Have I Shot Myself in The Foot?

[Toon]

Hi.

I recently regsistered for VAT on a voluntary basis starting from 1st Feb which is the start of my financial year so thought this would be the best time to start. I done it on a voluntary basis as I knew I will soon have to register for it anyway as I'll be exceeding the threshold soon so thought I'd try to get it out of the way. Put simply, if I don't include the amount of VAT my suppliers have charged me, I have lost 17.5% of all of my sales? I'm wondering whether I really should have registered as I'm sure the amount of VAT I have charged will exceed the amount I have paid!

 

[BMS]

HI Toon

It is a bit unclear what you mean when you say " if I dont include the amount of VAT that my suppliers have charged me" ?

When you process your Vat return (assuming you are fully VAT registered and not using the flat rate scheme) you will claim input VAT on all expenses including you supplier purchases. Basically any business expense which has VAT on it, you need to include in your VAT return.

This is then offset against your output tax (VAT on sales) and the difference is the VAT liability.

There are few cases that I have come accross, where it is likely not to be a payment liability ie a payment to Customs.

This is the way that it is and if you think about it if your sales and greater than your purchases (which is the way that it should be) then you will always end up paying Customs something.

With regard to your decision to voluntarily register, it is always a tough decision....but as you say, you assume your turnover will go through the £60K threshold soon enough so there is no choice at that stage.

If you need any help aor advice regarding the VAT return please ask the forum or sen me a PM.

 

[Toon]

Thanks for your reply. I've calculated the amount of VAT I have charged since 1st of Feb and it comes to over £5k. I now have to work out how much I have paid. Do I charge VAT on postage charges? If so, how do I claim this back when receipts from the post office always say "this is not a VAT receipt"?

 

[SillyJokes]

You must charge your customers VAT on postage.

Postage from Royal mail is Exempt (oversea is Zero Rated)

 

[BMS]

Hi Toon

Silly jokes is right in that postage stamps are VAT exempt.

I'm not sure what his comment " you must charge you customers VAT on postage means", unless he means that if you carriage / postage on your invoice then it will attract vat as per the invoice total.

As far as reclaiming VAT on stamps you are correct in that you cannot reclaim the VAT.

I'm not sure what the set up of you business is ie do you have premises so it's difficult to give a definitive answer but try looking at the following areas.

Business premises - electricity,telephone,heating, other services relating to the premises.

Suppliers invoices.

Stationery supplies.

Hope this helps, if not post again or PM me.

 

[Toon]

I have worked it out and really think I have made a big mistake in applying for VAT so soon. I think I'm just going to cancel it and re-apply in a few months when I go over the threshold. I am also going to move into a unit which means it will be much more worthwhile. If I paid VAT on all of my sales for this financial year then it will be over £5k. A lot of my stock comes from people who aren't VAT registered which means I can only claim about £2k back max! Obviously, as you say, when I have rent, electricity and such then it will even itself out.

 

[Alpha]

Toon

I am a bit confused by your wording.

Am I correct that you have been registered for VAT since the 01/02/05 and have been issued with a certificate from this date?

If so you cannot just cancel it.
You will have to complete your vat return for the quarter 01/02/05 to 30/04/05, pay over the vat and then apply to cancel your registration using form V7(assuming you still have a valid reason ie you are still running under the £60k annual turnover.

As was stated earlier if your business is making money you will always pay over VAT at the end of a quarter (Not sure why you would have thought otherwise)

With regard to postage Silly Jokes is correct you have to charge VAT on all your sales which includes any charges you make for postage(look at it this way, you are NOT selling stamps which are exempt you are charging for your service)

As I presume you sell to members of the public therefore cannot pass the vat charges on I would say that you have indeed 'shot yourself in the foot' by registering too early.

Oddly enough discussions on this issue have been posted quite often in these forums!

 

[Toon]

Am I correct that you have been registered for VAT since the 01/02/05 and have been issued with a certificate from this date?

I applied to have it starting from Feb 1st but only applied for it recently (I was going to backdate it). The certificate was issued 27 May 05.