VAT Issue

[jkelly]

Hi.
Can anybody please explain how VAT is collected on alcohol.
Do the publicans pay 15% at the point of entry and then collect 15% form the customers and pay this at the end of every VAT period less allowances.
Bit confused regarding how its done.
Thanks guys.

[Zeno]

Hi.
Can anybody please explain how VAT is collected on alcohol.
Do the publicans pay 15% at the point of entry and then collect 15% form the customers and pay this at the end of every VAT period less allowances.
Bit confused regarding how its done.
Thanks guys.

No, that's not quite how it works.

Very simply, the publican charges VAT on the sale of the booze to the customer (Output VAT) and reclaims the VAT charged on the purchase of it (and also on his expenses/overheads) by his suppliers (Input Vat).

He will then periodicaly (usually quaterly) pay (or reclaim) the difference between Output VAT charged and Input VAT recovered to HMRC.

This is just a very simple overview. it is infinitely more complicated than this.

[jkelly]

Thank you for your reply.
I bought some accounting software developed in the UK .
The cost price of the product in entered VAT exclusive and the selling price is price less the VAT.Should the VAT not be added onto the cost price and the selling price be VAT free with customer VAT calculated at end of VAT period.Bit confused .Thanks,

[spidersong]

VAT is charged at the time the supply is made, with the end user paying the VAT at that point. So if the customer pays £2.35 they've actually paid £2.00 which the publican would retain, and £0.35 which the publican would then pay over to HM Revenue and Customs at the end of his VAT period.

[David Griffiths]

You don't say what software you are using, or what data you are entering. Are you setting up products? If that's the case then

(a) both cost and selling prices are shown exclusive of VAT and that's quite normal.

(b) you are probably wasting your time as far as accounting for pubs is concerned. You won't be entering your sales item by item but just the daily totals from the till. In addition stock control is affected by waste beer, pipe cleaning and the like

Of course I may have misunderstood why you are entering this information

[jkelly]

Its a Stocktaking Package .Just confused why it does not add the VAT onto purchase price .Seems to be taking 15% VAT of sales price.Just cannot get my head around this.

[Zeno]

The VAT on the purchase is not a cost as it will be reclaimed however the package seems to be asuming that the sales price included the Output VAT charged so subtracts it.

This would leave you with the net purchases and the net sales.

[David Griffiths]

I see now!

As Zeno says, the VAT on the purchase price is not relevant to a stocktaking report as it's not a cost of the business.

It is relevant on the sale price. For stock control purposes, the package will calculate the gross value of goods sold, to check against the physical cash in the tills - your check against inefficiency and shortages.

However, it will produce a profitability report based on the sales net of VAT, because the VAT isn't yours to keep.

You also need to find out how to change the rate from 15% to 17.5% :)

[jkelly]

Thanks David.Its even worse .I have to change it to 21%.I have a few outlets in Southern Ireland .