Voluntary VAT Registration to SAVE money?

POPPYOSCAR

zygurat789 wrote: »

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

Not at all.


We quite often get a refund and have never had a problem.


Been in business for over 25 years.

zygurat789

FoxyGuyHawoo wrote: »

Hi zygurat, but then what about Mistral's post #26?

The invoice you receive for the goods you purchase will show the VAT separately. This will either be 20% of the value of the goods you have bought or nothing. So either you will have something to claim against the VAT you owe HMRC or you wont. Which one it will be is only answerable by your supplier.

Mistral001

Pennywise wrote: »

If your supplier is using the second hand margin scheme and therefore charges less than the full 20% VAT, he can't issue you with a VAT invoice and you can't reclaim any VAT they charge you. It's one of the conditions of the scheme. So, you'll have nothing at all to reclaim on your purchases unless they charge VAT at the full rate, in which case, they can issue a VAT invoice and you can reclaim it.

This is the answer the OP was seeking I think.


One other general point. The way VAT is supposed to work is that the end consumer is the person who ultimately pays for the VAT. The businesses whether they be manufacturers or retail in the supply chain pay VAT between themselves but they can reclaim it. The ultimate consumer of the goods cannot reclaim it and thus is ultimately the one who pays the VAT.


If people were charging VAT at 20% on a second hand item that would mean HMRC would be getting VAT revenue twice, once when the item was sold as new and again when the item was sold as second hand. I do not think the tax system is set up to work that way.

InsideInsurance

zygurat789 wrote: »

The invoice you receive for the goods you purchase will show the VAT separately. This will either be 20% of the value of the goods you have bought or nothing. So either you will have something to claim against the VAT you owe HMRC or you wont. Which one it will be is only answerable by your supplier.

As above, its not always 20%. Marginal rate is 16.67% and only charged on the difference between purchase price and sale price.

zygurat789

InsideInsurance wrote: »

As above, its not always 20%. Marginal rate is 16.67% and only charged on the difference between purchase price and sale price.

I feel you would benefit by reading post #41.
When you have done that follow it up with all VAT legislation to date then, perhaps, you will know.

System

Being VAT registered will 99 times out of 100 make your profit margin smaller.

In simple terms, using total (including VAT amounts)

Buy for £60

Sell for £120

Not being VAT registered, profit = £60
Being VAT registered, profit = £50. As you claim £10 on the purchase, but must hand over £20 on the sale to the tax man.


But then you can also claim back VAT on your postage and other costs for example, but still, your profit it definitely going to be less than if you were not VAT registered.

I was reaching the VAT threshold around 2-3 years ago and someone on here gave me good advice. I was not sure whether to limit my business or registered for VAT and carry on. The poster on here said would you rather be non VAT registered with a turnover of £80k. Or Vat registered with a turnover of £1 million. I now have a turnover of £2 million so very pleased I got VAT registered and expanded the business and not restricted myself to £80k of sales, even though my profit margin would have been higher because no VAT to account for

FoxyGuyHawoo

I'm beginning to think the Margin Scheme might well come into play in the case of secondhand goods, if the supplier applies it, or if I apply it when I sell the item on.

One thing I've learnt is that the Margin Scheme can only be applied once, or rather, it can't be applied in 2 consecutive links of the chain of transactions through which the item passes, i.e. if supplier applies it, I cannot apply it when I sell the item on, and if the supplier doesn't apply it, I can apply it when I sell the item on.

The headache continues, I suspect lots more can be said. The HMRC handbook on the matter could do with a tonne of worked examples.

Still not sure if Margin Scheme can be applied, ever since Post #20.

zygurat789

FoxyGuyHawoo wrote: »

I'm beginning to think the Margin Scheme might well come into play in the case of secondhand goods, if the supplier applies it, or if I apply it when I sell the item on.

One thing I've learnt is that the Margin Scheme can only be applied once, or rather, it can't be applied in 2 consecutive links of the chain of transactions through which the item passes, i.e. if supplier applies it, I cannot apply it when I sell the item on, and if the supplier doesn't apply it, I can apply it when I sell the item on.

The headache continues, I suspect lots more can be said. The HMRC handbook on the matter could do with a tonne of worked examples.

Still not sure if Margin Scheme can be applied, ever since Post #20.

Individual VAT traders are separate, I think you will find that what one trader does internally has no effect upon the trader he sells to other than what is written on the invoice.
If the first trader operates a margin scheme his invoice has no vat if he doesn't the invoice has 20% vat added.
In both cases the second trader is buying from a VAT registered trader so there is no possibility of using the margin scheme.

Mistral001

OP. Despite this being a big company that you are dealing with, they should not worry whether they are dealing with someone who is VAT registered on not VAT registered or a small startup like yourself or a large established firm. All they will worry about is whether you can pay.


You are second guessing what the supplier will say if you tell them that you need to know whether on not they will be charging VAT. What will they think of me? They are a business who want to sell these bikes and if a prospective buyer wants to know a simple thing like whether they charge VAT then they will be foolish not to tell them. Tell them that you are not VAT registered and that if they charged VAt that they deal would not be profitable for you. Get it in writing and make sure that it comes from someone senior as well.
Another thing you could do is get an accountant. People generally listen when you say "my accountants advises me that.....".

martindow

FoxyGuyHawoo wrote: »

Yes you're right. I'm a bit nervous about bugging the supplier. I'm very nervous about coming across as nervous over the phone too. And so on. Email contact has not been established (Supplier is a big company though, nothing odd there).

But whether or not it's £44 inc. VAT or not, it is indeed £40 ex VAT.

So what l really need to establish now is, as per Post #26, do l really need to pay VAT all over again?

I'm pretty sure l could settle this by phoning the Supplier again, but it would be nice to get your opinion too, and maybe this might help other people that are curious about self-employment. And of course there's the whole thing about me being a bag of nerves. I need to keep a poker face and so l'm trying to avoid unduly annoying the Supplier.

Bear in mind also that l'm going to speak to an accountant if l decide to get serious about this business opportunity. Still, l'd like some preliminary thoughts from you chaps.

It would be perfectly normal to contact the supplier by email and ask them to confirm the price and VAT they quoted over the phone.

I know your figures are just to demonstrate calculations but buying at 40 and selling at 50 is unlikely to form the basis for a profitable business.

You either need to be selling for around 80, or if the competition makes 50 the maximum selling price buying for around 25. You need decent margins to make it viable.

At each link in the supply chain a profit is being taken. You want to be buying as far back as you can find and preferably from the manufacturer negotiating as hard as you can.