Sole trader/partnership approaching the VAT threshold

salad17 · 24-09-2020 1:26am #1

Hi,

I operate a small business that is fast approaching the VAT threshold due to a boost in sales due to the coronavirus (tourist industry, increase in local activity due to no flights/staycations etc).

1) I am also planning to enter a partnership soon. My understanding is that if I enter a partnership the amount for the threshold would start again from zero as it is a seperate business? So should I just register as a partnership now to avoid having to register for VAT?

2) Alternatively, could I register for VAT and pay VAT on my remaining transactions this calendar year, then register a new partnership 1st Jan next year which wouldn't be VAT registered and would almost certainly fall under the threshold for 2021, and continue on that way?

3) And if I do that, my sole trader would still be VAT registered? If I also launch a seperate (fitness) business as a sole trader with an income of 10k I am stuck being VAT registered?

4) Lastly! VAT is such a massive loss on a business, would it not make sense for me to just cease trading at 35,000? Even if I stopped at 30,000 I would still be saving money by not hitting the threshold and not paying almost 10,000 in VAT every year, before I've even paid my income tax? Or am I missing something?

Thanks for your help!

Calahonda52 · 24-09-2020 5:26am

How do you make VAT out to be such a massive loss one a business?

Are you charging your current clients VAT or once you hit the threshold will you just increase the prices by the correct VAT rate?
The normal scenario is that the end consumer pays the vat to u and u pass it on to the revenue, minus any vat u pay on legitimate business expenses.

The partnership is a new business so new registration, in passing, are you both aware and happy with the liability risks around a partnership?.

The new sole trader business will just add onto existing.

salad17 · 24-09-2020 11:14am

Calahonda52 wrote: »

How do you make VAT out to be such a massive loss one a business?

Are you charging your current clients VAT or once you hit the threshold will you just increase the prices by the correct VAT rate?
The normal scenario is that the end consumer pays the vat to u and u pass it on to the revenue, minus any vat u pay on legitimate business expenses.

The partnership is a new business so new registration, in passing, are you both aware and happy with the liability risks around a partnership?.

The new sole trader business will just add onto existing.

We couldn’t just increase our price by 23% as that’s such a big jump we would loose a lot of our business. I understand the “idea” of it being paid by the end customer but I mean it’s still either a big price increase or a big loss if we just pay it ourselves. So a big loss either way.

I’m not sure we are aware of any specific risks of a partnership? Other than the obvious, partnerships gone bad etc!

Calahonda52 · 24-09-2020 12:16pm

I don't know if you can set up limited partnerships here, at least cheaply.
https://www.mhc.ie/uploads/Irish_Tax_Review_Gavin_OFlaherty_Muireann_Brick_April_09.pdf

deals with the pros and cons, the big one for me is the unlimited liability

A partnership is not a separate legal entity, › and therefore the partners can be sued in their own names. Each partner is liable for the debts of the partnership without limit (in time or amount)

While the recent Company Law act did a lot to remove the protection of the corporate veil, I still prefer the idea of a LTD CO

You could set up a company and not be vat reged if u wanted to, depends on your customers.
PS
getting the p/ship agreement written up is not easy, or cheap

Sole trader/partnership approaching the VAT threshold

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