quick vat question

andys · Jan 30, 2010

Good evening all just have a quick vat question

just setting up my pricing for some stock but i think im working backwards
just wondering if i have worked this out write

i have one item witch is cost me to £1.61 then i add VAT like i need to witch comes to £1.89 i sell that item for £4.99 so that VAT i charge would be £0.28 and my profit on that item would be £3.10 am i working this out write

Christiane · Jan 30, 2010

My initial thought is 'are you VAT registered'?

Your calculations don't make sense.

andys · Jan 30, 2010

just.b said:
My initial thought is 'are you VAT registered'?

Your calculations don't make sense.

I am waiting on my vat number at present so just getting prices sorted now so im orginised

EDIT: just worked out were i was going wrong all sorted

Christiane · Jan 30, 2010

andys said:
I am waiting on my vat number at present so just getting prices sorted now so im orginised

EDIT: just worked out were i was going wrong all sorted

I applied for a VAT no. earlier this month for another company I'm launching and got it within 2 weeks which is rather fast. Hope you get yours quickly too so you can start trading.

Nexstar · Jan 31, 2010

No. You need to look at it two fold as it were.

If the item cost you £1.61 inc VAT, then you pay £1.61 for it and reclaim the VAT at 17.5% which would be £0.24, but if it is £1.61 exc VAT then you have to pay £1.89 and reclaim £0.28 back.

Then, if you sell it at £4.99 including VAT then it will be as follows:

Stock price = £1.61 (£0.24 VAT) Inclusive
Retail Price = £4.99 (£0.74 VAT) Inclusive

Thus £4.99 - £0.74 - £1.61 + £0.24 = £2.88 profit

Reclaim £0.24 VAT which you have paid out, and pay £0.74 to HMRC for VAT charged & collected on the sale of your item.

Hope that helps

Spongebob · Jan 31, 2010

Just keep it simple...

Buy at £1.61 +VAT

Sell at £4.24 +VAT

Profit = 4.24-1.61 = £2.64

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