Confused with VAT

[ben.anderson5105]

I probably sound pathetic, my workplace which is VAT registered. I work out the fees from an automatic spreadsheet, what has confused me its adds the VAT on the items cost price then works it out from there. You take VAT of the retail don’t you? Not the cost. When I go to a shop if the items cost was £12 for example and retail was £30, that VAT was be about £6 wouldn’t it?

 

[Scalloway]

20% VAT is 1/6 of the VAT inclusive selling price.

 

[ben.anderson5105]

Is it right to work it out on cost price?

 

[Scalloway]

What are you trying to work out?

 

[SugarCubeProductions]

Say you buy an item for £1 exVAT. Thats £1.20 incVAT. You want to make 30% thats £1.56.

If you work it out the other way adding 30% and then 20% you still get £1.56. Percentages don't mind which order you add them in.


What your form does it uses the cost + VAT + Margin to work out what you should be selling for. This way you always make the same mark up on each item.

 

[chalkie99]

Say you buy an item for £1 exVAT. Thats £1.20 incVAT. You want to make 30% thats £1.56.

That isn't right.

If you want to make 30% then the calculation is £1.00 + 43% = £1.43 + 20% VAT = £1.72

You are confusing mark up and profit margin.

 

[ben.anderson5105]

If I have 1 item which costs me £30, the spreadsheet then says VAT is £6.00, I then add my retail cost of £60 into the sreadsheet, ebay/paypal fees then worked out at £8.24, postage is £5 and then it works out I earn £10.75.

I dont know why I'm getting so confused! I see it as retail is £60 which means VAT is £10!

 

[Bruno Domingues]

Proper way to do your calculation is always exclusive of VAT as follows:

Item cost price + profit margin + cost of shipping + fees = final price ex. VAT

Then you simply add VAT to that.

You should never add VAT before you accrue all the amounts because VAT has no relation with profit margins.

VAT is a sales tax added to the final price of the product you want to sell, which is not meant for you, it is meant for HMRC.

 

[Bob]

Proper way to do your calculation is always exclusive of VAT

Not if you're not VAT registered

 

[Bruno Domingues]

If you're not VAT registered it is always exclusive of VAT because... well... you're not VAT registered.

 

[Scalloway]

If you're not VAT registered it is always exclusive of VAT because... well... you're not VAT registered.

I presume you mean ignoring VAT as you will suffer VAT on you purchases if you are not registered.

 

[Bruno Domingues]

Yes, in that case I think it can be split in 2 different calculations, please correct if I missed something.

VAT registered:
Item cost price (exc. VAT) + profit margin + cost of shipping (exc. VAT) + fees = final price (exc. VAT) + VAT

Not VAT Registered:
Item cost price (inc. VAT) + profit margin + cost of shipping (inc. VAT) + fees = final price

 

[DontAsk]

If the supplier is not VAT registered you cannot claim any input VAT, which can also affect your "profit".