Voluntary VAT Registration to SAVE money?

InsideInsurance

FoxyGuyHawoo wrote: »

Thing is - hardly anybody advises to get VAT registered from the get-go, yet by my logic, everyone should get VAT-registered from the outset. So therefore l must be missing something in my reasoning.

Its more complex than that.

As has been shown, by becoming VAT registered you reduce your profit from £2 to £1.67 as reclaiming 20% on X is always going to be less than paying 20% on X + Profit margin

On the flat rate scheme you cannot claim back expenses VAT but pay a flat VAT on your sales prices, retail is 7.5% and so you buy the bike for £48 inc VAT, sell for £50 but £3.75 has to go to the tax man so you make a loss of £1.75

The Marginal Rate of VAT you cannot use as it excludes items you were charged VAT on acquisition for so as your vendor is charging you VAT you dont qualify.

Now, if you were selling B2B where your customers are VAT registered then if you sell for £50 with no VAT to be added of £50+VAT there is minimal difference other than a little cashflow and so then the recommendation is to register straight away.

FoxyGuyHawoo

zygurat789 wrote: »

If you are going to sell to VAT registered customers you should register ASAP, your VAT registered status will make no difference to them as they will claim the extra 20% VAT you have charged them back from HMRC.
If you sell to none VAT registered customers ie the general public, you should register as late as possible, they will have to pay your VAT and will not be able to claim it back; therefore your price will be higher and you will sell less than a non-VAT registered trader.

Hi,

As stated in post #1, l will be selling to the general public. Occasionally there will be VAT registered customers i.e. b2b transactions of course.

Also, as stated in post #1, the final price will always be £X, whether l'm VAT registered or not.

So, given that the end price will always be £X, how do l stand? My supplier makes £20 profit inasmuch as he ads £4 VAT. I make £10 profit and so l include £2 VAT. Therefore, under the Margin Scheme, l will always get refunded £2 VAT per sale, right? So therefore it's more profitable to be VAT registered from the outset, right?


Oh by the way, what about the add-ons to the final product, i.e. Courier charge, packaging cost? I understand l will have to pay the full price, but l can claim back the VAT at the end of the quarter, right? My sale item will be inclusive of P&P and any other add-on bells and whistles,

so l will have already passed on any VAT charges to the customer. Right?

So l'm due a refund on the P&P too, and any other add-on bells and whistles to the finished sale item, right?



Also, in the final analysis (and this might actually end up clarifying the foregoing):

What happens when l finally account for VAT in my quarterly return? Must l pay the HMRC all the VAT l charged to my customers?

Do l simultaneously get a refund for all the VAT charged to me?

And what of the VAT l charged to VAT registered customers? Is that a separate claim that those customers themselves must make, to get refunded?

FoxyGuyHawoo

martindow wrote: »

If you are registered for VAT you charge VAT on your sales but that it set off by the VAT on your expenses. Your supplier in effect pays VAT on his profit.

For you though that is unimportant as he will be charging 20% VAT on his sales. How profitable he is doesn't come into it.

How doesn't his profit come into it? He is charging me £44 inc. VAT. His profit margin was £20, that gives £4 VAT. His supply price is £40 ex. VAT / £44 inc. VAT. That £4 is the VAT on his profit margin. Right?

martindow wrote: »

Selling to the public as opposed to VAT registered companies it is usually advised to hold off registering until you reach the threshold of around £80k and are forced to get involved with VAT.

I can't legally turn away any customer can l? And how do l know they are VAT registered when the selling is all impersonal online?

POPPYOSCAR

FoxyGuyHawoo wrote: »

Hi,

As stated in post #1, l will be selling to the general public. Occasionally there will be VAT registered customers i.e. b2b transactions of course.

Also, as stated in post #1, the final price will always be £X, whether l'm VAT registered or not.

So, given that the end price will always be £X, how do l stand? My supplier makes £20 profit inasmuch as he ads £4 VAT. I make £10 profit and so l include £2 VAT. Therefore, under the Margin Scheme, l will always get refunded £2 VAT per sale, right? So therefore it's more profitable to be VAT registered from the outset, right?


Oh by the way, what about the add-ons to the final product, i.e. Courier charge, packaging cost? I understand l will have to pay the full price, but l can claim back the VAT at the end of the quarter, right? My sale item will be inclusive of P&P and any other add-on bells and whistles,

so l will have already passed on any VAT charges to the customer. Right?

So l'm due a refund on the P&P too, and any other add-on bells and whistles to the finished sale item, right?



Also, in the final analysis (and this might actually end up clarifying the foregoing):

What happens when l finally account for VAT in my quarterly return? Must l pay the HMRC all the VAT l charged to my customers?

