Is there any benefits??

Not that it matters as i have no choice..

Currently i pay VAT on all purchases, Being Vat Registered the buyer pays it yeah?

so if i paid say £10 i get charged £1.75 vat,then i sell for £100, But now the thing i bought for £10 im selling for say £100 is vat on the £100?? so in theory £17.50?

 

cant explain very well...


i buy summit for £10 plus vat so £11.75, Sell for £100 so £88.25 profit..

Vat Registered i pay £10 for part.. Still sell for £100 but vat of £100 is £17.5 so £82.50 profit, so being vat reg cost be £5.75??

am i getting this right?

 

You buy it for 10 plus vat so 11.75 (in essence 11.75 comes out of your account). You sell for 100 plus VAT so 117.50 is paid in. Each quarter you claim the VAT back on what YOU paid for the item (ie - 1.75) but you have to pay the VAT man 17.50 what the customer has paid. All depends on the business as to whether its advantageous.

 

If you're selling for £100 PLUS VAT, the VAT is £17.50 so total customer pays is £117.50.

17.5% VAT content in £100 is £14.89 not £17.50. ie [roughly] £85.11 + 17.5% VAT = £100.

HTH

 

so if i just sold as you put i will be worse off being vat reg

Not Vat Reg = sold for £117.50 = 105.75 profit (117.50-11.75)
Reg = sold for £117.50 = £98.69 profit (117.50 -10.00 - 17.5%)

in effect that sale being vat reg cost me £7.06?

 

Thing is, to sell my product at a value for money price it would need to be for example £117.50. the cost as example is £10 + vat, being registered or not i cannot sell for more that £117.50...

on this sale i Will make less so im worse off?

 

All depends on the business and how people are paying for the product. Not obliged to say on an open forum but a lot of people pay cash these days. What is it you are selling?

 

Not quite.

If you ARE VAT registered, buy for £10, sell for £100 [both figures plus VAT].

You will basically pay the £17.50 MINUS the £1.75 you paid out on purchase, so you'd pay £15.75 in VAT [get an accountant lol]. So profit [all things being equal] is £91.75.

You CANNOT charge VAT unless you're VAT registered, so if you can sell for £117.50 without charging it, do it that way but you're right, it's a swizz. As are all taxes

A lot of small businesses I know steer away from the threshold that requires you to go over to being VAT registered. It's not possible with what I do but some smaller businesses actually start up seperate companies to avoid paying it -or rather to avoid all the issues that arise [all quite legally].

It's a pain in the arse and as said above, get an accountant as a good one will save you more than you pay them!!!!

 

Vat registration is quite simple

Non Vat Registered:
You buy an item for £10+vat - you pay £11.75
You sell an item for £100 - you make £88.25
You Buy diagnosis equipment of £30+vat = £34.25

Total Profit = £100 - £34.25 - £11.75 = £54

Vat Registered:
You buy an item for £10+vat - you pay £11.75
You sell an Item for £100 - You pay vat of £14.89
You Buy diagnosis equipment of £30+vat = £34.25
Vat you pay to the taxman: £14.89 - £1.75 - £4.25 = £8.89

£100 - 30 - 10 - 8.89 = £48.89

You will be slightly worse off - however it is something any growing business has to take into account - unless you sell b2b like we do, in which case you simple write +vat on all of the quotes lol

 

And if you sell for £117.50 without vat, as soon as you become vat registered you will feel it sting in your pockets. A lot of business's i know have to absorb the costs or make a slight price increase to offset the costs.

A good accountant is worth there weight in gold when it comes to taxes. I can reccommend one who has got me out of the mess i got myself into if you want me to.

 

thats what im looking at, i have an accountant but didnt want to bother them with initial thoughts....

maybe worth the hastle for the difference...

 

Bear in mind that you can claim all VAT expenditure for the 3 years previous to registration on your first return....which can make it worth while from a short term cash flow point of view. What is it that you do? There are circumstances/products that are exempt from vat, or have a lower rate applied.

Chris