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

SuzieSue

dmg24 wrote: »

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:

Why do you have to make sarcastic comments? I am new to this forum and although you do often give good advice, this is negated by your caustic criticism on other threads especially when people are just trying to help.

pelirocco

How much of the business outgoings were non vatable?,this could explain how you are confused that even tho you made a loss vat is still due ? For instance wages , they can be a substantial cost to the business but they are vat exempt .

I am puzzled as to why you havent made any vat payments during the year?

gr8stuff

validata wrote: »

A £19k VAT bill over 2 years equates to a combined turnover of £108,571.43

The VAT threshold is £67,000 per annum.

Has any VAT been previously paid or claimed?

No VAT has previously been paid/claimed..

gr8stuff

pelirocco wrote: »

How much of the business outgoings were non vatable?,this could explain how you are confused that even tho you made a loss vat is still due ? For instance wages , they can be a substantial cost to the business but they are vat exempt .

I am puzzled as to why you havent made any vat payments during the year?

Well, a lot of the supplies are not VATable and I guess Rent, insurance, business rate which are outgoings but are not VATable...

To answer your last question, I had no idea I had to pay VAT until I got the accountant...:o...very new to business I'm afraid...

orangeslimes

What percentage of your turnover is the VAT?
or even better to tell if it is likely correct -if you have the information what percentage of your turnover is the output VAT i.e. the VAT on sales....
If all your sales are standard rated then this should be about 17.5%
If some of them are for zero rated products it should be less

What sort of food products did you sell?

I think £19000 could be correct but obviously no random person on an internet forum can really tell.

Pumpkinface_2

sandiep wrote: »

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:;)

The previous posts (including mine) were pointing out that VAT is nothing to do with losses as the OP seemed to think there was a connection. No need for sarcasm.

pelirocco

gr8stuff wrote: »

Well, a lot of the supplies are not VATable and I guess Rent, insurance, business rate which are outgoings but are not VATable...

To answer your last question, I had no idea I had to pay VAT until I got the accountant...:o...very new to business I'm afraid...

If you didnt know you had to pay vat , why were you charging it? , you do have a vat number i assume? if you had a vat number you would have been receiving vat returns every quarter , and if they hadnt been returned you would have received assessments , if you dont make a vat return you will have got a surcharge , the amount rising every quarter , in addition you will have been charged interest on unpaid vat , this will add thousands to the amount you owe for VAT . I am sorry but I cannot see how you wouldnt know you had to pay Vat , unless you arent registered ? , in that cae you shouldnt have been charging out vat

To have made a loss of the amount you have said you would have experienced a cashflow problem , Were you not aware the business wasnt profitable before the accountant did your books?

JasonLVC

What kind of stuff do you sell in your foodshop?.

Most raw foodstuffs are zero rated and so creates no VAT liability. If you sell things like Coka and crisps then these will be subject to VAT at 15%.

A retail scheme, previously alluded to here, is where you take a sample of purchases over a given week/fortnight and you analyse how much stock you sell is zero rated and how is standard rated (15%), you then apply that ratio to your turnover on a quarterly basis to calculate your VAT liability.

Can you explain how you have managed nopt to submit a VAT return for over two years without the VATman contacting you?. I assume you've only recently got the accountant in volved so the question is, who registered you for VAT and when.

I'm guessing you've never registered for VAT and you've gone over the threshold at some point in 2008 and the accountants have calculated your liability from that point onwards. You need to confirm to me if this is the case.

This is serious, not submitting a VAT return for two years (or registering for VAT when you passed the threshold) is subject to penalties and interest IN ADDITION to whatever liability you have calculated based on your turnover and with the new penalty regime now including 'ignorance' as a means to justify a higher penalty, you need to be very precise with your facts on this one or it could be DOUBLE the £19k you think you owe.

VAT is nothing to do with profit or loss, only to do with turnover. If you haven't registered for VAT when you should have, it means you didn;t charge VAT to your customers, so instead of them paying the VAT over to you to then pay over to HMRC, you are going to be wholly liable for the VAT you never charged in the first place.

So, to recap, can you confirm the following :-

1. Are you registered for VAT?.
2. if so, who registered you for VAT?
3. What foodstuffs do you sell in your shop?
4. When were you liable to be registered for VAT?
5. Estimated turnover for each year 2007, 2008 and to date (ie, today's date).

and from that we should be able to give you some more guidance.

.

inmypocketnottheirs

I hate making assumptions, but here goes:

To me it sounds like the OP has bought goods and supplies including VAT and this has been included as part of the cost of sales.

I assume that the OP is not VAT registered, and has therefore been unable to reclaim the VAT element of any inputs, and sees in the accounts that VAT has been accounted for in purchases and has actually been paid.

It needs to be explained that if VAT registered, then under the current rate 15% of the turnover would be the output (VAT element of the sales price) then the value of the inputs (purchases) would be deducted and the balance paid over to HMRC.

Whether the business is VAT registered or not will not affect the profitability of the business. However if the VAT man has made more out of the business than the OP, then clearly the business is not viable, and on that basis I am not surpried it won't sell.

I would shut up shop ASAP to mitigate losses, as it would appear that the cost of sales exceeds the profitability of the business.

Sorry to be blunt and make assumptions, but unless I am wide of the mark, I don't see how this can be resolved.

JasonLVC

pelirocco wrote: »

If you didnt know you had to pay vat , why were you charging it? , you do have a vat number i assume? if you had a vat number you would have been receiving vat returns every quarter , and if they hadnt been returned you would have received assessments , if you dont make a vat return you will have got a surcharge , the amount rising every quarter , in addition you will have been charged interest on unpaid vat , this will add thousands to the amount you owe for VAT . I am sorry but I cannot see how you wouldnt know you had to pay Vat , unless you arent registered ? , in that cae you shouldnt have been charging out vat

I suspect the OP has simply not considered VAT at all. I suspect OP has gone over the VAT registration limit without knowing this.

I suspect OP isn't actually charging customers VAT at all, but having gone over the VAT registration threshold, should have been charging it. Having now realised they've gone over the limit, they are now liable for the VAT on those sales but having not charged it to customers previously, means the OP is directly liable for the debt instead.

Reading ebtween the lines, OP has only just engaged an accountant and so it has only just come to light that they should have been VAT registered ages ago.

Once we get a turnover figures for 07/08/09 we can work out what the basic VAT liability is, once we know the date they went over the VAT reg. limit, we can then calculate the exact VAT liability and then we can consider mitigating schemes such as flat rate scheme, retail schemes, etc to get the debt down to as low as possible.

Unfortunatley for the OP, HMRC no longer accept that a person running a business can claim 'ignorance' of VAT and they'll go in at 50% penalty of the debt owed and then OP will have to show where he had took reasonable care to ensure VAT was complied with to mitigate that penalty....something that is going to be impossible to do when the OP states clearly they've never thought about VAT.