What can I charge instead of VAT for a Sole Trader?

[firstassist.it]

Hi all,

I'm just wondering for producing invoices, what can I charge instead of VAT, to possibly make a small profit?

I'm not VAT registered, but wondering if theres something I could charge ontop of the services I provide when the service is at a low cost, which won't really give a significant profit.

If I were to register for VAT, would I have to pay anything to HMRC yearly?

Sorry, I did look through 22 pages, but couldn't see anything which matched my needs.

Thank you!

[elainec100@cheapaccounting]

I'm confused?

Surely your fees would make a profit - otherwise why would you be in business?

Vat is a tax - you charge it, collect it and hand it over to HMRC

[Bri]

Yeah, surely you are marking up your goods to make a profit....hey heres a thought try marking up your prices by 17.5%

[KDMINX]

Yep it's called "markup" DO NOT call it VAT if it isn't!

[*Lexxy*]

hang on, i think we could be onto something here! a separate line on the invoice marked 'profit' ! sounds like a plan to me :D

sorry OP, couldn't resist. as already said, your profit should just be included in the cost of your service or products...

[Bri]

hang on, i think we could be onto something here! a separate line on the invoice marked 'profit' ! sounds like a plan to me :D



It'll never work I tell you:D

[*Lexxy*]

It'll never work I tell you:D

sure would make the day a bit more interesting though...

dull thud of the post landing on the mat, quickly followed by 'how much profit?!' :eek: :cool:

[KDMINX]

Reminds me of when I used to sell to big pharmaceutical clients. I took this girl from purchasing out and got her properly drunk. She told me that they got a bonus if they could show they’d negotiated the customer down to 9% margin.

From then on when we costed up a job exactly as we always had then added as a line item: 9% “margin”.

From then on our quotes always got accepted! They didn’t realise or didn’t care that all we’d done was increase our prices by 9% they got their bonus we got the job!

[firstassist.it]

Ok, looking back, I'm an idiot.

I've never known what to charge ontop of the original price to buy stock, then sell off.

Most of my sales have been done to friends and family, so I tend not to worry about cost and do at the baserate, but now i'm trying to get a foot out in the pool, I just need some help.
I just figured charging a percentage, not 17.5% and calling it something else, would help bring some money in.

Well, hope my n00bish faux pas gave a few laughs, and I can sort something out.

[David Griffiths]

You should simply set a selling price for your goods. I certainly wouldn't show cost plus a markup as people will always try to pick holes in that.

The markup that you do apply will, to a certain extent, depend on the trade that you are in, but at the end of the proverbial day it's down to what you the market will stand

There's no hard and fast rule, but 17.5% markup is going to be right at the bottom end of the scale. You probably need to do some market research to see what others are charging. if you can't, try some markups - 50% would be a starting point - and see what happens

[KDMINX]

Never be embarrassed about making margin!

[sanjiv]

Surely if you add whatever margin you make on there separately, then it will be easier for the customer to haggle and if they know the cost price, you may lose business because they know what other businesses would be paying too.

Doesn't really make much sense.

Also you can't just put VAT on there when you're not VAT registered because then you will face problems when a VAT registered company tries to buy from you because they can't claim it back if it was never paid and you wouldn't be able to provide them with a VAT receipt.

I don't get why you would want to do this anyway.

[Bri]

OK all he's realised and admitted his faux pas, sorry to fun at your expense there friend. Lots of other good advice that will spur you on your way.

[sanjiv]

Whoops. Didn't read the whole thread.

[firstassist.it]

sanjiv, I never intended to charge VAT, as I'm not VAT registered, as you've explained.

What I'm after is a suitable % to charge ontop of items to make a profit, but obviously I can't put this down as VAT, and I can't just call it "Profit" or "Markup".

I'm in the IT industry David, which I know is flooded already, but I'm hoping to be part of the competition.

I think I'm going to have to see what I can play with to keep costs low.

Thanks for the help!

[sanjiv]

Sorry its just:

If I were to register for VAT, would I have to pay anything to HMRC yearly?

Misinterpreted that.

