VAT Help

[John Hesketh]

I am about to import items from china and sel them via a web site with e-commerce functionality. I have registered for VAT and know that I will have to pay that when the goods arrive in the uk. I also know I can claim that back. My question is do I need to charge VAT to my customers on the web, or not bother. I am struggling with the concep of paying the import vat and then claiming it back. What is the point?

Thanks

John

[elainec100@cheapaccounting]

If you are vat registered then yes you do have to charge vat on sales.

You are just an unpaid tax collector for HMRC!

[Maslins]

Yes you do need to charge VAT to your customers.

VAT stands for value added tax. Effectively you only pay the tax over to HMRC on the value you add.

Eg you buy from China for £20, sell for £30. When it enters the UK, 15% is added onto the £20 (£3). You then want £30 for selling the item, but you need to add £4.50 VAT for a total gross sales price of £34.50. You then do a VAT return to HMRC showing input VAT reclaimed of £3 and output VAT to pay of £4.50. The net effect is you pay HMRC £1.50. This £1.50 represents 15% of your mark up (being £30 - £20 = £10).

[John Hesketh]

thanks but I have made lots of purchases on the web and I cant ever remember being charged vat. Where in the buying process would that appear on-line?

[David Griffiths]

thanks but I have made lots of purchases on the web and I cant ever remember being charged vat. Where in the buying process would that appear on-line?

Most traders will show prices that include VAT, particularly if their customers are not registered traders.

It's the same as shopping in Marks & Spencers - some item have VAT, some don't, but M&S will pay the correct amount to HMRC.

[Maslins]

On an invoice you got sent. Prices are normally shown inclusive of VAT (ie gross).

What kind of things have you been buying? If you buy things from eBay or other places where you're buying from very small traders they quite possibly weren't registered for VAT, hence they didn't charge VAT to you (but also they couldn't reclaim VAT on their purchases).

[John Hesketh]

OK...Many thanks, I think I am getting the hang of this now

[Kevin Hall]

My question is do I need to charge VAT to my customers on the web, or not bother. I am struggling with the concep of paying the import vat and then claiming it back. What is the point?

If you are registered for UK VAT and you have paid UK Import VAT (even if it is later reclaimed), then I assume the goods are in the UK when you sell them.

If the goods are sold (via the web) to customers in the UK, then UK VAT is charged to the customer.

If the goods are sold (via the web) to customers abroad, different rules might apply. For example, if you can identify that your customer is outside the EC and you transport the goods outside the EC, then you can "zero-rate" your sale and charge no VAT on the export.

If you sell to non-business customers in other EC countries, you should seek more detailed advice from a specialist. You are looking at charging UK VAT up to a certain threshold("Distance Selling") and, if you are highly successful (i.e. selling tens of thousands of pounds-worth of stock into that one country in a year), you might even have to register for VAT in that country.

VAT is a tax on detail and I don't want to confuse you at this stage. So perhaps you could let us know if all your customers are non-business ("B2C") and where these customers are/where you send the goods to. If it gets more complex, you might need to take one-off advice from a VAT accountant.

[John Hesketh]

Thanks. I would imagine the majority of my customers will be UK based non business. I will be selling worldwide and to other EU, but I would imagine this will be a very small percentage of overall turnover. I have forecasted a turnover first year of £50000 with each unit priced at £45.

[Wavecrest Ltd]

Hi John - what kind of goods are you importing from China. Have you already got the shipping and customs clearance side covered? If not please feel free to PM me.

Glen

[FR_2009]

Hi,

This is my first post but was hoping somebody may be able to help or advise,

I’m a contractor in transport with my own limited company, each month the company gets paid via an agency. I don’t send invoices with VAT added for my services but receive the payment automatically. My earnings are below the VAT threshold but I need to register in order to attempt to claim back Dutch VAT on training that I purchased, which requires a UK VAT number to register as a foreign entrepreneur. The question is if I register for VAT would there be additional money that I’d have to pay the revenue on what I each month i.e. 15%.

Thank you very much in advance