Sole trader and ltd company

2024

Is it possible to be a sole trader as a stonemason building stone walls and not vat registered aslong you dont earn over 37.500k and also have a ltd company building extensions, bathroom refits and other construction work being vat registered.

Calahonda52

So if you build me a block wall faced with stone I get two invoices, or more lightly one for the block?

Possible but why?

adrianw

Provided they are two distinct trades - yes, but there is anti-avoidance legislation to prevent someone setting up multiple trades/companies just to avoid exceeding the VAT threshold.

2024

https://www.boards.ie/discussion/comment/121660719#Comment_121660719

Can you explain abit more on the two distinct trades? Setting up multiple trades did cross my mind as i do a few trades other than stone. Would being registered as a tiler, plasterer, stonemason, painter for under the anti avoidance legislation.

2024

https://www.boards.ie/discussion/comment/121660257#Comment_121660257

I was class these two as under masonry work and not invoice separately.

Why am i asking this question. Ive been trading as a stonemason/multi trader for a few years laborer only. I have always been below the vat threshold but im now thinking if i set up a ltd company for building extensions, garages and maybe houses etc.. then would my bed and butter trade have to be charging vat aswell. If i was to be vat registered for my stonework, ill loose out on work because all my stonework has been for private clients, and they always use the non vat registered mason. I need this work to keep the eggs and bacon on the table!

Ideally id like to registered as separate trades. The vat threshold is holding me back from earning a good living but as the poster above said, this might fall under the anti avoidance legislation. for example 37.5(using previous threshold rate). Say 5k in expenses is 35k, income tax, prsi, usc doesnt leave me with much in this current climate. If i start having to charge vat, ill loose out on any work im getting.

TherapyBoy

You could stay as you are.

Work up to the threshold of 37.5k (or whatever it is) & if you’re going to hit or exceed it in the year stop doing that work (the stonemasonry) until the following year. As in, pace yourself (& the masonry side of things) & possibly create a bit of ongoing demand for your work.

If you’re setting up another side of the business anyway, VAT registered & fully legit as a limited company for example, you might not be able to take on as much masonry work as you did before. It might be worth it to you to dial the mason work back a bit. Maybe if your work is good & your skills are sought after it could be worthwhile to go legit on the whole thing & include your masonry side in with the building houses/garages/extensions etc.

Figure out what way makes the most sense (& money) to you & do that. I don’t know much about any of this stuff mind so it’d be worth your while talking to your accountant & finding out what their opinion is. They’d be much more familiar with what your best options would be.

2024

https://www.boards.ie/discussion/comment/121667218#Comment_121667218

I dont want to stay as i am. Its holding me back from earning more tbh or if i register for vat on this part of my business, ill loose out on work. I already have a good reputation and i am in demand however i know once i cross the threshold for vat and have to register and charge it, the extra few quid the clients need to pay for vat they will look elsewhere and i wont get the work. Esp in this climate with building costs high. I wouldnt do the "cash jobs" not declaring what i worked for either because its against the law.

I do understand that if i do become ltd aswell that ill be doing less stonework, but i still need it to fall back on if the other work isnt paying as much or dont get as much work as i need to cover myself. Ideally i would like to be just running the ltd business making more money than i would on the stone.

I will be discussing this with my accountant soon. Just looking as much research for now before i eventually do decide on what to do.

adrianw

To give two complete separate trades - if you earn €30k as an accountant and €30k as a plasterer you don’t have to register for VAT in either trade.

however if you operate a sole trade as a plasterer and earn €30k and operate a Ltd company as a plaster and earn €30k, Revenue anti avoidance rules state you do need to register for VAT.

Also it’s not when you exceed the threshold it’s when you expect to exceed the threshold. So for example if you earn €5k in Jan, Feb, Mar you should register for VAT in March even though your sales are only €15k (unless it’s due to seasonality or some other similar factors).

2024

https://www.boards.ie/discussion/comment/121672968#Comment_121672968

Yes I understand this but can someone register multiple trades. In today's market we have lots of multi traders doing a few different trades. Is it possible to register as 4 different trades and earn 30k each trade and still be non vat registered or is it because they all fall under construction, you can't register so many.

