Almightily confused about vat + ebay, please please help

joshclem

Hi there,

I am starting up a business on ebay, although i dont expect my first year profit to be high, i do expect my turnover to be high as i have a low profit margin.

What i really do not understand is how VAT applies to me selling an item.

If i bought a phone for £140 and want to sell for £200, so that after relevant fees from ebay and paypal I would make a £48 profit.

However, does VAT have to be payed on the sale of this item... so if i sold the item i would have to pay 17.5% of £200 which is £35 which means my profit would only be £13? I dont even know how i would send the £35 to hmrc? or would this be done automatically?

I really am getting so confused and i would be forever greatful if someone could please simply explain the process of VAT when selling items on ebay.

kind regards and sorry if this is a stupid question, mind is getting boggled today oh and also if i pay VAT do i then pay tax on my profits aswell!?! i really dont know...

gavjbrown

I dont know much about vat either but think that you have to turn over >£73,000 in the year before you need to be vat registered. Are you likely to turn over more than 73k?.

marie-20

Agree - you have to be taking in £73k before you pay VAT (not profit)

Plumbers_Shop_Lee

Couple ofthings first of all VAT is charged at 20% not 17.5% and you cant charge VAT unless you are registered. When you say you expect your turnover to be quite high what figures do you have in mind as the VAT threshold is currently £73,000. If you are below this loevel you may not have to register

joshclem

I must not be explaining myself very well sorry guys been working hard.

If i bought a phone for £140 and i sold for £200... as a business seller i would pay 3% to ebay ( technology product discount ) and 3% to paypal ( roughly ) meaning £12 in fees, meaning i would get £188 - making a £48 profit.

However i do not understand where VAT comes into this? I can understand paying 20% tax on my profits of £48. But i read somewhere you have to put VAT onto the item your selling aswell?

Lee, i may well come under the threshold your right, but im working on the premise that if i do... i need to know what to do...

kind regards

joshclem

this is the kind of vat im talking about

"You must include all sales- international or not. However, no vat is due on international sales if you can prove the export. If you sell to companies in the eu, you can zero rate the sale if they give you their vat number. However, you must charge vat to private customers and. Non vat registered companies in the eu."

Most of my sales will go to private customers, so how do i charge them vat and how does it work in my above example?

plz plz help

amcluesent

>But i read somewhere you have to put VAT onto the item your selling aswell?<

Only if you're VAT registered, either because you choose to be or you taxable turnover exceeds the threshold. However, while you're not VAT registered, you cannot claim back VAT on the goods you buy - the vatman get's his take at that point.

joshclem

see below

Plumbers_Shop_Lee

Josh
the link below should answer any questions you have. Unless you have a realistic chance of reaching a turnover of 73,000 within your financial year you aren't required to register for vat and even if you think you will reach it towards the end of your trading year you can apply for exemption in certain circumstances. When you do reach it you will have to pay 20% of your final selling price on all sales in vat but if you are purchasing from VAT registered suppliers you can then claim back the VAT you paid on the purchase price

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#1

hth

joshclem

Hi lee

So basically, i need to be working on a profit margin of at least 30%? because if im working on a profit margin of 20% i will pay all of that in VAT ( unless under the threshold? )

thanks

amcluesent

If you're looking at wholesaler prices quoted exclusive of VAT, then you'll need to add 20% to get the price they'll charge you while you're not VAT registered. If you can sell for more than that price, after deducting P&P and Ebay\Paypal fees etc, then you have the makings of a viable business.