vat on computers

dada44

hi there, i am new to the world of tax.

i am currently not employed. i was thinking of buying a new computer. however the vat is very high.

i was thinking of ways i could avoid this (legitimately), and since i was thinking of helping ppl repair their computers, i thought maybe i could register a company for that purpose, and claim back vat in that way? the computer repair is not likely to bring in a lot of money, and is something i wanted to start more as a hobby.

also, the computer i buy is likely to be as much for personal and educational use, as well as for helping ppl to repair their computers.

so, sorry for such a simple question, but this is really all new to me. is my line of thinking legitimate ?

00ec25

the following is somewhat (over)simplified

If you register for VAT then yes you can claim it back on your purchases BUT you must also pass on VAT on your sales. For a start up operation this means your prices just increased by 20% so will you have any customers will to pay ?

you are required to compulsorily register for VAT when your total sales in a rolling 12 month period is more than £79,000
you can voluntarily register for VAT below that level BUT by your own admission you activity will fail one of HMRC's tests which is to assess whether the business is a genuine trade and is undertaken for the purposes of making a profit or is it in fact a hobby

so if you set up a company which does diddly squat in terms of sales but you register it for VAT and then consistently claim VAT back, rather than pay VAT over to HMRC, they will challenge you and likely close you down

obviously every business had to start somewhere but mostly this will be as a self employed sole trader who is not registered for VAT and does not run a company. When your customer base has built up then you can think about incorporation and also look again at the impact VAT will have on your sales prices. during this evolutionary period it is possible that you may register for VAT and make net reclaims for a period but carry that on for too long a time and HMRC will come sniffing

dada44

thankyou very very much. i am surprised as to why such things are not taught at schools.

may i ask - would vat also apply to services provided? ie - if the business repaired computers (rather than sold them) ?

00ec25

dada44 wrote: »

may i ask - would vat also apply to services provided? ie - if the business repaired computers (rather than sold them) ?

yes - VAT is chargeable (by a VAT registered business only) on the supply of goods and services so whether it buys and sells new or secondhand computers to customers or fixes broken ones and returns them to its customers then either is VATable
time for you to do some research of your own http://www.hmrc.gov.uk/vat/start/introduction.htm

becoming VAT registered is a big step as the implications are huge for your business

do not even think about charging VAT if you are not formally registered, you may well end up inside if you do