Chapter 7 goes into what's involved in VAT and how it can affect your business. However, as your business grows so too does your turnover, which can have an impact on whether or not you either have to, or elect to, charge VAT. While many owner-operator gardening businesses trade below the VAT threshold and decide not to register for VAT, as soon as you start growing and your turnover looks to exceed the threshold you have to register for VAT.
The current VAT threshold limit (as at April 2006) is £61,000. Therefore if your business's annual turnover looks either to hit or exceed this figure you must register your business for VAT.
The obvious advantages to registering for VAT is that you get to claim back the VAT proportion on all business purchases that attract VAT. For example, fuel, machinery, vehicles, etc. The disadvantage is that you have to charge 17.5% on your labour and on all stock that you re-bill your client that attracts VAT. The impact of this is that immediately your labour rates must go up by 17.5% to compensate and you also have to ensure that add sufficient margins onto your re-sale stock to allow for VAT.
It's difficult to advise you whether or not you should register for VAT when you're not yet close to reaching the VAT threshold. A factor you should consider when deciding when to register is how much money you're going to spend on new equipment, which can include tools, machinery, vehicle, etc. By registering you get to claim back the VAT element of all these invoices, which can be a very helpful cash rebate for your operation. Whatever you decide, you should choose carefully and where possible seek the advice of an accountant. VAT is hugely complex and personally I've yet to find anyone who understands it fully!
Employer's Liability Insurance
If you employ someone to work with you or under your direction you must have in place Employer's Liability Insurance. If you don't, not only are you breaking the law but run the risk of serious penalty. You could also be sued by your employees in the event of them having a claim against you.
When tendering or applying for a commercial gardening contract you will usually have to have a minimum of £5 million Public Liability Insurance. Most Public Liability Insurance Policies aimed at the domestic gardening market will come with £2 million as standard. The hike in premium when increasing cover from £2 million to £5 million liability shouldn't be underestimated and this additional cost will have to be budgeted for. Therefore if you're going to tackle the commercial market you're going to have do so on such a scale as to make the additional costs of insurance worthwhile.
It's impossible within the scope of this book to cover this subject fully, however when undertaking work with employees you should always complete a written Risk Assessment.
Nothing complicated is needed here. Just use your common sense in identifying potential hazards, recording them and detail how you're going to minimise risk. You will need to ensure that all your employees are fully trained in using your equipment and that you keep details of their training recorded. You should also ensure that they're all given adequate protective clothing and gear as the job and machinery require.
For example, a gardener operating a lawn mower should be kitted out correctly including ear defenders, gloves, steel toe-capped boots and eye protection. As an employer you are under a legal duty of care for each of your employees, so you have to ensure that they are both trained to do the work you require and also correctly attired for the job.
For further help and information you should visit the Health and Safety at Work's website which can be found at: www.hse.gov.uk/ where you can access all the information you need including getting specialist publications suitable for your business.
Whatever you do, don't ignore health and safety. You have a legal responsibility to ensure the safety of your customers and employees.
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