Would it be a good idea to save up the scrap glass and declare it to the VAT people when needed. I'm new to this so please excuse the stupidity. I did all this a while back but have forgotten everything, plus someone else was handling it for me.
Now I need to be more active in all this ie stock taking, filing receipts, postage costs.....blah blah blah it all is very..... scary.
I will talk to the accountant in a couple of months I should imagine. Not sure she would be familiar with Lampworkers though
And stock taking!!!? All my rods? including my personal stash before I started selling?
I'd be grateful for help if you have a wee bit of time.
Personally, I'm not going to be VAT registered until I get over the threshold for it as I can't really see the benefit in doing it before hand. The VAT I pay and could claim back on materials & energy etc is minimal compared to the VAT I'd have to charge customers and the admin it would create.
But congratulations if you are up at that turnover that you have to be registered!
VAT (I'm assuming you are registered for it, which a lot of people don't actually need to be): you can claim it back on your business expenses only if you've got the receipt which says what the VAT amount actually is, and the receipt has to be less than 3 years old (unless you've only just registered, in which case it's less than that).
The personal stash from before you started selling: depends if you're using it for the stuff you're sellling. If you are, then the cost is a business expense and tax deductible, but it should be included in the stock take if you're doing one.
I'll leave it to the people with actual lampwork business experience to fill you in on how they do the bookkeeping - there can be more than one valid way of doing things.
Hiya, my partner is VAT so I am running it through his books. The accountant has no problem with what I'm doing but I don't think she is that knowledgeable about people who work crafts.
I understand all about the claiming and charging and have been doing so for every thing I have sold so far.
Just wanted to know if scrap glass and silver should be accounted for.
So, anything I use in my stash. Should I write it down? Going to be really hard as you all know we use a bit of a rod here and a bit of a rod there. How on earth should I count for things or should I just use a formula like. 1 bead = .5 of a rod.
Blimey, thinking of all the stuff I have. It would take yonks to stock take.
Up to now I have only put a couple of Tuffnell orders in the books and and a handful of silver corporation orders. Had a big US frantz order but I know I can't claim VAT for that but can be put in as expenses.
Is there a book, or website for lampworkers/glassworkers that I should be reading about for book keeping.
I don't want to keep pestering you all for advise and taking up all your time.
Muddled of Portchester. lol
With regards to the odd bits of glass, it doesn't have to be exact; a reasonable estimate of the cost will do. If I ever have to do this myself, I'm thinking of estimating an average cost of my glass stash and multiplying it by weight used. I admit I haven't dealt with small-scale crafts people with my accountant hat on, but this is a perfectly legit way of accounting for the cost of your materials when you're manufacturing stuff.
There shouldn't be any VAT on stuff you buy from abroad, so nothing you can claim back on the VAT return. It will be a tax deductible expense though.
Hi Kathy, I really am grateful for you replying.
I knew that about the US and VAT, I always like a US customer. As I don't have to charge VAT. which is nice. :)
Wow, this is going to be fun. Estimating the cost of one Owl. What with the bits and pieces I'm adding in to one, like silver findings, and other jazzy bits.
Where would I put this ledger of estimated cost per sale? and Used materials per sale? Blimey!
The accountant is using SAGE. Something I won't touch out of fear more than anything. A friend told me how trickey it can be if you input something wrong. So leaving that to the master lady accountant. lol.
What I DO understand is how keeping receipts, postal costs, suppliers receipts, that sort of thing is important and to keep in order to save the accountant time.
Might be worth me doing a stock take of all my glass and bits maybe. Long gone are the receipts to my personal hoard but I guess it will be easier if I did it this way?
OH my, questions galore! I need a course maybe?
If you are VAT registered, you have to state your VAT number on all of your sales receipts/invoices and also have to charge it as an additional 20%. I'm pretty sure craft goods wouldn't be vat exempt-pls correct me-any accountants out there? It's only really worth doing as an individual if your turnover reaches the annual threshold, which is something like £60 000 per year. That's a hell of a lot of beads! If you are not VAT registered, it is illegal to charge VAT and you can't claim it back.
You can however, be self employed and do a tax return and 'disregard' the VAT i.e. you have to pay it on goods from large suppliers such as Tuffnells (on goods which are VAt rated) but you can't claim it back it just goes down as part of the complete purchase price of your materials or expenses, which is tax deductible.
