Sales tax

bni

chalkie99 wrote: »

Sorry but those figures are WRONG.

£12.37 sales price (less 3.4% + 20p) = £11.75 less 20% Corporation Tax = £9.40 leaving a profit of only £6.40

Corporation Tax is calculated on net profits, you just applied it to the turnover minus transaction fee. The figures above are correct to figure the marginal effect of corporation tax.

WestonDave

You need proper advice as there are ways you can do what you are trying to do with the shares (different classes etc) but you aren't going to get that over the internet as its too complicated.

Your figures don't work. In your scenario if you buy for £3 and sell for £10 you make £7 profit, so the corporation tax at 20% is £1.40, so you are left with £5.60. However if you load the £1.40 on the top and sell for £11.40, your profit is now £8.40 and your tax is then 20% of that - i.e. £1.68 so you still only get £6.72. You can work it out via a process called iteration where you keep changing the numbers - the easiest way to do this is to use the goal seek function in excel, set up the formulas so that it works out profit after tax based on a given selling price and get it to change the number in the selling price field to produce an after tax profit of £7. The selling price you need is £11.75. That gives a profit before tax of £8.75, tax on that would be £1.75 and net profit of £7.

bni

WestonDave wrote: »

You need proper advice as there are ways you can do what you are trying to do with the shares (different classes etc) but you aren't going to get that over the internet as its too complicated.

Your figures don't work. In your scenario if you buy for £3 and sell for £10 you make £7 profit, so the corporation tax at 20% is £1.40, so you are left with £5.60. However if you load the £1.40 on the top and sell for £11.40, your profit is now £8.40 and your tax is then 20% of that - i.e. £1.68 so you still only get £6.72. You can work it out via a process called iteration where you keep changing the numbers - the easiest way to do this is to use the goal seek function in excel, set up the formulas so that it works out profit after tax based on a given selling price and get it to change the number in the selling price field to produce an after tax profit of £7. The selling price you need is £11.75. That gives a profit before tax of £8.75, tax on that would be £1.75 and net profit of £7.

It is pretty simple to calculate this accurately. If you divide the after tax profit figure by 0.8 (assuming 20% tax rate) you will get the profit before tax.

For example:
7 / 0.80 = 8.75

Dannycelluk

bni wrote: »

It is pretty simple to calculate this accurately. If you divide the after tax profit figure by 0.8 (assuming 20% tax rate) you will get the profit before tax.

For example:
7 / 0.80 = 8.75

Perfect! i knew there was a way of doing this! and i knew it was simple! just couldnt remember it!

so then i do exactly the same for the pay pal

thanks for the help

bni

Dannycelluk wrote: »

Perfect! i knew there was a way of doing this! and i knew it was simple! just couldnt remember it!

so then i do exactly the same for the pay pal

thanks for the help

Yes, you could:

7 / 0.8 = 8.75 + 3 = 11.75

(11.75 + 0.20) / (1-0.034) = 12.37

Dannycelluk

thats great, that gives me the minimum price i can sell an item for, exactly what i was looking for!

So annoying! I knew I could remember doing this at school, back in the day

nathand_2

chalkie99 wrote: »

Sorry but those figures are WRONG.

£12.37 sales price (less 3.4% + 20p) = £11.75 less 20% Corporation Tax = £9.40 leaving a profit of only £6.40

And again the figures are meaningless unless you take into account your other costs of sale such as delivery costs, advertising, etc., etc.

Unfortunately, these are all things you should have investigated BEFORE rushing into setting up a company.

If the goods cost £3 why would you pay tax on the full amount? £11.75 - £3 = £8.75. Then take off 20% to leave £7 profit.

bris

Your business has just failed. If you think you can just buy an item at wholesale and sell for a whooping 300% profit and get the tax out of it too, you are in for a nasty shock.

Not only is it a terrible time to start a business, but the ones who are surviving are cutting their prices just to survive.

Unless you have a truly unique product you can name your own price on, you will have to compete with the rest of the etailers and ebayers out there, get realistic.

nathand_2

chalkie99 wrote:

Sorry but those figures are WRONG.

I see everyone has already backed up the figures I gave. So in response to your comment no they aren't wrong.

Dannycelluk

bris wrote: »

Your business has just failed. If you think you can just buy an item at wholesale and sell for a whooping 300% profit and get the tax out of it too, you are in for a nasty shock.

Not only is it a terrible time to start a business, but the ones who are surviving are cutting their prices just to survive.

Unless you have a truly unique product you can name your own price on, you will have to compete with the rest of the etailers and ebayers out there, get realistic.

Thanks for that,

But yes it is a unique product that not many people have the expertise to sell. Our prices will also be undercutting alot of other shops that sell at alot higher prices.

Also the figures i gave were just for example.

I would rather try and fail, than not to try at all.
Worst comes to the worst we both still have full time jobs.