Becoming VAT Registered

[mattbuxton]

Hi everyone,
I have been running my business for a couple of years now buying clothing items from Italy and reselling in the UK, I currently do not make more than £1000 in profit a year but I would like to make my prices cheaper to sell more and get myself to that point.
I have been debating becoming VAT registered so I can reclaim the Import tax I pay on every shipment from Europe, but that was until I realised I will then have to pay 20% in VAT on every sale, not on profit which is how I originally thought it worked.

my question is, is it worth me becoming VAT registered at this stage and will I save any money and be able to make my prices any cheaper being able to reclaim import tax.
If not is there any other suggestions anyone has as to the best way to go about this, thank you in advance.

 

[GraemeL]

£1000 a year profit is not a lot. What are your sales? If they are signifcantly less than say £80,000 a year then its hard to justify VAT registration, unless your customers are also VAT registered.

 

[mattbuxton]

yes they are significantly less than £80,000 as this is only a side hobby but I would love to make my prices cheaper by being able to reclaim my import tax or import duties.
Is there any way to do this other than being VAT registered, or is there not any point for a business of my size?

 

[Ozzy]

Being VAT registered isn’t going to be the silver bullet to fix your profit problem. Your profit problem is because you are not selling with enough margin on top of your supply price.

As you have already noticed, being VAT registered means 20% of your sale goes to HMRC

 

[mattbuxton]

Being VAT registered isn’t going to be the silver bullet to fix your profit problem. Your profit problem is because you are not selling with enough margin on top of your supply price.

As you have already noticed, being VAT registered means 20% of your sale goes to HMRC

aha yes mate definitely not going to solve my problems like I thought it would

i can only assume then that there's no way to reclaim any of the 35% import charges added on top of every delivery from outside of the uk then?

And thought I would ask while you are here, do you know of any designer clothing wholesalers who promote them self's on here as I originally found Made in Italy the distributor I currently use on this website, apologies as it is most likely not your field just thought I would ask as your probably the most likely to know thanks in advance.

 

[Customs Geek]

aha yes mate definitely not going to solve my problems like I thought it would

i can only assume then that there's no way to reclaim any of the 35% import charges added on top of every delivery from outside of the uk then?

There’s no way to reclaim the import VAT (20%) unless you are VAT registered but as others have already said you need to also charge VAT on your sales.
There is no way of recovering any import duty or clearance charges. They are just a cost of importing.
You do however need to make sure you are paying the correct duty by making sure the goods are correctly classified and you are taking full measures to get the trade deal duty rates.
This can be tricky for garments as the rules are quite complex so there is a high chance they don’t quite qualify and so the full duty still applies.

 

[mattbuxton]

There’s no way to reclaim the import VAT (20%) unless you are VAT registered but as others have already said you need to also charge VAT on your sales.
There is no way of recovering any import duty or clearance charges. They are just a cost of importing.
You do however need to make sure you are paying the correct duty by making sure the goods are correctly classified and you are taking full measures to get the trade deal duty rates.
This can be tricky for garments as the rules are quite complex so there is a high chance they don’t quite qualify and so the full duty still applies.

thank you for the help mate will definitely be looking into it.

 

[japancool]

If not is there any other suggestions anyone has as to the best way to go about this, thank you in advance.

Find a cheaper supplier.

 

[mattbuxton]

Find a cheaper supplier.

this is fairly difficult when it comes to designer clothing but yes you are right.

 

[WaveJumper]

The joys of importing

 

[Narciso Baldo]

Seems like a lot of aggravation and the admin of running this isn't going to be worthwhile unless you can increase your margin and scale up. Given this is Italian clothing and your margin is under £1K PA, I hope your volume is super low otherwise there's something not quite right here!

 

[mattbuxton]

Seems like a lot of aggravation and the admin of running this isn't going to be worthwhile unless you can increase your margin and scale up. Given this is Italian clothing and your margin is under £1K PA, I hope your volume is super low otherwise there's something not quite right here!

aha yes I am barely selling more than 5-10 £100-£300 products a year and I would like to increase this significantly, but the only way I can think of doing this is by having cheaper prices.

 

[ash799]

aha yes mate definitely not going to solve my problems like I thought it would

i can only assume then that there's no way to reclaim any of the 35% import charges added on top of every delivery from outside of the uk then?

And thought I would ask while you are here, do you know of any designer clothing wholesalers who promote them self's on here as I originally found Made in Italy the distributor I currently use on this website, apologies as it is most likely not your field just thought I would ask as your probably the most likely to know thanks in advance.

Hi Matt
We import high quality clothing in wholesale volume from Italy and France, we are wholesalers in ladies fashion based in Manchester, Cheetham Hill.
Contact us on WhatsApp 07586 390330 or if your close by to Manchester visit us at our showroom warehouse ‘Desire Fashion, on Broughton street Cheetham Hill.
I’m sure we’d be able to help you out.
Regards
Desire Fashion Wholesale