hi, nice to meet you all :: Vat question, COMPLETE NEWB !!!

[whirly]

I'm starting up a company in the next 3 /4 months.


I will be running as a sole trader.

My questions falls under VAT. (sorry for newbie questions, i'm new to accounts, vat eughh!)

1) If i choose to be non VAT registered, what is the threshold before i have to apply to become VAT registered.

2) I understand that when i purchase an item to sell on, i have to pay the price of the item + VAT. I then don't claim back the VAT and sell at a fixed price. Is this correct or am i way off.

eg, I buy an item for £100 plus VAT. – I pay £117.50 including VAT.

I cannot claim back the VAT from the Revenue

I sell it for £235 – I receive £235.00.
I make £118 profit.

What happens if i am VAT registered using this scenario ?

-------------------------------------------------------------------------------

I buy a item for £100 plus VAT. – I pay £117.50 including VAT.
I claim back the VAT from the Revenue
I sell it for £200 plus VAT – I receive £235.00 including VAT.
I make £135 profit.

Is this right ? :?:

[visagephoto]

Hi Whirly

You buy for £100 + £17.50.vat = £117.50

You sell for £200 + £35.00.vat = £235.00

You claim back or deduct the vat paid (£17.50) from the vat collected (£35.00) = £17.50, this amount has to be paid to the vat man.

You make a profit of £117.50

I'm sure this is how it works.

[DuaneJackson]

Hi Whirly

You buy for £100 + £17.50.vat = £117.50

You sell for £200 + £35.00.vat = £235.00

You claim back or deduct the vat paid (£17.50) from the vat collected (£35.00) = £17.50, this amount has to be paid to the vat man.

You make a profit of £117.50

I'm sure this is how it works.

Close.

You buy for £100 + £17.50.vat = £117.50

You sell for £200 + £35.00.vat = £235.00

So your input VAT is 17.50
Your output VAT is 35.00

You now owe the vat man 17.50
You make 100 profit.

That's if you're vat registered.

If you are unregistered then

You buy for £100 + £17.50.vat = £117.50

You sell for £200 = £200.00 (You can't charge VAT if you are not registered)

You make 82.50 profit

[Ian J]

The figure for Vat compulsory registration is £58,000 turnover per annum but you can register voluntarily if your turnover is less than that

[Alpha]

2) I understand that when i purchase an item to sell on, i have to pay the price of the item + VAT. I then don't claim back the VAT and sell at a fixed price. Is this correct or am i way off.

eg, I buy an item for £100 plus VAT. – I pay £117.50 including VAT.

I cannot claim back the VAT from the Revenue

I sell it for £235 – I receive £235.00.
I make £118 profit.

Correct apart from the maths (you make £117.50 profit) :D

The figure for Vat compulsory registration is £58,000 turnover per annum but you can register voluntarily if your turnover is less than that

The figure for compulsory registration is £60000 taxable(i.e anything which would attract standard, reduced or zero rate vat) turnover :roll:

[Top Hat]

I would add if your selling to consumers (not other businesses) you can sell at the same price as if you were charging VAT (but not, of course!!)

You buy for £100 + £17.50.vat = £117.50

You sell for £235 (no VAT)

You make £117.5 profit

Personally I would advise this if your selling to consumers (others may disagree)
1) Your extra profitable when you start up
2) You won't have to raise your prices when you register.

[visagephoto]

Close.

You buy for £100 + £17.50.vat = £117.50

You sell for £200 + £35.00.vat = £235.00

So your input VAT is 17.50
Your output VAT is 35.00

You now owe the vat man 17.50
You make 100 profit.


That's exactly what I meant to say.......I think :oops:

[whirly]

thanks guys

i was quite embarrassed about asking those simple questions but if i've never done accounts and vat, always best to ask

thanks again

:D

[confused]

definately best to ask, I asked a similar question not many moons ago.
One thing to consider is your market, this is where I'm still in consideration as to whether I should register for VAT or not - where is your market, with me my market is businesses and what you would class as a consumer so I'm in the middle, if I regester for VAT, I'll either have to increase my prices to the consumer, or lose 17.5%.