Business without a VAT number

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Cicero

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I've started a small startup business, but we aren't registered for a VAT number because as far as I know, the turnover needed is quite alot, and at present thats not happening.

When I quote people, I just quote including VAT... Are there any repercussions here? The business is expected to do an annual turnover of about R200k, but right now its nowhere near that.

What are my options here? Any advice would be appreciated?

/And I know I should just get an accountant, but i just wanted to check here first.
 
AFAIK if you don't have a VAT number you are not allowed to charge VAT.
If you ARE charging VAT, make sure that you are setting the VAT aside to give to SARS, otherwise you will be in major kak.
 
Ok, those both are conflicting answers? But looking here, it seems as long as things stay below the threshold of R150k then all is good. But thats turnover tax, is that different to VAT tax?

It would seriously suck to have to keep all the VAT just in case. Right now, we're building the business and are aready paying VAT with our suppliers. But will probably exceed the minimum R50k turnover amount in the next couple of months, so then we can register for VAT. But is it really necessary to register, our turnover wont be anything near the compulsory R1mil mark - yet :p.

Its seriously confusing?! I do not want a big SARS bill, lol

What do I need to do to be ok? Keep the VAT?
 
Last edited:
thisgeek said:
AFAIK if you don't have a VAT number you are not allowed to charge VAT.
If you ARE charging VAT, make sure that you are setting the VAT aside to give to SARS, otherwise you will be in major kak.
Click to expand...
Surely you mean that he cannot claim VAT?

If he buys goods VAT inclusive then he must sell them VAT inclusive.

If he buys goods VAT exclusive then he can sell them VAT inclusive but will have to pay SARS the VAT he collected.
 
markface said:
Ok ok, I think I need to get an accountant to chat to. :p


Really?! That makes no sense? SUrely if I buy supplies that include vat, then I can't sell it excluding vat surely?
Click to expand...

just call them, they will answer your questions accurately.

say you buy a pen for R1 ex vat, your cost is R1,14, so you sell for say R3

you shouldn't be looking at the ex vat as far as i am aware as you can't claim anyway
 
if you gross turnover is less than 1mil you don't need to register.

Don't quote VAT. You are not charging it. State all prices are ex-VAT.
If people ask then you tell them you don't do VAT in a nice way. They ask coz they wanna know if the price will be more.

If you deal with businesses then they'll claim the VAT you charged & you can land in hot water.
 
MickeyD said:
Surely you mean that he cannot claim VAT?

If he buys goods VAT inclusive then he must sell them VAT inclusive.

If he buys goods VAT exclusive then he can sell them VAT inclusive but will have to pay SARS the VAT he collected.
Click to expand...
Yip,

so if the OP buys an item for R100 > R114 VAT inclusive his cost is R114 coz he can't claim VAT back.
 
Ok, thanks guys. You've all made me realise I'm way outta my depth here, gonna have to phone SARS or talk to someone who knows face-to-face so I can ask all my noob questions.

The business is just starting to make some real money so I needed to find all this stuff out asap, been concentrating on all the technical stuff (which I'm good at), and left this stuff to last (which I'm a real noob at).

Thanks again...
 
MickeyD said:
Surely you mean that he cannot claim VAT?

If he buys goods VAT inclusive then he must sell them VAT inclusive.

If he buys goods VAT exclusive then he can sell them VAT inclusive but will have to pay SARS the VAT he collected.
Click to expand...
He can't pay VAT to SARS if he doesn't have a VAT number. VAT claimed goes against VAT paid.
 
You issue INVOICES not VAT INVOICES to your clients.
Your price to your customers is your cost+markup. Nowhere say incl vat or excluding vat. Vat is irrelevant for you.
You PAY VAT you do not CHARGE VAT

You may also voluntarily register for VAT. YOu dont have to wait until you hit the threshold. But do not charge Vat and 'keep' it to pay SARS later.
 
IIRC the threshold is in the order of R1m turnover annually. It's actually quite a challenge to register for VAT these days, more so if it is voluntary.

If you are not registered you can't charge VAT on sales. Period. You still pay VAT on purchases/COS, but can't claim it back as input VAT.

Let's say you have sales of R200 (excl VAT) and input cost of R114 (VAT incl) -

Scenario 1 - you are registered for VAT

Gross sales = R200 + R28 VAT = R228
Net sales = R200
Input cost after input VAT claim = R100
Net profit = R100

Scenario 2 - you are not registered for VAT

Gross sales = R200
Net sales = R200
Input cost = R114
Net profit = R86

To make up the difference you can increase your sales price (in this example to R214), but the effectiveness will depend on your customers are. If they are mostly VAT registered themselves it won't work, because your customer in Scenario 1 is paying net R200 for the service/product (they claim the R28 VAT back as input VAT). If in scenario 2 you increase the price to R214 their net price increases to R214 as you don't charge VAT so they can't claim input VAT.

On the other hand, if your customers are mostly not registered for VAT then Scenario 2 is beneficial, as their net cost in Scenario 1 is R228 vs R200 in Scenario 2. You can therefor increase your price to R214 and they are still better off than buying from a VAT vendor.
 
It's quite straightforward.
Businesses need to prove either sales of over R1m/year, or impending sales of R1m/year based on tender or contract value awarded to the business.

If you are not a VAT vendor you will buy and pay VAT, which you cannot claim back. Added to that you will not be able to quote or charge VAT, and your clients will not be able to claim VAT back for purchases made from you if they are VAT registered vendors.

In your instance you buy product A for R100 + VAT from a VAT registered supplier.
You sell that product at R214 net. Your profit is R100, your client cannot claim any VAT back from a purchase made from you nor can you. You don't have to pay the receiver anything other than income tax at the end of your financial year which is profits less costs which are deductible from income tax.

I'm not an accountant but i know the above from personal experience in running my business. I was lucky to have registered the business when the threshold was R30k/month. It's a handicap to do business especially if your clients are from the corporate, mining or farming sectors. If you sell to Joe Public VAT does not pose much of a handicap against VAT registered competition, the only thing is that your profit margins will be lower as you cannot reclaim input vat on machinery, goods or vehicles purchased for the business.
 
I also run my own T/A business. I am not registered for VAT.

Therefore, I can not charge my clients any VAT. You just need to charge them the fee you do, without including VAT.

You are right, I have been to SARS and they recommended that you generate a substantial amount before considering registering for VAT. There is a long process in forms, them visiting your premises, etc. etc.

So, to be safe, keep VAT out of your pricing.
 
Thanks guys.

Big help, we'll just keep VAT out of the invoices for now.
 
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