VAT Inspection turnover limit?

System

thanks a lot everyone, what I will say is that becoming VAT registered is tearing my business into pieces.

My main product used to make £1.20 profit but becoming VAT registered the profit is now 22p and I can't raise the price because there are other non VAT registered sellers of it.

Surely Mr Cameron should consider raising the VAT limit to boost the economy, I may as well just stop trading and pop into the job centre for jobseekers allowance.

bni

berbastrike wrote: »

thanks a lot everyone, what I will say is that becoming VAT registered is tearing my business into pieces.

My main product used to make £1.20 profit but becoming VAT registered the profit is now 22p and I can't raise the price because there are other non VAT registered sellers of it.

Surely Mr Cameron should consider raising the VAT limit to boost the economy, I may as well just stop trading and pop into the job centre for jobseekers allowance.

Is there no VAT for you to reclaim on the stock or services for your main product? Or on any of your general overheads? VAT registration would reduce your profit margin slightly if you keep the sale price the same, but in normal cases not by almost 82%.

I don't think the VAT threshold should be raised, it would only change the timing of the same issue to a later point in your growth. The sensible thing to do to even the playing field is to reduce the VAT rate and require all businesses to be registered for VAT in the same way as many other European countries. Various concessions could be brought in for the smallest companies, like a yearly VAT return and less punitive penalties.

ILW

phill99 wrote: »

Not true. The reason the small operators get investigated is a) its easy to, b) we don't have the resources to employ professionals to hide our income, but more importantly, c) Vodafone, Boots, Amazon, Starbucks etc etc don't pay tax in the UK, so it's all of us self employed folk who have to pick up the tab.

They do tend to pay VAT. It's CT they avoid.

ILW

berbastrike wrote: »

thanks a lot everyone, what I will say is that becoming VAT registered is tearing my business into pieces.

My main product used to make £1.20 profit but becoming VAT registered the profit is now 22p and I can't raise the price because there are other non VAT registered sellers of it.

Surely Mr Cameron should consider raising the VAT limit to boost the economy, I may as well just stop trading and pop into the job centre for jobseekers allowance.

Are you sure you are claiming on purchases?

antonic

Businesses that are selected for VAT inspections are chosen (I think ) for the following reasons :

1) Risk Assessment - how many points does it score
2) What type of business
3) Is their a blitz on this type of business (as have been done previously on the catering trade)
4) How long since previous visit (if any)
5) Has the business made errors on previous VAT returns or not filed them on time (or at all)
6) Is it a cross-tax referral, ie other HMRC records (SA/CT/PAYE) show their is a problem.

Hope this helps.

ILW

They also do a number of totally random inspections.

martindow

I'm trying to do the maths. If your profit has fallen from 120p to 22p is that because the VAT element of your sale price is 98p?

I make this selling at 588p (now 490 + VAT). This means that you are buying at 468p (to give you 120p profit). But assuming that this is from a VAT registered wholesaler, 468p is 390p + VAT of 78p.

To me that suggests that your profit has dropped from 120p to 100p and you also can set off the VAT element of other expenses involved in your business so the drop is even smaller than this. The other thing that strikes me is that your mark up is quite small - or perhaps my maths is wrong!

paddyrg

VAT is a 2-way deal, you charge it but you get to reclaim it too. Cutting your margin from 120p to 28p is quite extreme - do you pay no VAT on your supplies? How come you have to charge VAT if the supplies are not VATted? Where does the £125k figure come from BTW, if that's your turnover you should have registered a long time back!

tlh858

berbastrike wrote: »

My main product used to make £1.20 profit but becoming VAT registered the profit is now 22p

Your calculations on that must surely be wrong.

berbastrike wrote: »

Surely Mr Cameron should consider raising the VAT limit to boost the economy

No, the VAT threshold should be drastically cut, probably to about £10k.
This will mean vast numbers of so called businesses would have to register, and then actually keep proper records and pay the taxes that they should.

The current situation is a farce.
Two examples:
Tradespersons such as builders can do over £1000 per week, not pay any VAT, and virtually all of that money can be labour as they most likely get their customers to buy any materials.
Others can sell vast amounts of gear on ebay and suchlike, and not have to account for VAT on postage, which instantly gives them a huge benefit compared to those who are VAT registered.

System

This is basically what is happening

Without VAT:
Sell at £100
Buy at £50
Postage £30
Payment fees £10
Profit £10



With VAT
Sell at £100
Less £20 Vat paid on sale
Buy at £50
Plus £10 Vat claimed back on purchase
Postage £30 NO VAT
Payment fees £10
Plus £2 claimed back on payment fees

Profit £2