VAT Dilemma

elemi

I have recently started my own small business, and the majority of my earning’s are from labour only, however I do, on some occasions, need to buy parts for my customers, and although I can obtain some items a discounted price, I find that by the time I add a small profit And I mean just a few pounds, Carriage and then VAT on top, the price of the parts concerned become, at times more expensive shop bought items.

My question is, would it be worth registering for VAT, as I’ve found that this is the cause of the rising cost of the items I buy.

Any help would be really appreciated

Thanks

elemi

gizmoleeds wrote:

If you are not registered for VAT you don't need to charge it..

Put it like this, at the moment:

Part costs £100 + VAT = £117.50.

You pay £117.50 for it and charge £130 to the customer.

Profit = £12.50

In that case would the profit not be £30. as the VAT could be claimed back.

Profit = £12.50 VAT calimed £17.50 = £30.00


So if i bought something for £100.00 + VAT = £117.50

And sold it for £105.00 + VAT = £123.38, but being able to claim the VAT back, that would be a profit of £23.38

Please tell me if im wrong. Not sure.

VeryTrying_2

elemi wrote:

:So if i bought something for £100.00 + VAT = £117.50

And sold it for £105.00 + VAT = £123.38, but being able to claim the VAT back, that would be a profit of £23.38.

If you register and can claim the VAT back, then you would also have to hand over the VAT you charged the customer.

Bought something for £100 plus VAT, but reclaim back the VAT, the cost to you is £100. Sell to customer for £105 plus VAT of £23.28. Pay £23.28 to the VATman. Profit to you, £5.00.

elemi

Thanks i need to look into this abit further, well

Don't think its worth it.

elemi

Ok then, one more question, why do people go VAT registered, is there any benefits of this?

stub451

For a turnover under approx £150k, you can opt for the flat rate VAT scheme. For IT consulting you pay 13% of turnover (12% in first year). You can't claim back the VAT you pay - but you pocket the difference in what you charge. i.e. sell item/services for £100 + 17.5% VAT = £117.50. Pay VATman 12% = £12 for first year. Profit from flat rate scheme = £5.50

Take a look online and see what the flat rate is for your profession. Works well for me!

bbruce

If you don't have to, don't register. You'll be more competitive and avoid the hassle and fear of the all-powerful VATman.
The exception is if you're mainly selling to businesses who are VAT registered it could be worth the extra paperwork and sleepless nights.