0% VAT FOR EU NUMBER HOLDERS

[HC Phil]

Hello, I'm starting up a sports clothing business and I have found a manufacturer from Poland who can make the items I require. Their quote includes the following information:

0% VAT FOR EU NUMBER HOLDERS / 23% VAT ADDED FOR PRIVATE BUYERS

What does this mean and what is the best course of action.
Do I get registered?
Can I claim the 23% back?

Thanks

 

[DontAsk]

The way I understand it:

Private buyers pay VAT. End of.

Non-VAT registered business (no VAT number) pay VAT. End of.

VAT registered business (have a VAT number) offset input tax against output tax and pay the difference over to HMRC (or claim a payment).

There's planty of info on .gov.uk

 

[kayenta]

The above is not completely correct.
You do not need to claim back the VAT because you do not need to pay it in the first place if you are a UK VAT registered business.
You give your Polish supplier your VAT number they show it on their sales invoice to you and that allows them to zero rate the VAT supply at their end so no charge to you.
It is called European Reverse Charge Mechanism if want to look it up

 

[Alan]

Do I get registered?

You need to do some sums.

Lets say the retail selling price is £12 and you are selling to the UK to consumers not businesses.

Lets assume the trade purchase price is £5 from Poland.

If you are not VAT registered
Cost per unit = £5 * 1.23 = £6.15
Income per unit = £12
Gross unit profit = £5.85

If you are VAT registered
Cost per unit = £5 * 1.0 = £5.00
Income per unit = £12
Vat due the HMRC per unit sold = £2.00
Gross unit profit = £5.00

Essentially, if you are below the VAT threshold ( turnover £85,000 ) and selling to consumers and your competitors ( hence the market price ) is the VAT added price then not being registered can be more profitable.

BUT it all depends on the mix of your other costs.

Your accountant should advise you.

 

[DontAsk]

The above is not completely correct.
You do not need to claim back the VAT because you do not need to pay it in the first place if you are a UK VAT registered business.
You give your Polish supplier your VAT number they show it on their sales invoice to you and that allows them to zero rate the VAT supply at their end so no charge to you.
It is called European Reverse Charge Mechanism if want to look it up

"The above" was completely correct. In the case where you do not pay VAT then your input tax is zero. You still have to account for it, even if it's zero.