VAT Inspection turnover limit?

leveller2911

tlh858 wrote: »

Your calculations on that must surely be wrong.


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.

Swings and roundabouts, a vat registered business can claim all the vat back on machinery etc wheras a business not registered can't claim back the vat and this can be £thousands.If a business is labour intensive it would make a difference but I doubt it counts for much when selling on E-bay for 99% of sellers.

Personally I don't agree with paying paying vat full stop.Why should we pay a consumption tax?.We pay a tax on most things,Insurance premium tax,vat,Corporation tax,NI,Stamp duty,Business rates etc etc etc.If they got rid of theses taxes it would show how much of our income is just tax, probably about 70p for every £ earned....All smoke and mirrors

tlh858

berbastrike wrote: »

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

The VAT element of £100 is not £20, it's £16.67

Presumably you are buying from somewhere which is not VAT registered - because if they are, you would effectively be paying £41.67

What are the 'payment fees' - if it's PayPal or credit card charges, then generally they would be exempt from VAT. Even if not, it won't be £2 on a total of £10.

ILW

First thing that jumps out is to use a VAT registered carrier.
There must be other operating expenses that VAT can be claimed back on.
You appear to be offering free delivery - Why?

leveller2911

berbastrike wrote: »

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 (wrong)
Buy at £50
Plus £10 Vat claimed back on purchase ( wrong)
Postage £30 NO VAT
Payment fees £10
Plus £2 claimed back on payment fees (wrong)

Profit £2

Sell @ £83-33 (£100 -£16-66 vat)

Buy at £41-66 (£50-00 - £8-33 vat)

Postage £30-00

Payment fees £8-33 (£1-66)

VAT charged would be £16-66 less £8-33 less £1-66 =£6-67 vat to pay. Dependant on vat rules 20% or 5% or zero rated item.

I'm no expert but your maths looks wrong,I'm sure others more qualified will post soon.

meer53

When we were VAT registered we had an inspection and we didn't turn over anywhere near what the OP is turning over. It was some years ago now but as i was paranoid about getting the VAT calculations right everything was fine.

I found being VAT registered was a help to our business as it forced us to look at the accounts more than once a year and helped come the year end as everything was up to date and documented.

techspec

HMRC are aslo not happy when people deliberately avoided the threashold, although im not sure what they can do.

Eg you trade 10 months and are very near the threashold - so you have 2 months off. My accountant told me this is a big no-no and an offence.

leveller2911

techspec wrote: »

HMRC are aslo not happy when people deliberately avoided the threashold, although im not sure what they can do.

Eg you trade 10 months and are very near the threashold - so you have 2 months off. My accountant told me this is a big no-no and an offence.

As long as no paid work is carried out I don't see there is anything they can do about it.

As an example If my turnover was around £70k for 10 months and I decided to go to Australia for 8 weeks that wouldn't be an offence even though the turnover is judged over a rolling 12 months.

I think the problem arises when someone has 2 companies doing the same work and splitting the turnover between the 2.So for example each company has a turnover of £40k doing the same type of work, big no no but taking 2 months off work an offence? I can't see that one standing up.

JasonLVC

davec1960 wrote: »

This is incorrect, all of your sales are subject to vat not just the amount above the vat threshold.

I think I know what you meant to post, I know you mis understood mine.

The OP is not VAT registered and so my post is advising that his first £77k of sales, he doesn't need to register, after £77k he does.

Once registered for VAT, all of his sales will be subject to VAT, but in the context of the OP's post, they were asking if they'd go to jail and whether they'd get caught if they didn't register for VAT.

So my post is just looking at if the OP gets caught and what would happen in terms of penalties, etc. I was using the OP's turnover figures for the example.

Nowhere did I mention that the first £77k of every year would be VAT free, nor is there any need to mention it as it makes no sense, but I think this is how you may have read my post.

davec1960

leveller2911 wrote: »

I'm not sure your correct.You would be required to register for VAT if your turnover exceeded £77k but the moment your turnover does exceed it you don't go back to all of your previous sales/jobs and ask for the vat, you start charging vat from the point at which your turnover exceeds £77k and turnover is judged on a rolling 12 months of turnover.Once registered your required to charge vat on all sales(except vat excempt items)



But I may be wrong......Its been known on a regular basis..:D

My fault, I explained it badly.
I may have misunderstood the post I replied to but the poster seemed to imply that there was a vat free allowance in the way that there is a personal tax allowance, it was that assumption that I was referring to.
You are correct in that vat is only charged on sales made after vat registration.
There is an awkward point between applying for vat registartion and receiving it where you charge an amount equal to the vat but can't issue a vat invoice/receipt.

martindow

I think UK Ebay and Paypal fees are liable to Luxembourg VAT at 15%. I've no idea how they get away with this fiddle when clearly they are trading in the UK.

If you give them your VAT number it is treated as an EU cross border transaction and no VAT will be charged.