Do l simultaneously get a refund for all the VAT charged to me?

And what of the VAT l charged to VAT registered customers? Is that a separate claim that those customers themselves must make, to get refunded?

When you submit your return you have a figure for vat paid by your customers and figure for vat paid by you.What you have paid is deducted from what you have charged.


You then pay the balance, if you are claiming more than you have been paid by your customers you will get a refund.

InsideInsurance

FoxyGuyHawoo wrote: »

Therefore, under the Margin Scheme, l will always get refunded £2 VAT per sale, right? So therefore it's more profitable to be VAT registered from the outset, right?

But you cannot use the marginal scheme https://www.gov.uk/vat-margin-schemes/overview as your supplier charges you VAT

FoxyGuyHawoo wrote: »

I can't legally turn away any customer can l? And how do l know they are VAT registered when the selling is all impersonal online?

Yes you can, as long as it isnt for a protected characteristic (age, sex, race etc) then you can pick and chose who your customers are

FoxyGuyHawoo

InsideInsurance wrote: »

by becoming VAT registered you reduce your profit from £2 to £1.67 as reclaiming 20% on X is always going to be less than paying 20% on X + Profit margin

Mega headscratch.

Me Non-VAT reg: Buy for £48 (assuming it's not Margin Scheme), Sell for £50.
Me VAT-reg (assuming it's not Margin Scheme, it's some other scheme, VAT charged on £40 in its entirety): Buy for £48, claim £8 back from taxman. Sell for £50, pay £10 back to taxman (???).
Me VAT-reg (Margin Scheme): Buy for £44 (seller adds VAT due only on his £20 profit, i.e. £4 - and theoreticals aside that is actually the real end price and profit he has quoted me), claim back £4 from taxman. Sell for £50, pay £2 back (20% of my £10 profit) to taxman. I make £2 from the VAT exchange, plus my £10 profit, right?

InsideInsurance wrote: »

On the flat rate scheme you cannot claim back expenses VAT but pay a flat VAT on your sales prices, retail is 7.5% and so you buy the bike for £48 inc VAT, sell for £50 but £3.75 has to go to the tax man so you make a loss of £1.75

Who would want to / be forced to go on the Flat Rate scheme? I'm imagining some mining company that got the raw materials from the earth or something?

InsideInsurance wrote: »

The Marginal Rate of VAT you cannot use as it excludes items you were charged VAT on acquisition for so as your vendor is charging you VAT you dont qualify.

I don't get this at all, sorry. I am charged VAT on everything right? Except insurance and postage stamps and a few other things. If l am VAT-registered, that's okay, that VAT surcharge isn't really a surcharge, l claim it back from the taxman, right? So l'm not really charged VAT therefore, right?

InsideInsurance wrote: »

Now, if you were selling B2B where your customers are VAT registered then if you sell for £50 with no VAT to be added of £50+VAT there is minimal difference other than a little cashflow and so then the recommendation is to register straight away.

In this case, if it's not Margin Scheme (as l understand things):
I buy £48, l reclaim £8
I sell £50 INC. VAT, l pay back £10.

The end price is always £X, let's just call £X "£50".
Am l even legally allowed to make the end price always £50 whether l'm VAT reg or not, and whether the customer is VAT reg or not?

FoxyGuyHawoo

POPPYOSCAR wrote: »

When you submit your return you have a figure for vat paid by your customers and figure for vat paid by you.What you have paid is deducted from what you have charged.


You then pay the balance, if you are claiming more than you have been paid by your customers you will get a refund.

OK thanks.

FoxyGuyHawoo

Don't worry guys, this discussion is coming to a close soon, l don't think l have any more personal misunderstandings to put out there. Just hoping for closure on whatever objections l've already put out.

InsideInsurance

FoxyGuyHawoo wrote: »

I don't get this at all, sorry. I am charged VAT on everything right? Except insurance and postage stamps and a few other things. If l am VAT-registered, that's okay, that VAT surcharge isn't really a surcharge, l claim it back from the taxman, right? So l'm not really charged VAT therefore, right?

No, you are only charged VAT when buying from a VAT registered business.

If you buy from a private individual selling their personal effects then there is no VAT at all. Similarly if you buy from a small company who's chosen not to voluntarily register/ doesnt have the turnover for compulsory registration etc.

The reason marginal is for secondhand items as its aimed at people who do house clearances etc and so are buying from private individuals and thus arent paying VAT on their supplies.

You are charged VAT, the fact you can claim it back is a different matter and irrelevant to the marginal scheme.

zygurat789

POPPYOSCAR wrote: »

You then pay the balance, if you are claiming more than you have been paid by your customers you will get a refund.

And a visit from HMRC inspectors to find out what you are doing wrong.