How to set up UK accounts - not VAT registered, but expect will be one day?

[Dr. David Kirkby (Kirkby Microwave Ltd)]

On 3 December 2016 at 09:22, Maf. King <maf at chilwell.net> wrote:
> On Saturday, 3 December 2016 08:49:58 GMT Dr. David Kirkby (Kirkby Microwave
> Ltd) wrote:
>> I run a company in the UK, but are not VAT registered. But I think
>> that will change at some point, and the company will need to be VAT
>> registered.
>>
>> Is it more sensible to set up the GnuCash account as "Business" or "UK
>> VAT Accounts"?  There seems to be two possible issues
>>
>> 1) If I set it up without VAT, it may become more tricky to manage if
>> the company becomes VAT registered.
>>
>> 2) If I set up with VAT, it will cause more of a headache now, when
>> the company is not VAT registered. (I did wonder if setting it up with
>> VAT, and setting the VAT rate to be 0% might be a sensible solution.)
>>
>> Any thoughts?
>
> Hi David,
>
> I have often said in the past (and others have too) that you should make GC
> reflect real life.  You are not registered for VAT, and showing any sort of VAT
> on your invoices is, IIRC, not legal.  You also may not ever register, or you
> may register with a flat-rate scheme agreed with HMRC which simplifies the
> accounting side.

OK, I'll forget the VAT.  I'm pretty sure I will not register this
financial year, which ends in February.

Since 90% of what I sell is exported, and much of it outside the EU,
it seems it might be sensible to register, as I believe I could then
recover the VAT on everything I buy, but would only charge VAT on a
small percentage of sales.

Once we leave the EU, it would be a no-brainer, as the amount sold in
the UK is small. . Y

> In terms of specifically your question about VAT, it is easy to add accounts to
> GC at any time.  IIRC, you will need to add a couple of liability accounts
> (VAT box 1 and 2) and an asset (for VAT box 4) all under a parent liability
> (which I  called VAT).  You'll also need to set up some tax tables for your
> vendor bills and customer invoices, but that will only take a few minutes.
>
> If you have expenses which are not on vendor bills (eg credit card) you'll
> have to manually record the VAT part as a split
>
> In short, I'd say that unless you are reasonably sure you'll hit the
> registration threshold this tax year, don't set up the VAT accounts yet.  Get
> more familiar with using GC and editing the account tree etc..  Adding VAT
> later won't be significantly more work than adding it now, and you don't need
> it yet.

I was concerned it would be a nightmare trying to add them later, but
if it's not a problem, I wont worry about it.

> 0.02
> Maf.

Cheers Maf.

Dave