VAT on Invoice and Paypal

jasmin10

I'll get the daft question out of the way.

I am a sole trader (well as of this week), when I send out invoices I don't need to add VAT do I, I'm not VAT register. I seem to think that I don't.

The other question is. If my clients want to pay me through paypal do paypal charge me it?

Opening up a business account tomorrow - would clients be able to pay me through BACS.

fguk

If you are NOT VAT registered. Do not put VAT on your invoices.

I dont know what Paypal will do about charges, but they will be VAT registered, and if the product they sell you is VATable, then it will be charged, even if you are not VAT registered.

If your clients have a BACS system, or a BACS agency, then yes they can pay you that way. They will also be able to pay via a standard bank transfer (same as you would from a personal account), and of course cheque and cash. Depending on the account you have, and who it is with, make sure you get free banking.

martindow

If you are VAT registered ebay charge UK VAT which can be reclaimed in the normal way but paypal charge Luxembourg VAT (15 per cent) so you need to give them your UK VAT number and they will then remove the VAT element.

jasmin10

No, I'm not VAT registered as I wouldn't earn enough at the moment but hey you never know. At least I know about that bit know.

The reason I questionned Paypal is that I have seen people on ebay saying that they take paypal but would charge an extra 50p for using it. If this is the case then I would do this.

The other this is actually I have also been out today looking at Business accounts. I didn't realise that banks charge you for basically everything. All I want is a straight forward current account like my personal one but with say trading as on it. I want to be able to take money out and pay money in that's it. Any ideas.

martindow

Re bank accounts, it is worth searching for threads on this. Abbey often comes up as a good free account - I've used this for several years and have had no problems.

saraharrow

We also use the Abbey and they are quite good.

Good luck with your business

Sarah

robram2

I am VAT registered, and Accept payments using paypal.

Now, Paypal do not charge VAT on their fees (therefore VAT Exempt) but I DO charge VAT on my sales.

Now, Let's say I Invoice someone £1000 + VAT, and they pay me £1175 through Paypal.

Paypal then charge me £40.15 (NO VAT) so I only recieve £1134.85.

BUT ... Do I have to pay inland revenue the FULL VAT amount of £175.00 ? Or do I pay them the vat element of £1134.85 (£169.02)

Up until now, I have simply been paying the FULL amount, and saying that paypal fees are an additional expense, rather than a deduction of the money received. but Just had a LARGE amount of money through paypal, so don't want to lose out on a fair amount just becuase my workings could be wrong.

TIA.

timnicebutdim_2

QUOTE=robram2;33671269]I am VAT registered, and Accept payments using paypal.

Now, Paypal do not charge VAT on their fees (therefore VAT Exempt) but I DO charge VAT on my sales.

Now, Let's say I Invoice someone £1000 + VAT, and they pay me £1175 through Paypal.

Paypal then charge me £40.15 (NO VAT) so I only recieve £1134.85.

BUT ... Do I have to pay inland revenue the FULL VAT amount of £175.00 ? Or do I pay them the vat element of £1134.85 (£169.02)

Up until now, I have simply been paying the FULL amount, and saying that paypal fees are an additional expense, rather than a deduction of the money received. but Just had a LARGE amount of money through paypal, so don't want to lose out on a fair amount just becuase my workings could be wrong.

TIA.[/QUOTE]


I'd say that any VAT charged to consumers, is being collected on behalf of HMRC so if you're charging £175 then this has to be passed on. If Paypal decide to take a transaction cut (fee) of this amount then it's just like a bank charge or a credit card processing fee which directly relates to the sale (cost of sale). You could always offset some of this cost by charging the customer if they use certain methods of payment, e.g 3% extra if paid via paypal etc.. though it might put them off!

Premier_2

Yes, the amount of vat you declare on your invoices is the amount of output vat you declare to HMRC. (assuming you are on the traditional method of paying vat)

Regarding surcharging for different forms of payment, as long as you make clear up front I believe you can set whatever terms you like. But as a customer, I hate it (and so do others seeing the number of complaints RyanAir seem to get for doing similar ... and presumably partially why ebay does not allow surcharging for accepting paypal) so think carefully before adding surcharges.
Better to price at a common rate that will cover your costs.