Advice / Tips on VAT saving - B2C E-Commerce

[cawards13]

Hey all,

A long time lurker finally posting.

We're a UK wholesaler in the UK with 98% of our stock being imported from the Far East, we hit the VAT threshold early last year and have been paying VAT ever since. We are in quite a competitive market and have struggled to offset our prices fully to cover the new VAT requirements (yes I know we creamed it good whilst we didn't have to pay it) - mainly because I feel such large increases could alienate customer base/new customers so we have opted not to increase across everything.

To that end we are forever in debt to the VAT man, every quarter we are paying large chunks in VAT rather than negating or almost negating with business expenses VAT claims - as put above we have little expense from the UK, nowhere near to even reduce our bill significantly.

We have looked at the flat rate scheme which could help somewhat but 9 times out of 10 we would be losing out - our average VAT bill payment is approx 14/16% once we take out any expense claim backs.

So my question is, is they're anyway or tips anyone can share to help such a business who solely imports to reduce the VAT bill other than increasing prices? I have a feeling the answer will be no but hopefully some more experted people have some small tips that could help.

One thing to add is majority of our stock is purchased at DDP price (Duty Paid), is it worth perhaps switching to DDU (Duty unpaid)? would this even achieve anything?

Thanks in advance

 

[japancool]

One thing to add is majority of our stock is purchased at DDP price (Duty Paid), is it worth perhaps switching to DDU (Duty unpaid)? would this even achieve anything?

It won't achieve anything, other than delay your imports and potentially increase your processing fees.

Using postponed VAT accounting will improve your cashflow, but your VAT bill will just be higher each quarter.

Other than that, and ensuring you claim for everything you're entitled to (and making sure the VAT being charged is correct), there's little else you can do.

For anyone else reading this - always, always, ALWAYS ensure your pricing is such that you know your pricing model will work uf you have to become VAT registered. If you can only compete by not being VAT registered, your pricing model doesn't work.

You said you're a wholesaler. Are your customers VAT registered?

 

[cawards13]

Thanks for the reply.

It’s more the fact I begrudge paying the VAT man as much as we do (haha), obviously if stock was sourced UK side it would be a different story and we could offset/save better.

Majority of our customers wouldn’t be VAT registered, we sell a lot of volume to small businesses / sole traders rather than big turnover customers.

 

[Newchodge]

Thanks for the reply.

It’s more the fact I begrudge paying the VAT man as much as we do (haha), obviously if stock was sourced UK side it would be a different story and we could offset/save better.

Majority of our customers wouldn’t be VAT registered, we sell a lot of volume to small businesses / sole traders rather than big turnover customers.

Technically you don't pay the VAT man anything - you get the VAT that you pay from your customers. If you cannot charge enough to cover your costs and VAT, the only thing I can think of is to reduce turnover far enough that you can de-register.

 

[japancool]

It’s more the fact I begrudge paying the VAT man as much as we do (haha), obviously if stock was sourced UK side it would be a different story and we could offset/save better.

It wouldn't make a difference. You'd still pay VAT on it if sourced in the UK. The only reason you'd pay MORE VAT (thus reducing your quarterly VAT bill) would be if the stock is more expensive, so that wouldnt benefit you.

 

[Deleted member 351022]

We're a UK wholesaler in the UK with 98% of our stock being imported from the Far East,

One thing to add is majority of our stock is purchased at DDP price (Duty Paid), is it worth perhaps switching to DDU (Duty unpaid)? would this even achieve anything?

Thanks in advance

To add to Japancool’s earlier post.
If you are supplied DDP make sure you understand who is paying or accounting for the import VAT . If your supplier is picking this up and not charging you correctly then it’s possible there is import VAT you are not claiming that you could be entitled to.
If you are being named the importer ( which can happen even with DDP) and import VAT is being paid then you can reclaim that but you need to download a document called a C79 from your customs account accessed via your government gateway.
The best way if you are VAT registered is to use the postponed VAT scheme which means no import VAT is actually paid but you do have to add the figures to your VAT return as both input and out put VAT so it nets off.

If you use VAT flat rate you cannot claim any import VAT.

It depends on the volumes you are importing and how much extra work you want to do to that can influence whether you switch from DDP importing. You will probably be paying a bit more via DDP as you are also paying for additional admin and whatever your supplier wants to charge for delivery/ freight.

 

[Mark T Jones]

Your opening post says you are a wholesaler - which suggests you sell B2B, in which case your customers are likely to be VAT registered and would actually expect to pay VAT

 

[DontAsk]

Hey all,

To that end we are forever in debt to the VAT man, every quarter we are paying large chunks in VAT rather than negating or almost negating with business expenses VAT claims -

The clue is in the name. If you are adding value (making a profit) you will always owe VAT to HMRC.

It's the customers that are paying it, you are just an unpaid tax collector.

Crossing the threshold is often a problem if not planned and accounted for in advance. What you need to concentrate on is growing the business and leaving the threshold behind. Higher turnover will allow you to cut your margins but still increase overall profit.

 

[cawards13]

Your opening post says you are a wholesaler - which suggests you sell B2B, in which case your customers are likely to be VAT registered and would actually expect to pay VAT

We're a small wholesaler in a few niche markets I would say 95% of our business is focused to B2C focusing on craft accessories, materials, printing services - with majority of our material expenses being imported. A lot of 'Small Businesses' use us which I know for a fact majority wouldn't even be close to the threshold - some perhaps would be registered either way.