Hi, my friend wants to set up his own limited company. He wants to do two very different things - removal services and attend a garage as a car mechanic with his own stuff (i.e. car paints, some equipment). He wants to buy those car paints in another EU country as he claims it is much cheaper. Now he would like to be VAT registered to reclaim the VAT mainly on those acquisitions. I'm not sure if it's beneficial for him to register for VAT at all. If he registers it needs to be on a standard scheme anyway if he wants to reclaim for acquisitions. If those spending are not very big it may not be beneficial to voluntary register at all as the rest would be just a flow of 20% from his customers to HMRC.
-- Edited by Ellie16 on Friday 21st of October 2016 11:44:19 AM
Hi Ellie As explained before we cannot help you on here - this is a website for professional bookkeepers and accountants.
Plus your earlier post was talking about second hand car sales which is usually using a special VAT scheme, if he decides or needs to register. Now it appears he also wants to do something else.
Besides there is insufficient information on here to provide advice - and we cannot provide advice to someone who is not a client
Your friend needs to use the services of an Accountant.
-- Edited by Cheshire on Friday 21st of October 2016 12:18:14 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
didn't the earlier post state that the friend already had an accountant and already has a limited company? This is all getting very confusing.
Ellie,
that you are asking questions here to me suggests that you are perhaps part of this world but out of your depth with the questions that your friend is asking you possibly because you may have some qualification in this area?
Do you want to tell us a little about yourself as that may open doors to you getting the answers that you need at the level that you need them.
In yesterdays post you mentioned about your client asking to register cars at the accountants offices and also spoke of dropping the accountant because they had not given advice peculiar to your clients business.
To be honest, an accountant knows their own business which is accounting, it takes many years to gain that knowledge. They cannot also be expected to know the intricacies of all of the industries within which their clients make their living (although we do pick up bits as we work with clients as Joanne had done in being able to give you the excellent response that you got from her).
The whole idea of your friend looking to use the accountants offices not only as a registered office but also to register cars to me suggests that your friend is not really a business person at all. If I were that accountant I would have seriously considered dumping your friend as a client the moment that they suggested anything like that.
Today we are looking at two seperate businesses but the impression given is that whilst your friend may have the skills for these businesses he does not have the required business acumen and their plans come accross as a bit amateurish. Of course, that impression is based upon second hand information.
Is the removals business a success? If so, why are they looking to diversify? Do they have sufficient funds to diversify?
The businesses do seem legitimately different so it is possible to register one without the other but are they competent enough not to use anything from the one business in the other one?
VAT is not simply a matter of reducing prices by te VAT but needing to charge 20% more to clients. Will that make them uncompetitive?
In calculating the cheaper prices has your friend taken into account delivery charges and in some instances import duties if the goods need to be imported into the EU before being shipped to the UK? i.e. many companies ship from China to Poland which has cheaper import duties then transport within EU without further duties but the end consumer may still be responsible for the import duties into the first point of entry to the EU.
Before attempting to build a business your friend needs to properly understand the mechanics of it then sit down with their accountant who will take them through the financial implications of the information that they are presented with by your client (quite different to the accountant n eeding to know all about the used car business).
Before that though they need to have the funds available to them for premises/insurances/materials/stock etc. for which they will need a business plan for them to present to investors (assuming that they do not have the money themselves). That would take a lot of time and effort by your client followed by a lot of (costly) time with the accountant to prepare a business plan and at the end of it all there is still no guarantee of a loan so they may have invested around £2k+ in fee's for nothing.
The type of business that this is combined with the questions that they are asking (still shocked at the audacity of a client to expect to register their stock at the practice address) to me would suggest that they would perhaps need have substantial personal security in order to stand any chance of any fincial support.
If you are not a bookkeeper who simply finds themselves out of their depth with the knowledge expectations of their friend (many people have no idea of the difference between a bookkeeper and an accountant... even within the profession, lol) then you may wish to use UK Business Forums rather than this site. Until you know the competence level of the person advising you over there take whatever you read there with a pinch of salt as there are quite a few mate down the pub type people who advise based on commmon sense rather than tax legislation and as we all know here Tax legislation and common sense are two things very seldom found together!
Good luck with your friend and to your friend.
kindest regards,
Shaun.
p.s. if this comes accross in a bad way go back and read it again as its really not intended that way
p.s.2 tell your friend to talk to the accountant. By all means change accountant if you have one that you find that you cannot talk to but don't get rid of them for not knowing your business as thats really not their role unless they are employed by the business and you've not given me the impression that your friend is in any position to have an accountant on Payroll.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun
Yes you are correct in that the other post stated the friend had a limited company. To be honest it's sounds like the pal wants to be self employed but hasn't quite sorted what that business will be. Has ideas, yes, but needs some direction perhaps.
Funding as you say is a big issue, be it for second hand cars, which takes a serious amount of capital even just for a handful of cars to be put up for sale, but also the mobile mechanic idea would need a fair amount for the kit required.
What I don't understand, and this bizarrely is the second time in one week I've heard this mentioned, is the idea of a mobile paint shop for cars. Guess if you are talking repairing small scratches from a spray can that's fine, but anything else requires a proper climate controlled, well filtered spray booth, surely, or the paint finish won't be any good.
Ellie mentioned the mobile mechanic idea is to go into garages to do the work, but would they not have their own staff and kit already in place? I know there is a shortage in mechanics at the smaller independent garages, so he could fill a gap, but I would've thought such places would be looking for a full time member of staff rather than one who might not be available when they have the demand.
Although mobile mechanics for individuals might be something that could work, although immediate downsides that come to mind are that's ok as long as he doesn't need a pit for any of the work he needs to undertake. Personally if I was getting a job done on my car, it would be by someone who could fix whatever was found on the car, rather than having to take my car to one, two or even three places (I mention this as I'm aware, increasingly these days, that fault detection is done by code reads of engine management systems so having the right electrical gear to undertake such isn't bought by every garage as its a very very expensive bit of kit)
What is good is the fact that there is some thought going on with regards to how to keep costs down, but a full blown pros and cons (called a SWOT analysis) needs to be completed with as much as this chap and his pals can think of, narrow down the ideas to focus on one thing perhaps, plus as Shaun indicated, that conversation with a qualified Accountant to work through the rest as to whether or not it's feasible. Totally agree with Shaun in that without some serious personal assets to put up as security, and maybe even with them, I'm sorry to say, you wouldn't be getting a loan from any financial institution for either of the businesses in their current guises.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
