wholesale suppliers does not charge vat

[imageonline]

I am trying to learn about vat as I may soon have to register.

One of my main whoelsale suppliers does not charge vat, how they do this I don't know as they are a big business.

When I sell goods that I have not been charged vat for, do I have to pay vat on the full selling price?

Also when deciding to register for vat, am I allowed to deduct refunds (as I have several thousand pounds in refunds due to fashion business) from my total sales, which may still keep me under the vat threshold for a little longer.

Thank you for any help you can give.

[gordano]

My suggestion is to go to the HMRC website, they have lots of useful info.

The two aspects to note are input VAT and output VAT. The input VAT comes from your supplier, you use this to offset the output VAT you charge your customers.

If your supplier charges no VAT then you have no input VAT to offset.

[David Richards]

When I sell goods that I have not been charged vat for, do I have to pay vat on the full selling price?
If you are not VAT-registered, then you don't add VAT on anything you sell.
If you are VAT-registered, then you add VAT on to the full selling price of everything you sell (unless it is exempt or outside the scope of VAT).
Some things are 'zero rated'. They are still subject to VAT, but the rate of VAT is 0% - for example, in your industry children's clothing is zero rated.
Any VAT that you charge is paid to HMRC.
It might be worth having a read of Business Link's Introduction to VAT (http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&r.l1=1073858808&r.lc=en&r.l2=1083126673&topicId=1081167361).

[elainec100@cheapaccounting]

One of my main whoelsale suppliers does not charge vat, how they do this I don't know as they are a big business.




what are you buying from them?

[imageonline]

Hi Elaine

I buy handbags from a chineese supplier based in the uk who charges no vat but sells vast quantities of stock. I need to know what happens when I become vat registered, sell this stock, how do I stand with the vat man, do I have to pay vat on the full selling price or none at all. I am confused.
There seems to be no answer to this on HMRC website.

[roydmoorian]

It looks like your supplier is in for a big shock :eek:

[David Richards]

I buy handbags from a chineese supplier based in the uk who charges no vat but sells vast quantities of stock.Hmm, sounds dodgy. (I suppose it is just possible that they are VAT-registered, but knowing that you are not VAT-registered they're not issuing you a VAT invoice which itemises VAT separately. However, that seems very unlikely to me.) I think HMRC would be quite interested in hearing (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_PROD_008211&propertyType=document) about this supplier who isn't VAT-registered...

I need to know what happens when I become vat registered, sell this stock, how do I stand with the vat man, do I have to pay vat on the full selling price or none at all. I am confused. There seems to be no answer to this on HMRC website.I guess that handbags are standard rated, so yes you will have to add VAT @ 17.5% on to your selling price when you become VAT registered. Have a look at this page on the HMRC website (http://www.hmrc.gov.uk/vat/start/register/waiting.htm).

[spidersong]

Are they shipping from the UK, or from China? Have you actually received any yet?

If the supplier is selling goods that are still in China then they may not be making a supply in the UK, however if this is the case then you would be receiving bills for import duty and import VAT from whoever brings the goods into the country. (unless it's small consignments that you're buying of £18 or under a time which seems unlikely)

Otherwise if they're selling goods from the UK and have a turnover of £70K or more they should be VAT registered and charging VAT on the handbags.

[imageonline]

reply to SPIDERSONG

I have been buying from this company for 2 years now, the goods are in the uk, the wholesaler has a retail shop and both retail and wholesale websites.
I think that when I become vat redistered, if I buy goods from them for eg £5 sell for £10 and pay vat on the full £10 with no vat to deduct that should have already been paid to the supplier.
I hope you follow that.

[elainec100@cheapaccounting]

Anyway for the purposes of the question their vat reg issue is irrelevant to you.

Your cost is £5 - end of.

It is their issue as to where or not they should have charged vat.

You buy for £5 sell at £10 plus vat assuming vat registered yourself.

profit is £5

[Kevin Hall]

One of my main whoelsale suppliers does not charge vat, how they do this I don't know as they are a big business.

Spidersong is right. But VAT needs a lot of detailed facts before answers can even be guessed at. For example, have you asked your supplier whether they charge VAT or are you judging from the invoices you receive from them? I ask, because another possibility is that they are issuing "retailer invoices" which include VAT, but do not show it separately.

To resolve this, we would have to see the invoices and/or speak with the supplier. It will be important to resolve this once you become VAT registered (i.e. to know what purchase VAT you can recover in your VAT returns), but it is irrelevant for working out whether or not you need to be UK VAT registered (see below).

When I sell goods that I have not been charged vat for, do I have to pay vat on the full selling price?

Yes, assuming you sell in the UK. For sales outside the UK, it might be possible to avoid charging UK VAT.

There are two ways of doing this: £10 selling price becomes £11.75 selling price (net £10 plus VAT £1.75); or £10 selling price remains as £10 selling price (net £8.51 plus VAT £1.49).

Also when deciding to register for vat, am I allowed to deduct refunds (as I have several thousand pounds in refunds due to fashion business) from my total sales, which may still keep me under the vat threshold for a little longer.

No this is not possible. The main test for determining whether you are required to VAT register in the UK is whether your UK sales (alone) in any rolling 12-month period exceed the threshold set by HMRC (£70,000 for 2010/11).

So, broadly speaking, if your UK sales (alone) exceeded £70,000 in the past 12 months, you will have to register for UK VAT and start charging this on your UK sales in future.

Hope it helps.

[Williams lester]

No this is not possible. The main test for determining whether you are required to VAT register in the UK is whether your UK sales (alone) in any rolling 12-month period exceed the threshold set by HMRC (£70,000 for 2010/11).

So, broadly speaking, if your UK sales (alone) exceeded £70,000 in the past 12 months, you will have to register for UK VAT and start charging this on your UK sales in future.

Hope it helps.

Could you clarify this please Kevin, surely if the OP has (for instance) £75k of sales in a year and £10k of this is returned for credit, then the T/O is £65k and under the threshold?

[Kevin Hall]

Ah, "refunds" meaning returns by the customer (not refunds of VAT reclaimed on purchases). This is a far more interesting question that would need consideration.

On the one hand, returns which are cancelled by credit note indicate that the transaction effectively never took place.

On the other hand, a sale which has not yet been refunded is still an actual sale.

Furthermore, a sale which is later returned by the customer for "credit" within the same shop will be even more confusing. What is the Tax Point? When the money was paid to (effectively) purchase the credit, though an actual purchase of goods will happen later? Or will it fall under the new "face-value retailer voucher" rules, so that the VAT will be accounted for when the credit is used to pay for goods.

I must admit I do not know the answer off the top of my head, and would recommend checkingwith HMRC. If you cannot get through on the telephone lines, you can submit your question online now:

http://www.hmrc.gov.uk/vat/managing/problems/getting-answers.htm#7

[Williams lester]

I am fairly confident, in this situation, the OP is selling online through a website where a client may 'purchase' 3 items and then return 2 for credit. The sales and credits are ongoing and would therefore lead to a long list of monthly sales and credits, but the overall turnover would therefore be the difference between them, as all sales are paid (and refunded) by card or online portal such as Paypal.