Do I have to pay VAT even if I made a loss??

gr8stuff

Hi,

I'm new here and I really need some expert advise for my situation. I run a small food shop since 2007 and recently I got an accountant to do my accounts for tax purposes. Well, the shop hasn't been doing too good and I've been trying to sell it off for a while but without much success. Anyway, my net loss for 2007 is around £ 16,600 and my net loss for 2008 is around £17, 400...but according to the accounts my VAT payable for 2007 & 2008 combined is a whopping £19,000...:shocked:... Now I'm confused...do I have to pay this even after making such losses in the business..??.

Pls help!!! Thanks...

kazwookie

VAT = on sales and on purchases, if the 2 don't balance you have to pay the difference to the VAT office, that is why it is importnat to keep all invoices / till readings etc, but I am sure your accountant has been over it all with you.

A read of this might help you

http://www.hmrc.gov.uk/businesses/

and if you do owe that much, and your accountant is right, and you cannot pay, I would suggest early contact with HMRC, putting a good case as to how you are going to pay, ie go to them, BEFORE they come to you.

But make very sure your accountant is right

Pumpkinface_2

VAT has nothing to do with your profit or loss, you are essentially just collecting VAT on behalf of the tax man.

Debt_Free_Chick

VAT is nothing to do with your profit. VAT is what you've collected from your customers (less the VAT you've paid to your suppliers). So, effectively, you have this VAT to hand over as it was included in what your customers paid you.

Sorry

sandiep

OK. Food shops. These are covered under various retail schemes that apportion the vat due on your sales between zero and standard rated items based on the proportion of your purcahses (or other proportion as you determine).

It sounds to me as if you are not using one of the retail schemes and have simply calculated vat based on full turnover.

Which indicates that your accountant probably isn't actually an accountant, more a book-keeper or accounting services company. Big difference, mainly in skills, knowledge & qualifications.

Speak to your "accountant" and ask if a VAT retail scheme is being used, If it's not go and find a new accountant and recalculate everything all over again.

(Ps - I am a chartered accountant!)

dmg24

sandiep wrote: »

OK. Food shops. These are covered under various retail schemes that apportion the vat due on your sales between zero and standard rated items based on the proportion of your purcahses (or other proportion as you determine).

It sounds to me as if you are not using one of the retail schemes and have simply calculated vat based on full turnover.

Which indicates that your accountant probably isn't actually an accountant, more a book-keeper or accounting services company. Big difference, mainly in skills, knowledge & qualifications.

Speak to your "accountant" and ask if a VAT retail scheme is being used, If it's not go and find a new accountant and recalculate everything all over again.

(Ps - I am a chartered accountant!)

You cannot make such statements based on the very limited information given.

Perhaps you, as a chartered accountant, should know better than to make wild assumptions without asking for further information? :rolleyes:

sandiep

Where as all the previous posts telling the OP to pay the vat and lump it are totally accurate based on full professional knowledge :rolleyes:;)

prowla

In normal operation, you:
(a) pay VAT on items you purchase.
(b) charge VAT on items you sell.

When due (quarterly), you pay the tax man (b) - (a).

gr8stuff

Thanks everyone for your help...It's impossible for me to pay this amount...I'll have to talk to my accountant again or get someone else to help with the accounts...I've checked the accounts again, and it's true that the VAT was calculated from the turnover...I'll have to look into any retail schemes to see if I can reduce this amount or not...

orangeslimes

prowla wrote: »

In normal operation, you:
(a) pay VAT on items you purchase.
(b) charge VAT on items you sell.

When due (quarterly), you pay the tax man (b) - (a).

except that it is more like
a) pay VAT on items you purchase where you are charged VAT and have valid VAT receipt (and if you are running a food shop then many of your supplies are likely to have been zero rated - healthy raw ingrediants generally are)
b) charge VAT on items you sell where applicable and if it is food then a lot of items are zero rated...and it depends on things like whether it is takeaway food/hot or cold/raw ingredients or processed. you can find a list on HMRC website.

prowla

orangeslimes wrote: »

except that it is more like
a) pay VAT on items you purchase where you are charged VAT and have valid VAT receipt (and if you are running a food shop then many of your supplies are likely to have been zero rated - healthy raw ingrediants generally are)
b) charge VAT on items you sell where applicable and if it is food then a lot of items are zero rated...and it depends on things like whether it is takeaway food/hot or cold/raw ingredients or processed. you can find a list on HMRC website.

OK - I over-simplified...