Does this help? I would avoid tagging your business onto your partners if this forces you into the VAT area. Seeing as you are 'adding value' to your materials i.e. you are taking glass and increasing its value making it into beads and would be unlikely to be using VAt registered sub contractors, you would not gain anything except increasing the costs to your customers and giving yourself a load of accounting grief. You may be better off doing your accounts separately to avoid having to go down the VAT route and having to increase the sale price of your beads by 20%. There may be other reasons to keep your businesses separate if they are totally different, such as insurance. I've got a unbeady business which started off not being registered, and we did our own accounts and returns, then had to go VAT registered and now feel it's better to pay accountants to get us through the minefield of VAT returns and other stuff.
Sorry to be a such a bore.
Hi Mel, I'm selling with VAT already and it's not a problem for the accountant to deal with. Each customer gets an invoice proper, so no worries there.
My partner knows the Tax and VAT, he answers my questions but some things he doesn't know. Like lampworking and artist stuff.
My work will not go up because I have to add VAT. What I quote to customers is the vat included and a proper breakdown on the invoice goes out with everyone.
The way I see it is this, if I go it alone I'd have to do the accounts and employ one for my side, the odd here and there I put into the biz is worth me doing it this way.
my brain doesn't work with numbers so I'd fail awesomely if I did it myself.
Plus, I plan to expand my equipment so claiming back vat will be most helpful.
I just have to learn what to do with stock taking. I' unsure where to start and what to do. Do I stock take in weight, numbers of rods? bah!!!
oh and Mel, you're not a bore. its nice that you have made sure I know the ins and outs so to speak. That is very kind of you to do so :)
By the way, just a few topics down the page from this one is a post about bookkeeping spreadsheets, which looks very useful.
Sage is quite good if you properly know what you're doing; if you don't, don't even go near it. A nice neat spreadsheet, however, will make your accountant like you a lot more.
And it doesn't matter whether you count the number of rods or just weigh the stuff. For example, if I had a big box of sundry cheap Effetre stuff that's all vaguely three-quid-a-quarter-kilo-ish, I'd just weigh the lot all at once, it will do.
Quote from: Hotglass28 on June 04, 2014, 05:06:30 PM
Plus, I plan to expand my equipment so claiming back vat will be most helpful.
Just to put this out generally, and as said before - we can all claim VAT back on equipment and materials even if non-registered: the gross amount invoiced can be put against tax (if you pay any) and that includes the VAT element.
The downside is charging VAT, and what impact this may have on your business. What being non-registered does for you is to free you from having to charge VAT.
Handy. If an item has a perceived value of say £50, what 'private' customer wants to pay £60 for it? And if they
would pay £60, wouldn't you rather keep the tenner than give it away?
By 'absorbing' the VAT
QuoteMy work will not go up because I have to add VAT
you could be selling at a loss. The VAT on sales is almost always greater than the VAT on inputs. You send HMRC money.
With the greatest of respect, there's sometimes a misplaced rush to get over formalised turning a hobby into a business, and if not over the threshold for compulsory registration, perhaps think carefully about 'joining'.
Chas
I can see no advantage in being registered for VAT on a craft business (unless you have to) because you have to charge VAT on your labour and your profit as well as your materials. You can only claim a small portion of that back in expenses. You will never be better off.
I was registered for VAT until last year because I had a zero rated business and when I asked my accountant about adding my lampwork to the business he said that because it was a completely different business it had to be treated separately.
My response would be similar to Spexy, I was persuaded to register by a book keeper friend who clearly didn't have a clue about small craft businesses. When I realised she didn't know as much as she pretended to, and saw how much 20% actually was out of my takings I deregistered and took back control of my books. Well I say that, there's 1 months worth of paperwork 'filed' under the desk lol but you get my drift. She also had me opt out of paying NI which has left a huge gap in my state pension etc that I will now need to top up so don't do that either ;)
For stock taking, whether VAT registered or not, I do everything by weight that can be done by weight. You don't want to be counting rods! I weigh my beads too, and I know what glass went in them so can estimate what amount of everything I used. (If you were only using standard Effetre, I'd work out an average cost/g then just apply that to the beads, but with silver glass and all different manufacturers I do it by the actual prices). Things like silver leaf I use in specific sized pieces, so I have a cost worked out for those and just add that on if a bead used a unit of silver leaf.
You probably could still average everything out more than I do, and if you're making a similar range you only need to work the cost out once then apply it to all beads in that range.
Hello lovely people who are helping me.
All very interesting to read and I'm taking it all in. The issue I had was the stock taking and I think Kalorio and Dementedmagpie has answered my question regarding this issue. Which was doing my head in :o
It's early days for me with regards to wanting to go bigger in the future. That's why I wanted to be VAT. But it's not like I'm totally starting new on my own. My partner has been vat reg for 12 years so it's not a big problem.
