New sole trader - vat questions

icecreamcart

Hello,


I am hoping you clever tax wizards can help me answer my question as my brain is struggling with it.


I am in the process of setting up as a sole trader with an ice cream cart to hire out at fixed fees to weddings, parties and other events. I have already registered with HMRC and a local wholesaler. My question is do I pay VAT on the wholesale price and then claim it back later? Or can you only claim it back if you charge a customer VAT? I wont be charging customers VAT as it is a "package" hire price so I am a little confused.


Thanks in advance

maisie_cat

It depends on 2 things really, how much do you expect to turnover, if less than £85k then you do not need to register. If your customers are not VAT registered businesses then there is no point voluntarily registering as they will not be able to recover the VAT element. If you do register you must add VAT to your prices, or at least separate it from the inclusive prices you give customers and supply a VAT invoice.

icecreamcart

So put simply I can't claim tax back unless I register for VAT?


I wont be making a huge turnover and my customers will mainly be individuals not businesses so I guess it's not worth registering?


It's very confusing

00ec25

icecreamcart wrote: »

So put simply I can't claim tax back unless I register for VAT?

yes of course

you would be foolish to voluntarily register for VAT as unless you intend to make a loss, the VAT you charge on your sales will always be more than what you claim back on your purchases and your customers would prefer that your prices were 20% cheaper because they did not have VAT added to them

Even more so in the context of a business selling a "luxury item" such as ice cream, as that is classed as a standard rated product (you must charge 20% on your sales) but many of the ingredients you buy to make it have no VAT to be recovered because they are classed as food and are zero rated

if you ever reach the point where your turnover exceeds £85,000 and you are therefore compulsorily required to register for VAT you'll need to read this:, paying particular attention to section 3.5
https://www.gov.uk/government/publications/vat-notice-70114-food/vat-notice-70114-food