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Comment by deutronium | Hacker News Reader

What's the advantage of being VAT registered out of curiosity?

If you register for vat and go on the flat rate scheme you charge 20% and only have to pay 14.5% to the vat man. If you charge £50 an hour, you get an extra £110 a week for simply being registered. Also, it makes you look like youre big enough that you need to be vat regged.

Also you get an extra 1% in your first year.

Flat rate is calculated on your total revenue including VAT, so for £2000/week your gains would be £52/week (£2000 * 1.20 * 0.855)

20% and 14.5% are not comparable percentages here:

You charge 20% VAT but then you pay 14.5% of the 120% total (i.e. 17.4%).

This may be a good deal if you have relatively few VATable expeneses, and you are charging customers who are insensitive to VAT (you are paying their VAT for them). At best, you're making £52pw rather than £110pw.

Make sure that all your clients are VAT registered business, otherwise you work out 20% more expensive.

You claim the VAT back on all your business purchases - essentially a 20% discount :)

Also, if you don't have that much external expenditure; then you can sign up for the flat rate scheme, which for tech essentially gives your income a boost of 4% for free.

But at the cost of having to raise your rates by 20% without seeing any of that.

Profitable corporations would see VAT as adding 0 cost, since they would otherwise have to pay the same amount directly to HMRC.

It depends who your customers are.

You mean a 16.6% discount ;)

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