for 20k but the average monthly will be around 3.5-4k. So should I pay as soon as my calendar says I will turnover 37.5 for the year (which would be soon) or wait until I have actually received that 37.5k, which wouldn't be until October or November?
Am I taking a gamble if I let it go over 37.5k because I am in the danger zone until (and if) I reach 41.2k? Or if I let it go over now and basically think I will be earning more than 3,125k per month, that I just pay the 9% every month (or 6 months as the case may be) via direct debit?
Is that how it works?
Appreciate your time!

You need to seek professional advice regarding VAT. You charge VAT on your sales at the rate appropriate to your business activity and you can also claim the vat element of related business​ expenses. For example in a 2 month VAT period you may have Vat on sales at 500 euro but vat on expenses at 300 euro meaning you only have 200 euro to pay over. You must file a vat return showing your vat sales and purchase figures.

Being VAT registered also effects how your tax return will look as your sales and expenses will now be net of VAT not gross.

http://www.revenue.ie/en/tax/vat/

NoQuarter

relax carry on wrote: »

NoQuarter wrote: »

Thanks, that was very helpful. Just some follow-ups...
With my business, the calendar fills up throughout the year so I will know what I am earning for the year months in advance. There would never be a one-off payment for 20k but the average monthly will be around 3.5-4k. So should I pay as soon as my calendar says I will turnover 37.5 for the year (which would be soon) or wait until I have actually received that 37.5k, which wouldn't be until October or November?
Am I taking a gamble if I let it go over 37.5k because I am in the danger zone until (and if) I reach 41.2k? Or if I let it go over now and basically think I will be earning more than 3,125k per month, that I just pay the 9% every month (or 6 months as the case may be) via direct debit?
Is that how it works?
Appreciate your time!

You need to seek professional advice regarding VAT. You charge VAT on your sales at the rate appropriate to your business activity and you can also claim the vat element of related business expenses. For example in a 2 month VAT period you may have Vat on sales at 500 euro but vat on expenses at 300 euro meaning you only have 200 euro to pay over. You must file a vat return showing your vat sales and purchase figures.

Being VAT registered also effects how your tax return will look as your sales and expenses will now be net of VAT not gross.

http://www.revenue.ie/en/tax/vat/

Thanks for the answer. It didn't quite answer my question though. I understand the principle - I'm just trying to get to the bottom of the logistics really.

CIARAN_BOYLE

NoQuarter wrote: »

Thanks, that was very helpful. Just some follow-ups...
With my business, the calendar fills up throughout the year so I will know what I am earning for the year months in advance. There would never be a one-off payment for 20k but the average monthly will be around 3.5-4k. So should I pay as soon as my calendar says I will turnover 37.5 for the year (which would be soon) or wait until I have actually received that 37.5k, which wouldn't be until October or November?
Am I taking a gamble if I let it go over 37.5k because I am in the danger zone until (and if) I reach 41.2k? Or if I let it go over now and basically think I will be earning more than 3,125k per month, that I just pay the 9% every month (or 6 months as the case may be) via direct debit?
Is that how it works?
Appreciate your time!

Once you are likely to go over you have to register.