An accountant and plasterer I can see they are different but a block layer and stone Mason would be similar.

I don't understand you about the expected to register if you earn 5k each month for 3months. Say one earned 5k for 5 or 6 months then nothing the rest of the year, surely he wasn't expected to register for vat then.

TherapyBoy

If your work is good enough they’ll pay your rates.

Do it once & do it properly, set yourself up as a limited company or a sole trader (advantages & disadvantages to both, check them both out) & march onwards. Trying to register 4 separate trades to avoid paying tax leaves you consistently looking over your shoulder.

Work out how much you’re likely to make in a year if you set yourself up as one company. Work out whether you’re likely to stay as a one-person effort or will your future include you hiring others to work with/for you. Talk to your accountant & ask their advice & then make your decision.

adrianw

As mentioned if it’s seasonality or some other reason you might have higher sales at the start of a trading year then it is possible as you mention you might have zero sales for six months however this is unlikely as it most likely wouldn’t be a viable business.

so if sales are expected to exceed the threshold you should register from the time you expect the turnover for the year to exceed the threshold and not when you actually exceed the threshold.

2024

https://www.boards.ie/discussion/comment/121677975#Comment_121677975

Yes i do get this though if im a sole trader and earn 35k in 9 months and could earn another 5k in the last 3 months, am i supposed to register or even thou im wanting to stay under the threshold to keep me competitive. Dont take on the 5k work and take the rest of on holiday.

2024

https://www.boards.ie/discussion/comment/121676329#Comment_121676329

If the work is good enough theyll pay it. My work is excellent i can assure you this but experience tells me from other vat registered tradesmen and talking to clients, they'll find an equally good non vat registered tradesman to do the job cheaper. Esp in these times of ridiculously high building and living costs. Alot of clients ive dealt with over the years would need counselling if they broke into an extra fiver. Adding another 13.5% or 23% to there costs would put them in a mental institution haha. Jokes aside thou, i have worked on projects where clients have been spending millions on there homes to others spending hundreds. They all want it cheaper!

2024

On another note. Im still learning up on charging vat. Its abit of a minefield tbh. Defiantly nothing simple about tradesmen charging vat on materials and labor. Previously i always thought as many did, you just add another 13/5-23% ontop of everything but thats not the case. Below is what is an example of how i now think it should be charged. Would i be correct?

builder buys materials at 100e ex vat. 123e incl vat.

100e labor plus 13.5% 113.5e

invoices the client 100 materials + 13.5% which is now 113.5e plus the 113.5e for labor. Total is 227e

As for working out how much i pay revenue, ill leave that to the accountant. But its knowing how much to charge is what ill need to know.

adrianw

If you plan on stopping when you reach x turnover then yes you could argue you don’t expect to exceed the threshold even if you were to earn €30k in the first week of the year.

Taxes

At the moment, the final VAT cost falls on you. If you register for VAT the final cost will be passed on to your customers.

Allinall

https://www.boards.ie/discussion/comment/121681090#Comment_121681090

You need to ask your account how you charge VAT as well.

There are complicated rules on mixtures of parts and labour, and the VAT you need to charge can depend on the nature of the job, and percentage split of parts/ labour.

2024

https://www.boards.ie/discussion/comment/121681849#Comment_121681849

Yes this is something i understand. But once someone is registered for vat, the price goes up. Now, if i want a basic income, i stay as a sole trader. I could work to the threshold and do the rest cash and not declare but im a law abiding citizen and this is something im not comfortable with doing. Plus i wouldnt want to be looking over my shoulder waiting on a rap of the door.

2024

https://www.boards.ie/discussion/comment/121681868#Comment_121681868

I will in time but theres no harm in getting the basics of it for now. I agree, its very complicated but once its explained to me (a few times haha) ill get to gripes with it.

Taxes

https://www.boards.ie/discussion/comment/121682114#Comment_121682114

The general rule in VAT law is that each transaction is treated separately. So if you are supplying goods(materials) and services(labour), the supplies would be treated separately. So you’d charge VAT on the goods, say at the standard rate, and charge VAT on the services. say at the reduced rate.

