Tax/VAT advice on admin fees.

[kermit]

Hello there,

I'm looking for a little advice and since i've been lurking around here for the last month or two, it seems the best place to ask!

My new online venture is almost ready for launch. I'm not selling a product as such, but a membership. There is no regular payment with the membership, but I will be charging a small initial one-off admin fee which goes towards covering the cost of that member's postal welcome package (envelope, card, printing cost, etc). Anything left over from that will be profit. Teeny, but still, profit.

My question concerns VAT, and whether the above is something I would have to add VAT on if I reached the required registration threshold? I know some items are zero-rate or reduced rate but truthfully? It all goes way over my head, i'm ashamed to say.

Also, because it's online, people who join up can be from anywhere in the World. To process payments i'll be using paypal and I'm currently deciding on whether to charge in U.S Dollars or UK Pound, regardless of PayPal converting it for them during the payment process. If, for example, the bulk of potential members were from the U.S, I wouldn't want them to be immediately put off by seeing the fee in £ and assuming that excludes them from signing up, despite that information on the page.

However, does this type of set up have any tax implications I need to know about? Allowing membership outside the UK, and therefore the admin fee from outside the UK? Or is that all really beside the point and you simply get taxed on whatever profit you make, regardless of where in the world it came from?

Any help you can lend me on these matters will be most appreciated. Any further information you require, just let me know :)

[kermit]

Forgive me, have I post in the wrong section? Or am I just asking a completely daft question? Wouldn't be the first time, lol.

[Alpha]

Hopefully to simplify matters

If your turnover is likely to be less than £60000 per year for the forseeable future and the majority of the 'members' are likely to be private individuals and you have no large purchases to make then I would advise you to forget about registering for vat.

As to which currency to display and trade in I would advise that from a commercial point of view you should list prices and trade in the currency of wherever your customer is based i.e. for US customers price in $, for Uk price in £ :D

The traded currency has no bearing on VAT or business tax.

[kermit]

Big thank you for your reply, Alpha :)

Regarding the payment currency, that's an option I had thought of but wasn't sure whether to go with. Since you mention it also, it might be the option to pursue, so thank you :)

As for vat, indeed. I can't see myself reaching the £60,000 threshold any time soon so if you advise not to register until such time, then that's sound advise to me. The only thing about VAT that confuses me is exactly what it has to be added to. That said, perhaps it'll be better to come back with that question when the venture has officially launched and no longer shrouded in secrecy? ;)

Thanks again, Alpha. Your help is much appreciated :)

[DuaneJackson]

If you're not VAT registered then you don't add anything on. If you are VAT registerted then you need to add 17.5% on to your charges/invoices.

That extra 17.5% that you recieve isn't yours - it's the governments. You are, in effect, an unpaid tax collector.

[TechFox]

That extra 17.5% that you recieve isn't yours - it's the governments. You are, in effect, an unpaid tax collector.

I should charge the government a fee for this service.

[kermit]

If you're not VAT registered then you don't add anything on. If you are VAT registerted then you need to add 17.5% on to your charges/invoices.

Is this regardless of whatever you're charging for? My membership service is such that, to commemorate their participation, a certificate is sent out to that member. The fee I charge is basically to cover the cost of the certificate, postage & packaging. There would be a small profit left over which would cover my time spent adding that membership and sending out their certificate, but we're talking pennies not pounds here. Ultimately, aside from this fee, the membership itself is free.

The whole vat aspect has me confuddled because this isn't a conventional 'sell'. In the eyes of VAT though, I take it that means very little?

Gah. Thank you for your help, btw. Most appreciative!

That extra 17.5% that you recieve isn't yours - it's the governments. You are, in effect, an unpaid tax collector.

Thought provokingly put. Fiendish government :shock:

lmao @ TechFox.

[DuaneJackson]

There are some items that are either zero rated or at a lower percentage for VAT (such as kids clothes, books and some foodstuffs I believe). I don't think what you are doing would qualify though.

Check with an accountant to be sur (I'm definetley not one!)

[kermit]

Thank you muchly. An accountant in the near future it is then!

I suppose the simplest thing would be to account for VAT beforehand. That way i'm prepared for whatever happens...

Thank you again for your help. Couldn't have done without it :)

[DuaneJackson]

I suppose the simplest thing would be to account for VAT beforehand. That way i'm prepared for whatever happens...

What do you mean by 'account for VAT' ?

[kermit]

My apologies. I basically mean working out what the VAT would be and then adding it inclusively?

[DuaneJackson]

Ahh, OK. I was worried you were going to charge VAT before being registered as an unapid tax collector!

I suppose doing it that way is a good idea. It'll mean you make more profit initially, but if and when you become registered your profits will go down.

[kermit]

It's my bad. I've got a long way to be before I fully pick up business speak ;)

Unpaid tax collector. Meh. Can we protest it? With cross-country marches, stickers, and pointy hats? I can make the stickers.