VAT advice

my_names_tom

Bean_Counter wrote: »

Well I'm no VAT expert but I do think that this is not allowed.

VATA 1994 Sch 6 paras 2, 13 state that HMRC can value a retail supply between a VAT registered person and a non-VAT registered person at open market value. Hence in Tom's example they would value the TV at around £115 and account for VAT on that value.

As with most things with VAT it seems a complicated area and as I said I am not expert, but with you usually find that there is some law somewhere where you are trying to evade paying HMRC some taxes.

You might also want to refer to EC Sixth Directive, Art 27, Direct Cosmetics Ltd v C&E Commrs, CJEC [1985] STC 479 (TVC 21.320) (and the subsequent appeal by Direct Cosmetics and Laughton Photographs Ltd v C&E Commrs, CJEC [1988] STC 540 (TVC 21.321)) and Gold Star Publications Ltd v C&E Commrs, QB [1992] STC 365 (TVC 65.25). Perhaps also C&E Manual V1-12, Chapter 2 para 4.4 and this link.

Thank you very much, this is exactly the kind of response I was looking for, I will have a look at those references you gave me later today.

blue_monkey_2

my_names_tom wrote: »

Firstly, there is nothing suggesting my friend does not sell zero-rated goods, if a sale of them were needed to make it bona fida I would ensure a real sale of physical goods took place.

Secondly I do not currently do this. I have a very limited knowledge of tax and VAT which is why I came onto this forum for advice. I would not participate in any activity I knowingly knew was fraudulent or illegal and it angers me that you suggest I do.

Whether or not your friend sells real physical goods, you have clearly stated that he would be selling you a 'TV' for 1p and then charging £99.99 for baby clothes - which are Zero VAT rate. Which kind of indicates you DO know what you are talking about as you know they are zero rated goods and not subject to VAT.

I am sorry but I do find it hard to believe that you had no idea that it was frauduent or illegal. If you need more help then call the VAT Office, they are helpful and will be more help than us. But you did not ask them you asked us, which kind of implies that you thought you had found some sort of VAT scam and wanted verification on whether it would be possible.

I really would not touch what your mate is doing with a bargepole, also by selling electricals you are going to need public liability insurance incase something happens to one of your customers (electric shock for example) as business practices are not covered by household policies. Please do be very careful if you really do not have any idea of what you are getting into and are new to all of this.

my_names_tom

blue_monkey wrote: »

Whether or not your friend sells real physical goods, you have clearly stated that he would be selling you a 'TV' for 1p and then charging £99.99 for baby clothes - which are Zero VAT rate. Which kind of indicates you DO know what you are talking about as you know they are zero rated goods and not subject to VAT.

I am sorry but I do find it hard to believe that you had no idea that it was frauduent or illegal. If you need more help then call the VAT Office, they are helpful and will be more help than us. But you did not ask them you asked us, which kind of implies that you thought you had found some sort of VAT scam and wanted verification on whether it would be possible.

I really would not touch what your mate is doing with a bargepole, also by selling electricals you are going to need public liability insurance incase something happens to one of your customers (electric shock for example) as business practices are not covered by household policies. Please do be very careful if you really do not have any idea of what you are getting into and are new to all of this.

I know the basics of VAT, and I found baby clothes as an example by searching Google for a list of zero-rated VAT items!

It is true that I was asking for validation if what I thought of was illegal and fraudulent, and it turns out it is thanks to the knowledge of members of this forum.

I have a basic grasp of the legal side of business but if I were to pursue a business as a full time, or even part time venture it would not be without a massive amount of research, learning and consultation from experts.

Lifeisbutadream

Blue Monkey can you explain what your insurance against VAT inspection is?

I had a dream the other night that all my documentation (i.e. invoices) went up in smoke! when I woke up I wondered what would happen regarding tax and VAT under those circumstances... (we have a massive turnover with around 15-20% profit! would we be liable for tax and VAT on the turnover amount?)

blue_monkey_2

Hi LIBAD, I have mine with my membership with the National Market Traders Federation, I also have Public Liability and I get loads of stuff cheap by being a member. They never actually asked me what I do (although I did have a market stall at that time) so I guess anyone can join if you are selling to the public.

