VAT on income tax forms?

altern8_2

Hi all. I asked a similar question on here a few weeks back but been ill and didn't really get my head around the replies:(

I'm a self-employed courier and was advised to get VAT registered. Although replies to my earlier post said that they were separate issues, I don't understand how VAT and income tax work independently. To put it simply - If I'm paid £200 per month in VAT does that go on my VAT return as well as my income tax return? Thus appearing to be earning £2400/yr extra income.

In my head it seems I'm paying tax on fuel, parts etc, increased income tax bill (because of the £200 p/m rise) Then also having to give the difference between incoming and outgoing tax to HMRC on my quarterly VAT return.

Anyone please advise - simply! I fail to see how it benefits anyone but the tax man....surprise.

ncthomas1

Tax and vat are totally separate issues and there is nothing really to "Understand" about it, however I will indulge you for clarity:

INCOME tax, is tax you pay on your INCOME (Clue is in the title)

VAT , is money that you collect, on behalf of HMRC, and is never yours, so is not your INCOME so does not come into it.

Your INCOME tax return, contains figures of your INCOME, not someone else's like the VAT office's Vat. All figures on your INCOME tax return should be NETT of vat (BEFORE vat)

Does that make more sense like that?

altern8_2

Thank you (I'll ignore the condescending manner of reply!)

Simple answer is all I'd been trying to find and this is that!

I have no idea (like alot of people I suspect) how tax works. My accountant fills in my forms. As far as I'm concerned if I get £300 for a courier run then that is my 'INCOME' - same as shopping, it has VAT on it but it's still the 'BILL'

I've not dealt with VAT so assumed my INCOME is everything I have INCOMING! Hence the question.

jimmo

I didn't follow that either. Mind you, I don't know a lot about VAT.
However, from an Income Tax point of view if you are VAT registered you should prepare your accounts totally without VAT.
Then if you charge your client £100 plus VAT you will charge your client £120.
Your income for Income Tax purposes is £100 and the £20 goes in your VAT account.
Similarly if you pay someone else who is also VAT registered £50 for something as a business expense that is £40 income expense and £10 VAT.
If you are not VAT registered then when you charge your client £100 you get £100 business income.
However when you pay someone else they will still charge VAT and your outgoings will still be £50. This time, because you are not VAT registered, the full £50 is a business expense in your Income Tax accounts.
These are the HMRC instructions on this.
http://www.hmrc.gov.uk/manuals/bimmanual/BIM31525.htm
http://www.hmrc.gov.uk/manuals/bimmanual/bim31535.htm

ncthomas1

"condescending manner of the reply"??? I beg your pardon?

I did my utmost to write that in very simple terms, highlighting the relevant words so that you could see whta I meant, as it is difficult to understand, and even more difficult, to try to explain, down an email

My intention was to HELP, otherwise I wouldnt have been on here answering your question now would I?

People seem to think they can "Hear" a tone of voice in an email which they can't so they shouldnt assume someone means something in "a certain manner/ way" when all that person was trying to do was help, and answer in simple terms, which is what was asked of me.

I won't bother in future then