Sport supplements flat rate scheme VAT

dudens

Hi,
I have online shop with sport supplements, drinks, tablets etc.
I've just registered for VAT flat rate scheme.
The question is: How much % of VAT shoul I add to the final price?
I can't just find this category anywhere.
Thanks for any information!

zygurat789

dudens wrote: »

Hi,
I have online shop with sport supplements, drinks, tablets etc.
I've just registered for VAT flat rate scheme.
The question is: How much % of VAT should I add to the final price?
I can't just find this category anywhere.
Thanks for any information!

VAT is 0% on raw foods, 5% on power and 20% on everything else unless it's exempt and you really don't want that.

JasonLVC

dudens wrote: »

Hi,
I have online shop with sport supplements, drinks, tablets etc.
I've just registered for VAT flat rate scheme.
The question is: How much % of VAT shoul I add to the final price?
I can't just find this category anywhere.
Thanks for any information!

Sports nutrition has some unusual rules http://www.hmrc.gov.uk/manuals/vfoodmanual/vfood7590.htm but most drinks are generally standard rated.

The flat rate tables are here http://www.hmrc.gov.uk/manuals/frsmanual/frs7300.htm#IDAA3WPH
Look for "Retailing food, confectionery" which covers all retailers selling food (butchers, grocers, Holland & Barrett, etc). Which is 4%.


Flat rate scheme means you still charge 20% VAT to the customer but you only pay over 4% of the VAT inclusive selling price to HMRC, you keep the difference but lose the right to reclaim input tax.

zygurat789

JasonLVC wrote: »

Sports nutrition has some unusual rules http://www.hmrc.gov.uk/manuals/vfoodmanual/vfood7590.htm but most drinks are generally standard rated.

Surely the clue would be in how much VAT is charged on the purchase invoice.

dudens

I buy all stock from another UE country, so purchase VAT is 0%.

JasonLVC

zygurat789 wrote: »

Surely the clue would be in how much VAT is charged on the purchase invoice.

Not necessarily.

Buy a spud (zero rated) and sell it as a spud, its still zero rated. Buy a spud (zero rated) and bake it, sell it as a baked spud and its standard rated.

Buy 10 yards of cotton material (standard rated) and make a girls skirt out of it, sell the skirt and its zero rated.

JasonLVC

dudens wrote: »

I buy all stock from another UE country, so purchase VAT is 0%.

Is it really zero rated?

If you acquire goods from EU, the seller will not charge VAT and you are supposed to treat under reverse charge rules, where you account for the VAT in Box 2 of the VAT return.

If the goods you import are ordinarily standard rated here in the UK then you are supposed to calculate 20% of the invoice value and declare in Box 2 of the VAT return. If you were not on FRS you would reclaim the same amount in Box 4, but on the FRS you cannot reclaim VAT in Box 4 and so what happens is you self declare output tax in Box 2 and is a cost to you.


If the goods you are acquiring re normally zero rated here in the UK, then there is no issue.

You need to make sure you operate the FRS properly or you could be storing up a potential VAT liability in the future. If you bought the goods in the UK you'd be charged VAT and not be able to reclaim it on the FRS. So by buying from other-EU supplier doesn't change a thing, you self-declare output tax and can't reclaim it, otherwise everyone would use FRS and buy from abroad and avoid the 20% VAT liability. This is why there is this reverse charge procedure that needs to be followed.

Not too technical an article here
http://www.taxation.co.uk/taxation/Articles/2010/03/03/258931/reversing-charge

antrobus

JasonLVC wrote: »

Is it really zero rated? ...

VAT has to be accounted for under the reverse charge mechanism as you have pointed out.

And I think you might well be right, I'm not so sure it's a good idea to opt for a Flat Rate Scheme if you have a lot of reverse charge acquisitions from the EU. I'd have thought that you'd still have to pay HMRC the VAT due on the acquisition, but then wouldn't be able to claim it back as input tax, because you are in a FRS.

I'd ask an accountant if I was the OP.

chrismac1

Good posts from the last 2. The final elephant in the room is why the guy is registered for VAT in the first place! Unless you have done sales of £82k you have no legal obligation to be in VAT, and on the basis of your post I am not sure why you have registered unless you saw it as just a way of avoiding the VAT charges on the imported goods in which case you now know better.

So de-registering pronto might be plan A unless you have a big chunk of VAT to reclaim on fixed assets or something.

dudens

So for example if i bouht goods for £10 in another UE country with 0%VAT, I need to:
1) pay 20% input VAT which is £2 (£10 +£2 = £12)
2) add my profit for example £3 (£10 + £2 + £3 = £15)
3) add 20% VAT to the selling price (£15 + 20% = £18, so 20% is £3)
4) Flate rate scheme on sport supplements is %4 so
I need to give 4% from £3 which is £0.12 to HMRC
Or should I pay 4% from whole final price £18, so £0.72 to HMRC ?

Did I make it right?

JasonLVC

dudens wrote: »

So for example if i bouht goods for £10 in another UE country with 0%VAT, I need to:
1) pay 20% input VAT which is £2 (£10 +£2 = £12)
2) add my profit for example £3 (£10 + £2 + £3 = £15)
3) add 20% VAT to the selling price (£15 + 20% = £18, so 20% is £3)
4) Flate rate scheme on sport supplements is %4 so
I need to give 4% from £3 which is £0.12 to HMRC
Or should I pay 4% from whole final price £18, so £0.72 to HMRC ?

Did I make it right?

Its 4% of the vat inclusive selling price, so its 4% of £18, not £3.

So of the £18 sale, you pay 72p of vat over to hmrc plus a further £2 on the vat incurred bringing goods into uk, so £2.73 of vat out of the £18 sale belongs hmrc, you keep the rest.