VAT- Sold at less than bought

[mclark6127]

I recently set up a business selling DVD's and Video Games which is going very well, so well in fact I will soon have to register for VAT, however I just need to check something

I sell across multiple sales channels and if I sell something that has run out of stock and cannot get from my supplier I will buy at retail to keep my customers happy, this sometimes means I end up paying more than I sold it for, so here's the question:

If I sell at less than I bought, where do I stand with the VAT?

Obviously I have made no profit, in fact a loss, so will I actually be owed money for the VAT diffference or is this just written off somewhere?

Cheers

Matt

[Zeno]

Before we even get into VAT, basic business says that if you routinely sell things for less than you paid for them you will go bust. It seems a very expensive way to build customer loyalty/satisfaction which in your line of business must be fleeting.

If you buy an item for £10 + vat and sell it for £5 + vat then HMRC will owe you £0.75.

[mclark6127]

We're talking 1-2% of all orders and even then the deficit is never more than £5, which I make back on 1-2% of all orders, so that still leaves me clear profit on 96%+ of my sales - I appreciate what you are saying and I would indeed go no-where fast losing money, but when the sales channels I use all work on feedback, 1 unhappy customer can cost 10 so I am happy to make a loss to keep the small numbers effected happy as well!!

Thanks for the short answer to the actual VAT question

[Zeno]

We're talking 1-2% of all orders and even then the deficit is never more than £5, which I make back on 1-2% of all orders, so that still leaves me clear profit on 96%+ of my sales - I appreciate what you are saying and I would indeed go no-where fast losing money, but when the sales channels I use all work on feedback, 1 unhappy customer can cost 10 so I am happy to make a loss to keep the small numbers effected happy as well!!

Thanks for the short answer to the actual VAT wuestion

From my limited understanding of Ebay and the like, I understood it was not the done thing to offer items for sale that you do not have in stock.

I realise this is general business practice in most other cases but I understood that Ebay etc has a particularly negative attitude towards this?

[mclark6127]

As I sell accross different marketplaces I sometimes get sales across all of them for the same item which then causes me to go out of stock, however as said it is only a small number so whether it is frowned upon or not, I am doing my best to keep my customer's happy

[Zeno]

As I sell accross different marketplaces I sometimes get sales across all of them for the same item which then causes me to go out of stock, however as said it is only a small number so whether it is frowned upon or not, I am doing my best to keep my customer's happy

I am not critising. I was just under the impression that Ebay sellers are held to ransom by Ebay/Paypal and that out of stock items were a common source of dispute and negative feedback however if you mitigate that risk by supplying from an alternative source then you might not fall foul of it.

[DuaneJackson]

Sounds like you know what you're doing and have the numbers worked out - so if it works for you then great, so I'm not going to question/criticise the process.

But as confirmed above, you would be owed money by HMRC

[mclark6127]

I realise you are not criticising, just trying to understand. What you just said right there is exactly why I will source out of stock items, even at a loss, to keep eBay and PayPal from getting involved and causing me headaches!

[Charlie Moor]

Hi Matt

The output vat from the sale would be inclued on your VAT return as usual, as would the input vat from the purchase. The result of this one transaction is that the HMRC will owe you the difference between the output and input vat, but no further adjustments will need to be made (ie do not write anything off).

Best wishes