avoiding VAT

[dtr]

hi me and a friend, started a partnership nearly a year ago recycling and resselling ex buisness pcs on ebay, but we have reached our vat threashold in the first 8 months, we have quite high turnover, but profit is only about a third of our turnover, we do not buy from many places that are vat registered so becoming vat registered will take pretty much take all of our profit, so just wandering if there are any ways arround this.

many thanks jason

[Nexstar]

Firstly, congratulations on doing so well!

Technically, any VAT you charge is not yours and is not classed as profits. As a business we all collect it on behalf of HMRC and thus you should charge VAT on top of your current price, thus why it is called Value Added Tax.

So, basically when you register for VAT, you can either increase your prices by 17.5%, which obviously won't be a very attractive option for those customers who cannot reclaim it, or absorb the 17.5% in your profits, again not very nice for you.

Within my business, I either list a price inclusive of VAT, or where I am selling to someone who can reclaim the VAT back I list the price + VAT, so long as you are clear about it, no problem.

Hope that helps.

[dtr]

hi thanks for the reply unfortunatly we are selling on ebay to very tight profit margains if we put our price up at all we wont sell.
regards jason

[Nexstar]

I know what you mean Jason, I used to do the same and then gave up when I realised how much I'd have to pay back for VAT. :(

[Williams lester]

If you are buying second hand equipment have a read of the information here. http://www.hmrc.gov.uk/vat/start/schemes/margin.htm, you should really discuss this matter with your accountant, as it can be quite complex.