VAT, benefit or unpaid collector?

Rhino666

I have had a kitchen fitted and the supplier has sourced various items from other companies and sold them to me. He is VAT registered and I have paid VAT as expected.
The items include a cooker, hob, worktops and fitting, etc.
Is there any VAT benefit to the kitchen supplier?
I pay VAT on the final purchase which is the only VAT due to HMRC I think.
I assume he would have paid VAT on these items/services but could claim it back or offset it?

Thank you      

easy

No,  there isn't a benefit to your kitchen supplier.  He will reclaim the VAT he has paid to buy the materials and appliances,  but he pays the VAT he has charged you to HMRC.    

If he makes a profit on selling them to you,  he pays more VAT than he reclaims.

e.g.  he pays £100 plus £20 VAT for a worktop
If he sells the worktop to you for £110 plus £22 VAT,   he will reclaim £20,  but declare  £22 VAT on sales,  so he will pay £2 to HMRC.  

If he sells the worktop to you for the same price as he buys it,  then the VAT reclaim will = the VAT declared. 

I hope that makes sense.

Rhino666

Thank you for your reply, explains it very well.
I just got confused by the apparent gains I used to get reclaiming expenses, etc and also the charge rate was lower at 14% I think where the prevailing VAT rate at the time was 17.5%; well it was 2007!  

tightauldgit

Was it a kitchen for your business? Are you VAT registered? On what grounds would you be reclaiming the VAT?

DullGreyGuy

Rhino666 said:

Thank you for your reply, explains it very well.
I just got confused by the apparent gains I used to get reclaiming expenses, etc and also the charge rate was lower at 14% I think where the prevailing VAT rate at the time was 17.5%; well it was 2007!  

You are talking about the flat rate scheme where you pay a percentage of the gross sale to HMRC but are unable to recover VAT from your purchases. 

So if you take Easy's example where he sell it to you for £132 rather than paying HMRC £2 for the difference in VAT paid and charged instead he now pays £18.48 (assuming he is on the same 14% flat rate) so he'd be worse off. In practice what percentage you pay varies depending on your industry and if your typically buying/selling goods with VAT the percentage to be paid over will be lower.