[Bri]

sanjiv, I never intended to charge VAT, as I'm not VAT registered, as you've explained.

What I'm after is a suitable % to charge ontop of items to make a profit, but obviously I can't put this down as VAT, and I can't just call it "Profit" or "Markup".

I'm in the IT industry David, which I know is flooded already, but I'm hoping to be part of the competition.

I think I'm going to have to see what I can play with to keep costs low.

Thanks for the help!

never mind the VAT element, if you purchase goods to supply and pay VAT on them then make that a part of your mark up. Also whats your worth/value as an engineer/technician? how much do you charge for your expertise.

[paulears]

Margin is to be honest, what the market will stand. Many of the items I sell have pretty 'common' price points. So I buy from supplier X for say £13.50 and sell it for £39.90 - ignore the VAT from the maths for the moment. I also buy another similar products from a different supplier for £25.50, but also sell this one for £39.99, because lots of other dealers also keep this item in stock and shift them at that price. I prefer, obviously, selling the other one - but having both in stock helps.

Profit is very different. The items you sell at 'cost', are in fact probably being sold for less than they really cost you. Do you pay by credit card, and pay interest, did they sting you for postage but you forgot to add that on, did you have to drive to collect it, did you order it on the phone - maybe your mobile at premium rate? All these things cost you money, so profit is what you get when you consider expenditure, expenses and cost. It's obviously a bit more complicated than that, but the basics are pretty simple. At the end of the year, Her Majesties Revenue and Customs would like you to give them a share of it, of course - but, if you have a job, and you lose money on your business, then they might even give you some back!

I sell quite a bit on eBay, and after you pay the fees, and suffer the indignity of paypal also taking some of your money, sometimes what you can sell things for is hardly worth the effort.

Profit is not a dirty word. You just need to research your costs, and don't just pick a percentage out of thin air.

[oldeagleeye]

Hi OP

Couple of points. You couldn't just register for VAT anyway. You have to virtually prove to C & E that you will go over the threashold which is £60K plus turnover.

As others have pointed out margins do vary according to the product.

Your conrner grocery store for instance makes about 15% on a tin of baked beans or frozen birds eye food. An off licence an average of between 22.5% and 30% depending on how much wine. A newsagents makes a third on newspapers and mags but only 4%-5%% on fags.

That is at the bottom end. Fashion and furniture up to 100% mark up.

It is obvious then that if you can discount a high margin product you would still make more than a low margin and possibly do more trade.

I'll tell you one thing however. You can't treat a business like a hobby and if you think your family and friends think your Mr Wonderful for selling them goods at cost. Don't you believe it. They will think that you are making a good profit even if your not.

Robert

[David Griffiths]

Hi OP

Couple of points. You couldn't just register for VAT anyway. You have to virtually prove to C & E that you will go over the threashold which is £60K plus turnover.



Not correct.

Any business that is making taxable supplies can register voluntarily, irrespective of turnover.

[oldeagleeye]

David. As I understand it the business has to anticipate going over the threasehold.

Then again. I think that C & E put this about sometimes to deter people registering that may be intent on vat fraud. Claiming on imports for example and no outputs.

[David Griffiths]

David. As I understand it the business has to anticipate going over the threasehold.

Then again. I think that C & E put this about sometimes to deter people registering that may be intent on vat fraud. Claiming on imports for example and no outputs.

No, you don't have to be over the threshold or even anywhere near it.

All that is required is that you are making taxable supplies in the UK.

Link (http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#5)

[paulears]

100% agree with David. My turnover was nowhere near this level when I first registered, which I did mainly because all my customers were VAT registered and wouldn't worry when my invoices suddenly had the VAT added, yet all my supplies would effectively be cheaper. It worked well, and the HMRC didn't query it at all.

VAT registration under the threshold is totally up to you, and there is no requirement whatsoever to have a large turnover.

[oldeagleeye]

Can only relate my own experience but the last time I needed new VAT no was quite a while ago. Thanks for the update David.

Robert

[dflongmuir]

Have you thought about the possibility of charging an administration fee of a fixed amount or percentage of the sale?

I think thats what you are getting at?