However,If you are supplying both a service(labor) and goods(materials) and the supply of materials is ancillary(complementary) to a wider supply of services, then one supply is deemed to have taken place, not two, and you could charge VAT at the reduced rate, on the supply of services.

If you are supplying both services and goods and both are treated as separate supplies, and the value of the goods constitutes 2/3s or more of the entire value of the supply then the overall supply with be treated as a supply of goods, chargeable to VAT at the rate applicable to the goods, say the standard rate.

In terms of pricing maybe, considering you will now be entitled to a reclaim vat on the costs you incur in relation to your trade, maybe you could pass some of this saving onto the customer i.e., reflect this in your pricing.

2024

https://www.boards.ie/discussion/comment/121682382#Comment_121682382

Ive read this 5 times and still dont understand it. Even if an accountant explained all what you said above, id still be no the wiser.

Have is it possible to differentiate all 3 above you mention. Are you sure youve explained it correctly.

I get that if i supply labor its a reduced rate.

I get the 2/3rds rule is both labor and materials as 13.5%, if over 2/3rds then its 23%

I get that if supplying just materials then its 23%

What you wrote above is supplying labor and materials in each example. Can you even explain all 3 in invoice examples. Id be able to understand this abit better tbh.

Taxes

1.) You’re building a wall for a customer. The customer supplies the majority of the blocks. You supply a small number of blocks to finish the wall. The supply of blocks by you is an ancillary part a wider supply of services(labour). One supply is deemed to have taken place, a supply of services by you. VAT chargeable at the reduced rate. Say blocks cost €150, 20 hours, €50 an hour. €1,150 plus vat @ 13.5%.

2.) facts as above only you supply the blocks. The blocks cost €2.100. The supply of blocks is not ancillary to a wider supply of services. This is a mixed supply of goods and services. The value of the goods supplied constitutes 2/3rds or more of the overall supply. Ie (€2,100/€3000). VAT charged at the rate applicable to the supply of goods. €3100 * 23%.

3.) facts as above, you supply the blocks and they cost €1,000. The supply is a mixed supply of goods and services. The value of the goods does not constitute 2/3rds of the overall supply so the 2/3rds rule does not apply. VAT chargeable as follows. €1,000 at 23%, €1,000 at 13.5%

2024

https://www.boards.ie/discussion/comment/121686420#Comment_121686420

On the first example. Blocks cost me 150e and labor 1000e . Invoice for 1150 + 13.5% which is now total 1305.25e. But is this not the client paying double the vat. If the blocks cost me 150e, i paid 23% to the supplier which was 34.5e . The blocks cost me 115.5e ex vat. But if my total for blocks was 150inc vat, im then passing this onto the client in the final invoice then adding another 13.5% ontop of it so they are now paying vat on vat.

Second example is the same, paying vat on vat. Also, because the supply of materials is over the 2/3rds of the overall invoice, my labor now jumps to 23% aswell.

In your examples i guess thats just passing on the vat to the client but what about if i add profit to the materials. How is the new invoices calculated then.

2024

https://www.boards.ie/discussion/comment/121686420#Comment_121686420

see my post above. Would i be correct in your examples are wrong because the client would be paying vat on vat.

2024

https://www.boards.ie/discussion/comment/121686420#Comment_121686420

On the first example. Blocks cost me 150e and labor 1000e . Invoice for 1150 + 13.5% which is now total 1305.25e. But is this not the client paying double the vat. If the blocks cost me 150e, i paid 23% to the supplier which was 34.5e . The blocks cost me 115.5e ex vat. But if my total for blocks was 150inc vat, im then passing this onto the client in the final invoice then adding another 13.5% ontop of it so they are now paying vat on vat.

Is it not suppose to be me charging 13.5% on the ex vat price for the blocks and charging 13.5% on my labor. So the total im supposed to charge the client 113.5 for the blocks plus 1135 labor . Total 1248.50euro . My output was 148.5e and input was 23 i then pay revenue 125.50e vat.

Hoping someone could clear this up for me :)

Geuze

In my answer I am presuming that you don't want to add any margin to the blocks. I am not an accountant.

Blocks cost 150 incl 23% VAT

You made a mistake here, 150 incl VAT is 121.95 excl VAT.

