Readers’ forum: Paint and decorate

Bill and Ben each own 50% of a small limited company through which they have traded as painters and decorators for a number of years paying themselves a combination of salaries and dividends.

In early 2014 the directors advised us that they wanted to register for VAT although their turnover was well below the registration threshold. This was because almost all their customers at that time were VAT-registered contractors and because Bill and Ben’s company was supplying the paint and other materials it could claim back the VAT on some materials making the work cheaper for the clients.

We warned our clients that this might mean they would “price themselves out of the market” for non-VAT registered customers but they insisted they had so much work from those that were registered that this was not an issue.

We duly registered the company for VAT...