Had a long chat yesterday which halted my fears. What I do know is it's added paperwork but I'm prepared to deal with that.
Not to worry about me making a loss, I've done my sums and I won't be making a loss on that front.
I've just had an order which the customer wanted a VAT receipt as he only deals with vat customers for some reason. (why would this be?) I didn't ask but a phew popped into my head.
In 6 months I think I will take stock and see how things are going and reassess. I'm deff going to be watching whats going on after all of your advice.
I'm not sure how to say this but....I have never done a stock take in all the years I've been running my bead business (ltd company).
At the outset I did some calculations based on a range of the kinds of beads that I make and came up with an average of 10% of the sales value of the beads being materials. Given that this is likely to be understated what with all the wastage and some of the silver glass costs, plus some jewellery sales where the raw materials costs are higher, I and my accountant feel that it is the best way of accounting for materials. Otherwise I'd have to weigh kilos and kilos of glass each year and count all my silver foil sheets and rummage through the cupboard of shame etc. So, stock value is worked out as value of raw materials introduced to the business at the outset of the business (when it became more than a hobby) plus new materials purchases in year minus materials usage in year (i.e. the assumption of @10% of sales) and that's the value of materials stock that goes into the balance sheet. If I have disposed of anything (e.g. I ditched a load of silverplated findings to a charity), I agree with the accountant what the write-off figure would be for that and it is netted off the stock value.
I don't know if that's helpful, but that's the way I do it. The value of my bead business is not so great that if the tax man disagreed with my methodology, it would entail a huge payback e.g. if they felt the materials element should be lowered to 5% but I would still argue that 10% is a reasonable figure and more than likely understates the true cost.
Kazx
Hi Kaz, that's very helpful! Thank you for taking the time to write that for me.
I got told to chill out by the boss. lol. He said he isn't worried and we will stock take the glass and silver and findings what we bought from when the glass owls/beads started to sell. So I'm not worried now. I think you have prob guessed over the years I can worry too much ::) "We are not doing anything wrong and if they come for an inspection" he said "make them a nice cup of tea and show them your workshop and what you do" He knows how to calm me down thank god!
"cupboard of shame" I like this. Am relieved I don't have to do this (stock take all of it, that is) I have lots of shameful drawers of stuff I've bought and forgotten about. hehe
Can the vat man tell you how much you should be spending on raw materials on each piece? That's a bloody cheek isn't it? I'd tell him where to go...... (actually prob wouldn't out of fear of them)
My accountant pretty much does what Kaz says "So, stock value is worked out as value of raw materials introduced to the business at the outset of the business (when it became more than a hobby) plus new materials purchases in year minus materials usage in year" can't be doing with weighing glass and counting tiny silver beads! I did do a proper stock take the first year (when I was only selling a bit and didn't have to make it pay so had plenty of time on my hands!) and then a couple of years after that and it turned out to be pretty much the same anyway.
Not sure if it is me or the conversation that is getting confused here but I'm not getting the connection between stock taking and VAT accounting. Surely VAT is input v output then you pay the VAT man or he pays you? As previously mentioned you need to charge 20% on your selling price (which includes any time/labour you may add in) I can't see how this will be beneficial to you and your lampworking business in isolation?
Personally I would be wary of piggy backing someone else's business as it won't be you or your trade that is VAT registered. I would advise that as far as HMRC are concerned you are responsible for your tax and VAT returns regardless of the fact that an accountant is doing them for you.
Quote from: Hotglass28 on June 06, 2014, 11:49:43 AM
"make them a nice cup of tea and show them your workshop and what you do"
I dealt with a VAT man for a number of years who refused to accept a cup of tea as this would be a free and therefore a "gift", I am willing to accept that he was a bit hardcore !
A cup of tea as a gift! I'd say it was a must! :)
All sorted on the hissy fit I was having. The accountant hasn't got an issue with how things are being done, so no problems.
Thank you for all for helping :)
That VAT man was a bit hardcore: unless you're the Ritz, a cup of tea is well within the realm of acceptable hospitality...
Yeah, what Kaz said about cost and stock takes. If you were, say, running a shop or a factory, you would have to do "proper" accounts, with stock takes and everything. But if you are only a tiny business, that would be faaaar too much of a faff. Kaz's approach to expenses (as a percentage of sales) sounds very reasonable - if anyone questions the numbers, show some workings on a back of an envelope*, it should be enough!
(A technique accountants do use themselves. Quite often, actually. Sometimes literally on a back of an envelope.)
Oh Kathy you are giving all our secrets away now !!
And yes he was a right miserable bugg$$