Voluntary VAT Registration to SAVE money?

FoxyGuyHawoo

InsideInsurance wrote: »

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.

OK thanks!

I probably didn't understand what the supplier had told me. I could barely write things down fast enough whilst he was speaking.

So, let's just say:

VAT-reg Supplier sells me Bike @ £44 inc. VAT.

Non-VAT-reg Me sells Bike for £54.

My profit is £10.


Then one day l become VAT-reg

VAT-reg Supplier sells me Bike @ £44 inc. VAT. I claim back £8.80 from taxman.

VAT-reg Me sells Bike for £54. I pay taxman £10.80.

My profit is - (minus) £0.80.

Is that correct?
And then after that, l must apply income tax if by the end of the year l pull through and get into a taxable income bracket.Is that correct?And on a quarterly basis, if NI contributions are payable, l pay them too.

Is that correct?


And then l'm done? Or is there a matter of working tax credits? A brief statement on that issue would do if applicable.

FoxyGuyHawoo

zygurat789 wrote: »

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

Haha no worries about that. I would take pride in having everything in order. A tight grasp of the accounts will make money my friend.

motorguy

FoxyGuyHawoo wrote: »

OK thanks!

I probably didn't understand what the supplier had told me. I could barely write things down fast enough whilst he was speaking.

So, let's just say:

VAT-reg Supplier sells me Bike @ £44 inc. VAT.

Non-VAT-reg Me sells Bike for £54.

My profit is £10.


Then one day l become VAT-reg

VAT-reg Supplier sells me Bike @ £44 inc. VAT. I claim back £8.80 from taxman.

VAT-reg Me sells Bike for £54. I pay taxman £10.80.

My profit is - (minus) £0.80.

Is that correct?
And then after that, l must apply income tax if by the end of the year l pull through and get into a taxable income bracket.Is that correct?And on a quarterly basis, if NI contributions are payable, l pay them too.

Is that correct?


And then l'm done? Or is there a matter of working tax credits? A brief statement on that issue would do if applicable.

Firstly, its not £8.80.

His price includes VAT, so the easiest way to calculate the VAT is divide by 6, so your VAT would be £7.33.

Secondly, i'm not sure how you can claim back more VAT than was paid on the item? Its a used item so hes obliged to quote a VAT inclusive price, but hes not expressly declaring 20% VAT

FoxyGuyHawoo

motorguy wrote: »

i'm not sure how you can claim back more VAT than was paid on the item?

I would be owing VAT, hence the minus sign, right? Anyway, please see the revised scheme, below.

motorguy wrote: »

Its a used item so hes obliged to quote a VAT inclusive price, but hes not expressly declaring 20% VAT

Not expressly declaring 20% VAT? I don't get that. The item will be inclusive of VAT at the going rate, which is, let's assume, 20%. Is that alright?


REVISED SCHEME:

VAT-reg Supplier sells me Bike @ £44 inc. VAT.

Non-VAT-reg Me sells Bike for £54.

My profit is £10.


Then one day l become VAT-reg

VAT-reg Supplier sells me Bike @ £44 inc. VAT. I claim back £7.33 from taxman.

VAT-reg Me sells Bike for £54. I pay taxman £9.

My profit is - (minus) £1.67.

Is that correct?


And then after that, l must apply income tax if by the end of the year l pull through and get into a taxable income bracket.

Is that correct?



And on a quarterly basis, if NI contributions are payable, l pay them too.

Is that correct?


And then l'm done? Or is there a matter of working tax credits? A brief statement on that issue would do if applicable.

Mistral001

motorguy wrote: »

Its a used item so hes obliged to quote a VAT inclusive price, but hes not expressly declaring 20% VAT

If the seller is VAT registered do they have to pay VAT to the VAT man on used items they sell. The VAT has already been paid by the first owner when it was bought new after all. Since I am not VAT registered (yet) this has been something that has puzzled me to be honest.
The OP is getting caught up in the VAT being charged by the supplier for some reason but it is quite possible that the supplier will not be charging VAT.

FoxyGuyHawoo

Mistral001 wrote: »

If the seller is VAT registered do they have to pay VAT to the VAT man on used items they sell. The VAT has already been paid by the first owner when it was bought new after all. Since I am not VAT registered (yet) this has been something that has puzzled me to be honest.
The OP is getting caught up in the VAT being charged by the supplier for some reason but it is quite possible that the supplier will not be charging VAT.

I was getting caught up because of this thing about VAT already having been paid on a used item. I thought the Margin Scheme was there for such situations, charging VAT only on the refurbishing done to the item, that refurbishing being made known through the profit made by the supplier when selling to me, thus l thought the Margin Scheme would come into play, being VAT on Seller's profit margin.

Now you're saying there needn't be any VAT at all!

A little more info:

The seller is a massive company. They are VAT reg. They might well be donated their gear which they re-sell, but l doubt it's so informal as they are a massive company. They do light refurbishing as l've described in Post #1.

So where do we go from here?

fishybusiness

Personally I think this a bit nuts......

THE PROBLEM:

The supplier made £15 worth of upgrades for each bicycle (mainly a new seat).
He is selling them for £40 each ex. VAT.
I am not VAT registered. The cost to me per bicycle would become £48 inc. VAT therefore (@ 20% VAT).

If l am to pay an extra £8 (£48-£40 = £8 VAT) then my profit per bicycle becomes £2 (£10-£8), and this would make the business untenable.

You need to be buying at a lower price - perhaps half the retail price. All of the calcs and potential of VAT for £10 is just not good business.

Add in the odd cost of a return item, warranty costs, fees (did you add those in to your calcs), your time, and anything else that comes up, blimey, there is not much left.

Your supplier will likely be selling to you at a margin plus his costs, which could be lower than he says. That's the cost price you want, especially if is simply a change of seat required.

Cut out the 'middle middle' man .

FoxyGuyHawoo

fishybusiness wrote: »

Personally I think this a bit nuts......

Please treat all figures as theoretical, as stated in Post #1.

FoxyGuyHawoo wrote: »

As yet, what l'm about to describe is entirely theoretical.

Also you might notice unicorn leather isn't viable anyways:

FoxyGuyHawoo wrote: »

l can coat the handles in leather (quality unicorn leather ofc - l got a good source on the stuff)

Substitute "bicycles" with "spaceships" rated at 20% VAT if it helps.

zygurat789

Then one day l become VAT-reg

VAT-reg Supplier sells me Bike @ £44 inc. VAT. I claim back £7.33 from taxman.

VAT-reg Me sells Bike for £54. I pay taxman £9.

My profit is - (minus) £1.67.

Is that correct?


And then after that, l must apply income tax if by the end of the year l pull through and get into a taxable income bracket.

Is that correct?

NO

Cost £44 less VAT £7.33 = net cost £36.67
Proceeds £54 less VAT £9 = proceeds £45
Profit £8.33

InsideInsurance

zygurat789 wrote: »

NO

Cost £44 less VAT £7.33 = net cost £36.67
Proceeds £54 less VAT £9 = proceeds £45
Profit £8.33

NO

The op says it is £40 + VAT at marginal rate giving gross of £44

So cost is £40 as they can only recover the £4 VAT the supplier charged
Proceeds £54 less VAT £9 = £45
Profit = £5