Voluntary VAT Registration to SAVE money?

fishybusiness

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.

Couldn't agree more, it is the purchase price that is the deal breaker, not the VAT.

motorguy

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.

The VAT rate in that case is still 20%. It represents 16.7% of the profit made however.

If i buy a second hand item at £60 and sell it to a customer for £120, then i have made £60 profit.

VAT is assumed to be included in that, so in effect you've made £50+ 20% VAT, which is the £60.

As a percentage it works out at 16.67% but only because the VAT element represents a sixth of the profit, being 1 part VAT to 5 parts profit (20%)

motorguy

I dont think you can claim back the VAT anyway if the item was sold to you under a VAT margin scheme -

https://www.gov.uk/reclaim-vat/what-you-can-and-cant-reclaim

What you can’t reclaim

You can’t reclaim VAT for:

goods sold to you under one of the VAT second-hand margin schemes

Which makes sense when you think about it. The seller, even though VAT registered might not have made any money on the item, so how can a subsequent VAT registered buyer take back 20% VAT that was paid in the first place?

motorguy

FoxyGuyHawoo wrote: »

He is selling them for £40 each ex. VAT.

Is he selling them at £40+VAT, ie is that what he is invoicing with VAT separate, or is he charging a VAT inclusive £48?

motorguy

Oops - you've already answered

FoxyGuyHawoo wrote: »

Well, the supplier quoted me his price, plus VAT on the profit. He let slip his profit, and as far as l can see, he seems to be basing this on the Margin Scheme which l learnt about a few hours after hearing his price quote with & without VAT (this part is actually based on reality but it's only to answer your previous question). What l mean is:

his quote inc. VAT

As hes applying a VAT margin scheme on second hand goods, then you, as per my above link, cant reclaim the VAT element that he paid.

motorguy

fishybusiness wrote: »

Couldn't agree more, it is the purchase price that is the deal breaker, not the VAT.

+1

I wouldnt be bothered if those were the actual figures. A lot of hassle for little - if any - return, particularly once you've factored in advertising, any further repairs, etc.

FoxyGuyHawoo

Hi,

I've spoken to the company, and now confirmed that the Margin Scheme doesn't come into it. I guess that simplifies things.

At least we publicised the Margin Scheme in this discussion, and the need for an Accountant (= a court wizard).

Regarding the mock figures that l quoted, they were just for illustration, but yeah, £10 profit is fine by me. As you know, some people make their profit from a courier deal and / or cheap packaging materials. £10 profit for something with mass-appeal and which takes 30 mins to process, is fine by me! Probably can't get a house and raise a family off such margins, mind.

But l digress.

Edit: Thanks for all your input, ppl. I really appreciate it. I'll come back if l have more questions.