You made the typical mistake of getting 23% of the 150, which is wrong.

Go back to JC maths, you divide the 150 by 1.23.

So the nett costs of the blocks is 121.95 excl VAT.

Your labour is 1000.

Here, I am going to defer to @Taxes above and this PDF

https://www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part06-rates-and-exemptions/mixed-supplies-of-goods-and-services/rates-mixed-supplies-of-goods-and-services.pdf

To me, this looks like a Composite Supply, with the blocks as ancillary?

VAT is charged on (1000 + 121.95 = 1,121.95) at the rate 13.5%.

1121.95 + 13.5% VAT 151.46 = 1,273.41

You collect 151.46 VAT from customer, and send 151.46 - 28.05 to the Revenue

Geuze

You should not be charging VAT on VAT.

2024

https://www.boards.ie/discussion/comment/121726849#Comment_121726849

Yes so i was right in so far as he was charging vat on top of vat in his examples and how i worked it out was correct only i made a mistake on my numbers. I dont know how but somehow i was using 100 + 13.5% vat instead of deducting 23% of the 150.

So basically anytime i do an invoice for materials and labor, i charge 13.5% on top of the ex vat price i buy the materials for and also charge 13.5% onto of my labor. The 23% i paid to the builders merchants i then deduct this from the vat i charged the client to work out how much i pay vat to revenue. If so, thats abit of a relief because my wee headgasket was fried trying to work all this out!

2024

https://www.boards.ie/discussion/comment/121726855#Comment_121726855

was this for me or @Taxes

2024

On another note, does the vat get paid everytime i get paid or do i have to pay it up front even if the client hasnt paid me yet?

2024

https://www.boards.ie/discussion/comment/121726849#Comment_121726849

I was just going over your numbers again. why is it you divide 150 by 1.23. Is 23% of 150 not 34.50€ which leaves 115.50€ . The head gasket is blowing steam again trying to work that out haha

Geuze

The 150 is 123% of the ex-VAT cost

If you get 23% of the 150, you will NOT be calculating the VAT.

That is a typical mistake made by children doing VAT in the Junior Cert.

150 = 123% of the cost

Divide both sides by 1.23

(150/1.23) = (123%/1.23) = 100%

Geuze

Here is another example to show your mistake.

Take an item that costs 100.

Add 23% VAT = add 23 euro = 123 selling price.

All okay so far?

Now, let us do what you did.

(123) * (0.23) = 28.29, this is the wrong answer.

You are presuming that 23% of the selling price is VAT, but that is false.

VAT is 23% added on to the cost, which IS NOT the same as 23% of the price.

Ciaran

https://www.boards.ie/discussion/comment/121727036#Comment_121727036

If your turnover is less than €2m per year, you can opt to account for VAT when you get paid. Lots of info on revenue's website here.

https://www.boards.ie/discussion/comment/121727094#Comment_121727094

VAT is always calculated on the VAT exclusive price. If the €150 includes VAT, it's made up of the VAT exclusive price of €121.95 and VAT of €28.05 (23% of 121.95).

2024

https://www.boards.ie/discussion/comment/121727263#Comment_121727263

https://www.boards.ie/discussion/comment/121727263#Comment_121727263

I have been working on building sites or private work since i was 14 yrs old. I dont have a junior cert or leaving cert. I cant even spell right. If ya want to know, I have to ask the kids how to spell for me or use the spell checker on the laptop. I have never needed to calculate anything other what i earned or even a simple calculation of adding material costs up for clients. I might be simple in that department of calculating vat because its something ive never needed to do! But put a few tools in my hand and youll see a different side to me. I really appreciate your input into this thread, i do , but i dont appreciate that wee dig about the mistake made by children you mention. Was there any need for it! It might be simple for some but i was finding it difficult, all this add here, take away this then deduct this. It can be daunting for someone like myself whos never done it.

Again thou, thumbs up for the help. Much appreciated!

Geuze

I'm sorry.

Don't worry, your mistake is very common.

People think that if VAT is x%, then the VAT is x% of the final selling price.

Think about it, is 23% of 123 equal to 23 euro...................