As much as I keep everything in order you really never know if you are going to get flagged up and it helps to know I have people to fall back on to help should I need it. I am a bit anal about paperwork though so I should be OK but I do know what you mean but do you keep back ups of everything? I have 2 back ups and some of my paperwork is in storage so I'll get compensation should anything happen to it so that will cover me. Might be worth thinking about, my local storage place charge s£3.50 a week for filing paperwork for people. Just means it is safe and out of harms way for me really.

http://www.nmtf.co.uk/index.php?id_cpg=6

I got my Merchant Accounts free so no set up (I have 3) and I do not get a monthly fee as most are a min of £20 a month, cheap line rental on my handheld terminal, cheap banking, there are loads of advantages to being a member.

Same as my husband still being in his old union despite no longer being in the trade, he stays because he gets legal services for free should he need them, I do not think they are of help to him in pay disputes and the like but he gets free solicitors services for anything and everything.

Bean_Counter

my_names_tom wrote: »

Thank you very much, this is exactly the kind of response I was looking for, I will have a look at those references you gave me later today.

To be honest I haven't read them all myself. VAT and tax in general is very complicated and I tend to use books such as Tolleys for an easier explanation of the rules in the first instance. Going back to the actual statute books for many people (myself included) is virtually impossible to understand.

If you want advice on a very technical area such as this query, then go to an accountant or VAT specialist. For general information on VAT and tax rules, get a good book or see if HMRC are running any of their free seminars in your area, as these are quite useful and interesting.

blue_monkey_2

Also wanted to add that the HMRC are lovely to deal with and everyone I have spoken to by telephone has been extremely helpful, they seem like big bad wolves but they give excellent advice, you should not be scared of speaking to them and they will give you information that is 100% correct so you get things right.

Lifeisbutadream

blue_monkey wrote: »

Hi LIBAD, I have mine with my membership with the National Market Traders Federation, I also have Public Liability and I get loads of stuff cheap by being a member. They never actually asked me what I do (although I did have a market stall at that time) so I guess anyone can join if you are selling to the public.

As much as I keep everything in order you really never know if you are going to get flagged up and it helps to know I have people to fall back on to help should I need it. I am a bit anal about paperwork though so I should be OK but I do know what you mean but do you keep back ups of everything? I have 2 back ups and some of my paperwork is in storage so I'll get compensation should anything happen to it so that will cover me. Might be worth thinking about, my local storage place charge s£3.50 a week for filing paperwork for people. Just means it is safe and out of harms way for me really.

http://www.nmtf.co.uk/index.php?id_cpg=6

I got my Merchant Accounts free so no set up (I have 3) and I do not get a monthly fee as most are a min of £20 a month, cheap line rental on my handheld terminal, cheap banking, there are loads of advantages to being a member.

Same as my husband still being in his old union despite no longer being in the trade, he stays because he gets legal services for free should he need them, I do not think they are of help to him in pay disputes and the like but he gets free solicitors services for anything and everything.

I am a bit of a perfectionist when it comes to paperwork - I do all of my own accounting (although I have an accountant to do my yearly returns) - I back all of my computer files up (but keep everything on site, so that wouldnt protect me from fire) and I store all my previous years invoices and receipts in the loft (obviously not very safe.

Our turnover is really big now, as I often sell products without us fitting them (such as a kitchen) which obviously increases the turnover by a lot. I keep thinking that if anything happened we would be liable for tax and VAT on £200K!!!! which is a scary thought :eek:

I think we can get memebership into the builders federation - I have never really had time to look into it...

I like your idea of paying for storage - it would free up some loft space as well, even if nothing else!

moneypooh

Don't keep too much, last 7 years is sufficient, then shred the rest

IIRC at work we have insurance that includes tax inspections and any legal assistance needed via FSB should we need it for help on an inspection. I'm not sure what it would actuallys, but any help is better than none, eh?

Lifeisbutadream

moneypooh wrote: »

Don't keep too much, last 7 years is sufficient, then shred the rest

IIRC at work we have insurance that includes tax inspections and any legal assistance needed via FSB should we need it for help on an inspection. I'm not sure what it would actuallys, but any help is better than none, eh?

We have only been trading for 3/4 years so I have to keep it all anyway...