VAT Registration Help

[luca]

Hi All,

I currently run a small technology company and with demand growing, it is becoming more likley that I will exceed the VAT threshold due to the high price of the computers/parts that I have having to order in and sell.

I just need to know if what I have been reading about in terms of VAT is correct and if it is worth my while registering or just keeping it below the threshold.

An example of a sale would be as follows:

Buy in stock computer at £1163 in VAT at 15% and sell at £1325 inc VAT at 15%. I am not sure what VAT I will owe HMRC after this sale. From what I have been reading, is it the difference in the VAT paid out for the stock and the VAT I take from the customer?

If I am completely wrong then just let me know, I am completely new to this!

Thanks in advance,
Luca

[Leo-InstallingIT]

Hi

Yes, basically on the standard system it is the difference. So in your example:

You buy the product for £1011.30 +(£151.70 VAT)

You sell the product for £1152.17 +(£172.83 VAT)

So you owe the HMRC £172.83 and you can claim back £151.70. Therefore in affect you need to pay them £21.13.

I hope this helps,
Many Thanks

Leo

[KM-Tiger]

..... and if it is worth my while registering or just keeping it below the threshold.

Depends who you mainly sell to. If it's mainly to VAT registered businesses then you will almost certainly be quids in by registering. No need to wait for the threshold you can register voluntarily.

[Beachcomber]

if it is worth my while registering or just keeping it below the threshold.

Personally I'd trade just below the VAT threshold until you are in a position to really maximise your sales and push your turnover far beyond the VAT limit.

Trading just over the VAT threshold caused extra admin, hassle and cost for no benifit - when your business is ready to take a quantum leap - do it then.

[scott12345]

its great,thanks

[David Griffiths]

Personally I'd trade just below the VAT threshold until you are in a position to really maximise your sales and push your turnover far beyond the VAT limit.

Trading just over the VAT threshold caused extra admin, hassle and cost for no benifit - when your business is ready to take a quantum leap - do it then.

But that's simply not true if the business sells to VAT registered traders. There is no cost, and there are savings on input tax which becomes recoverable. As to admin & hassle, if you're keeping a proper set of books, particularly on computer, there is next to no extra work involved in accounting for VAT.