Backdating VAT - Online Retail

MAGFin

Hi,

I have a question about backdating VAT in an online retail environment.

I have recently started an online retail business and would like to voluntarily register for VAT. This is because the rate of output VAT is a reduced rate of 5% (due to the nature of the product i'm selling), and the input VAT reclaimable is standard rated. So it makes sense for me to register.

However, I understand I can backdate claims for input vat, presumably meaning i don't need to register urgently/immediately.

The question is, what about backdating the output VAT? As an online retailer can't go back and charge customers for VAT at a later date. But equally i cannot charge them VAT now because i don't have a VAT registration number?

If i make a backdated claim for input VAT, presumably i have to also pay the output VAT applicable to that same period, but out of the business profits? So although i'm not charging VAT to my customers, i should keep back 5% of the revenue to eventually pay over to HMRC when i do register?

Any advice much appreciated!

Thanks

Sibbers123

Backdated is the incorrect term.

You will only be able to reclaim VAT on stock held at the date of registration (subject to conditions) - not the stock that you have already sold.

What are you purchasing and what are you selling that gives rise to the different VAT rates?

Pennywise

You can only claim back input VAT on goods you have in hand as at the date of registration, i.e. stock, equipment, etc., and "services" during the 6 months prior to registration. You can't claim back input VAT on things you've already sold or which you no longer have (i.e. scrapped equipment etc). You don't do anything about sales prior to registration.

MAGFin

Ah thank you. The '6 months prior' is what i was missing.

The item i am selling attracts a 5% rate, and I am also buying inclusive of 5% VAT. It was more the 'services' - like shipping, and selling commissions for example. Also the boxes i am sending the product in include 20% VAT, but applying the rules above i will only be able to claim vat on the boxes i still have in stock at point of registrtaion?

So in summary - I can only claim VAT on stock (Product and Boxes) held at the date of registration, but i can claim for vat on services like shipping costs for 6 months prior. And i don't do anything about sales prior to registration.

Sibbers123

With services incurred in the 6 months prior, you can only reclaim the VAT if the services relate to VATable sales, not on general costs.

Think of it as you can only reclaim VAT on the costs if you will also be collecting VAT on the sales related to the costs.

nick74

Will your online customers happily swallow a 5% increase in prices, or will you have to absorb the extra output VAT yourself? If the latter then I would think very carefully before voluntarily registering. You may end up worse off over all, despite the difference between the 5% and 20% VAT rates.