Those who become self-employed are faced with many administrative tasks that cost time and nerves. The advance VAT return is one of them. As a small business owner just like a man with van birmingham you are exempt from this. However, the regulation does not only bring advantages.
Small business owners – pros and cons
Why should one work as a small business owner instead of a normal self-employed person?
The advantages of the small business regulation
- It is a relief because you have less effort and bureaucracy. There is no need to submit monthly sales tax returns, which definitely saves time.
- You can offer lower prices to end consumers, i.e. private individuals because you are not allowed to add sales tax to your own net price.
Both the relief and the lower prices compared to private individuals are advantages that should not be underestimated.
But there are also some disadvantages of the small business regulation
- A big disadvantage is often that there is no possibility of input tax deduction. When you start a business, you have to make a lot of purchases that cost a lot. Here you have to pay sales tax, but you can’t get it back from the tax office, as is the case with “normal” self-employed people.
- You have to check at the beginning of each year whether you still fall under the small business regulation or not.
- If you make more sales than stated in the estimate made to the tax office at the beginning of the year and you no longer fall under the small business regulation, the tax office demands the non-withheld sales tax. This often means a great financial burden. However, this only applies from the second year.
- By switching to the normal sales tax treatment, price changes may be necessary or you have significantly less profit.
- One should not underestimate the impression made on the customer. As a small business owner, you’re really a small business owner. Not every customer likes that.
Incidentally, small business regulation has neither advantages nor disadvantages compared to commercial customers. They can get them back from the tax office for invoices with sales tax. For commercial customers, every invoice is like a net invoice.