Flat rate VAT scheme and billing for materials used.

[Worsley]

Hi Guys

i just want to double check before i go ahead that i have this right, i have just gone on the flat rate scheme for vat and i have just realised that if i pick up and make purchase of a boiler for £1000 from my supplier and only charge the customer the £1000 that i paid for it.

with the 9.5% rate i am on i will have just lost out on £95 to HMRC is that correct?

thanks

Worsley

 

[SimonJBaker]

You should charge your customer £1000 + Vat and then you've 'made' £105.

Simon

 

[Mr D]

Hi Guys

i just want to double check before i go ahead that i have this right, i have just gone on the flat rate scheme for vat and i have just realised that if i pick up and make purchase of a boiler for £1000 from my supplier and only charge the customer the £1000 that i paid for it.

with the 9.5% rate i am on i will have just lost out on £95 to HMRC is that correct?

thanks

Worsley

The flat rate scheme applies only to what you pay to HMRC, for the purposes of dealing with customers you are charging VAT at the standard rate.

If you were charging customers £1,000 to sell them a boiler before then charge them a new amount and show you have charged them VAT at the 20% rate. What actual amount you charge the buyer overall is up to you.

 

[Talay]

If you buy a boiler for £1000 ex VAT then you pay £1200 being £1000 plus £200 VAT.

If you charge your customer £1200 then you pay 9.5% of £1200 which is £114 but you cannot recover the VAT of £200 paid out.

To reach equilibrium with a non VAT registered end client, your £1200 boiler would have to be charged out at £1200 / (1-9.5%) = £1325.97 which means you pay £1325.97 x 9.5% = £125.97 VAT leaving you with £1200 which you paid for the boiler.

If you want to make £500 on the boiler (net of VAT) then you need to charge (£1200+£500) / (1-9.5%) = £1878.45 which means you pay VAT of £1878.45 x 9.5% = £178.45 leaving you with £1700.

However, if you bought 2 boilers for £2000 plus £400 in VAT, you could recover the £400 as the invoice would be over £2000 !

As it is the invoice which needs to be over £2000, you could buy anything else to the tune of £1000 to go with your boiler and then recover the whole £400 VAT meaning your second £1000 of items was only costing you a net £600 !

 

[Scalloway]

However, if you bought 2 boilers for £2000 plus £400 in VAT, you could recover the £400 as the invoice would be over £2000 !

No! You can only reclaim VAT on assets, not goods for resale.