Claiming pre-registration VAT- Urgent Help Needed!

[James@88]

Guys, I need some help.
I am a sole trader selling online on eBay as a dropshipper.
I found out at the end of May I had exceeded the VAT threshold and I am late by two months to register for VAT but I have now registered for VAT and I am on the process of getting my VAT certificate. I am also aware HMRC will issue me a penalty of 5% on the total VAT due to be paid.

I have heard that after VAT registration is done, VAT can be claimed on the products I purchased to supply to my buyers. If this is true, am I allowed to claim VAT on the item I purchased prior to VAT registration if so how many month prior to registering VAT.

Please could someone clarify it. I do have a detailed records of VAT invoices for the products I have purchased.

Thank you all!!

 

[LPB 123]

For stock you can go back 4 years prior to registration but you still need to currently have the stock on hand. If you're dropshipping then I'm assuming you don't have any stock, so nothing to claim there.

Here's some more info: https://www.gov.uk/vat-registration/purchases-made-before-registration

 

[James@88]

For stock you can go back 4 years prior to registration but you still need to currently have the stock on hand. If you're dropshipping then I'm assuming you don't have any stock, so nothing to claim there.

Hi,

Thanks for your response.

I have just been advised by an accountant that as long as it was for business purpose and the VAT invoice clearly labels my address as billing address and includes seller's business address and their VAT number, I will be able to claim the input VAT.

Any accountant here who has worked for dropshipper approve this ?

Many Thanks

 

[STDFR33]

Hi,

Thanks for your response.

I have just been advised by an accountant that as long as it was for business purpose and the VAT invoice clearly labels my address as billing address and includes seller's business address and their VAT number, I will be able to claim the input VAT.

Any accountant here who has worked for dropshipper approve this ?

Many Thanks

The previous poster is correct. You can only claim VAT on stock if you still hold that stock.

 

[Scalloway]

I will be able to claim the input VAT

Only if you charge VAT on the sale.

 

[James@88]

Only if you charge VAT on the sale.

Could you please elaborate more ? Thank you

 

[Scalloway]

How VAT works.

• You buy goods and reclaim the VAT on the purchase.
• You sell the goods and charge VAT on the sale.
• HMRC get the difference between the selling VAT and purchase VAT
• You neither gain nor lose on VAT. You are an unpaid tax collector for the difference paid to HMRC.

If you reclaim VAT on goods that you have already sold without VAT you are better off because you have not paid any VAT to HMRC. They will regard this as fraud.

 

[James@88]

How VAT works.

• You buy goods and reclaim the VAT on the purchase.
• You sell the goods and charge VAT on the sale.
• HMRC get the difference between the selling VAT and purchase VAT
• You neither gain nor lose on VAT. You are an unpaid tax collector for the difference paid to HMRC.

If you reclaim VAT on goods that you have already sold without VAT you are better off because you have not paid any VAT to HMRC. They will regard this as fraud.

Thank you for taking your time and explaining properly.

Basically I have registered for VAT and have stated my effective VAT charging date to be on 1 June.
I will be paying the VAT for the month starting from 1 June.
So does that mean I can claim input VAT on the item which I purchased for dropshipping business since June 1 ?

 

[STDFR33]

Thank you for taking your time and explaining properly.

Basically I have registered for VAT and have stated my effective VAT charging date to be on 1 June.
I will be paying the VAT for the month starting from 1 June.
So does that mean I can claim input VAT on the item which I purchased for dropshipping business since June 1 ?

Yes because you will have to charge Vat on any sales made after 1st June.

 

[James@88]

Yes because you will have to charge Vat on any sales made after 1st June.

What I meant to say is if I am paying VAT for sales after 1 June, am I eligible to claim input VAT on the purchases made after 1 June ?

Thank you

 

[STDFR33]

What I meant to say is if I am paying VAT for sales after 1 June, am I eligible to claim input VAT on the purchases made after 1 June ?

Thank you

Yes.

 

[ecommerce84]

It may be worth you looking at the Flat Rate Scheme as it simplifies your VAT returns.

That said VAT is actually a very straightforward system of taxation so even if it feels complicated now, you will get the hang of it once you get going. And if you don’t, go and see an accountant, it’s money well spent in the long run.