New to in-house printing....suffering from VAT

[LeafletsInLincs]

Hi,

We're baffled by the rules regarding VAT & hope for some help.

We've always been a sole trader but now we have a printer we're getting hit by VAT & so maybe need to become a limited company?

One thing that baffles me is the following:

We can't charge VAT because we're not registered (i know it's a criminal offence) yet we're supposed to charge VAT on certain types of product.

How does it work when we outsource to a trade printer & they charge us VAT...if we then charge the customer VAT then the taxman will be getting paid twice surely?

Also if we have to charge VAT due to the print then we will have to add VAT to our distribution prices which makes no sense at all as it will just make us very expensive.

Anyone experienced similar situation?

 

[Newchodge]

If you are not registered for VAT you cannot charge VAT on anything, supplied to anyone.

If your supplier is registered for VAT they must charge you VAT on everything that they supply you that is VATable.

This is true whetheryou are a sole trader or limited company. I haven't the faintest idea what you having a printer has to do with anything.

 

[AllUpHere]

See an accountant. It's clear from your post that you don't understand even the most basic principles of VAT or accounting. An accountant would take 10 mins to tell you what you need to know, and stop you digging yourself a very large hole to fall into.

 

[TheCyclingProgrammer]

It sounds like what you’re getting at is that your supplier is charging you VAT (maybe they’ve recently become VAT registered) and so your costs have gone up. You can pass the VAT costs onto your customers but you still aren’t charging VAT, you’re just increasing your prices.

If your customers are mostly VAT registered businesses then it may be worth voluntarily registering. Speak to an accountant.

 

[Mr D]

Everyone pays VAT.
You are required to register for VAT when you hit or are due to hit the threshold in a rolling 12 month period. You can register voluntarily beforehand but get expert advice before doing that as to whether its worth it for your business.
When you must register then you do so and become an unpaid tax collector for the government.
You still pay the VAT your supplier must charge you.
You also get to charge your buyers VAT on any goods or services where VAT applies (not everything has VAT). The money you charge your buyers for VAT belongs to the government.

How much you hand over is open to question as there's more than one VAT scheme. Again, expert advice would be good before deciding which scheme to have.

VAT is something both you and your competitors will have to deal with. Once registered for VAT then either your buyers pay it when needed to be charged or you pay it - HMRC do not care, they get the same money regardless.

It has been said a few times that a business should factor VAT into prices when setting up the business, that way initially there is higher profit and later there need be no change in pricing when must charge VAT as its already factored into pricing.
eg new business charging £12 a widget rather than £10 the owner wants. Later on that year with good sales there is no change in price when registering for VAT, owner still gets the £10 he wants and buyers still pay £12 in total.

 

[LeafletsInLincs]

The issue is that we have never noticed VAT previously as we did not buy supplies due to being a service business. Now we have to factor in the vat on everything from paper to our printer lease which is a large amount on a monthly basis.

Newchodge: The printer is the reason we are having to pay the VAT & we have never had to buy supplies at such a level previously.

Granted it may be best to speak to an accountant but wondered if anyone else had come across the same issue.

 

[STDFR33]

The issue is that we have never noticed VAT previously as we did not buy supplies due to being a service business. Now we have to factor in the vat on everything from paper to our printer lease which is a large amount on a monthly basis.

Newchodge: The printer is the reason we are having to pay the VAT & we have never had to buy supplies at such a level previously.

Granted it may be best to speak to an accountant but wondered if anyone else had come across the same issue.

Your accountant will be able to quickly tell you whether or not it is worth registering for VAT voluntarily.

 

[Newchodge]

If you didn't buy supplies or use the printer before, presumably you are now offering a different or additional service. You just have to ignore the fact that pArt of what you are paying is VAT, as it makes no difference to you what the total bill is made up of, and set your prices for the new services based on the total cost to you.

If you register for VAT you will be able to reclaim the VAT you are paying out, but you will also have to charge your clients VAT, so it may not be worthwhile to register voluntarily. That is what you need an accountant's advice for.

 

[AllUpHere]

It's very very simple maths, but you do need to have a basic grasp of how VAT works to be able to play with the numbers. You are thinking it's more of a problem than it needs to be. Once you've got it, you'll understand it for ever.

 

[DavidWH]

In simple terms.

Not VAT registered -

You take your cost price inclusive of VAT + add your markup

VAT Registered

Your take your cost price exclusive of VAT + add you markup, then if it's a vatable product you will have to charge VAT on that price.

VAT isn't your money, it is the tax mans. Each quarter you deduct your purchase VAT, from your Sales VAT, and pay the difference.

If you sell mainly leaflets (not vatable) you could reclaim the VAT on the paper, printer, consumables, but won't be charging VAT on the finished product... on the other hand if you're selling a mix of all sorts of material, you'll have to charge VAT on all products that are vatable.

Speak with your accountant, they'll be best placed to advise you.

 

[Mr D]

The issue is that we have never noticed VAT previously as we did not buy supplies due to being a service business. Now we have to factor in the vat on everything from paper to our printer lease which is a large amount on a monthly basis.

Newchodge: The printer is the reason we are having to pay the VAT & we have never had to buy supplies at such a level previously.

Granted it may be best to speak to an accountant but wondered if anyone else had come across the same issue.

You were not buying services previously?
Yes the various companies you deal with, unless small enough, will be charging you VAT on what you purchase if its applicable.
As they will to every company and the public if they sell to them.

 

[pentel]

Printing and VAT can be quite complicated as some printed items are zero rated and some are not.

Depending on what you are printing you could be charging no VAT but be able to claim back all the VAT you have pave paid on supplies.

This is where an accountant with good VAT experience comes in.

 

[KAC]

To be honest you should have been discussing this with your/an accountant before taking on the lease. You may well end up with your prices increasing by 20% because of increased turnover requiring you to register. Speak to your/an accountant NOW before you dig yourself a big hole

 

[AccountOnThis]

You only need to be VAT registered if your turnover is greater than £85000 per year (currently).
If you register, you will need to charge VAT to your customers, but you will also be able to reclaim VAT from your suppliers, which balances things out a little.

 

[LeafletsInLincs]

I wasn't referring to being VAT registered.

This post is about the amount of VAT we're having to pay since we started printing ourselves....vat on the printer lease, the paper, equipment, imposition software, our guillotine purchase.

These are not small sums of money.

We're going to speak to an accountant & probably split into 2 Limited companies & have the printing business VAT registered so we can claim the VAT back.

The rules regarding VAT in the UK are ridiculous & shoiuld be reformed.

 

[AllUpHere]

I wasn't referring to being VAT registered.


We're going to speak to an accountant & probably split into 2 Limited companies & have the printing business VAT registered so we can claim the VAT back.

And what you will produce is a textbook case of artificial separation.

 

[Mr D]

The rules regarding VAT in the UK are ridiculous & shoiuld be reformed.

Yes can agree they are pretty bad. Reform? Be careful what you wish for. Government meddling being to your advantage and against theirs would be unlikely.
Ask Greggs regarding hot food.

 

[Mark T Jones]

Seems likely they will be reformed. But not necessarily the way you are hoping

The simple fact is we are all subject to the same rules. This is a classic case where planning would have allowed you to anticipate the problem

 

[KAC]

And what you will produce is a textbook case of artificial separation.

Google disaggregation for VAT
It seems like you don't yet have an accountant? This is one of the occasions when engaging an accountant may have significantly reduced your tax liabilities

 

[AllUpHere]

Google disaggregation for VAT
It seems like you don't yet have an accountant? This is one of the occasions when engaging an accountant may have significantly reduced your tax liabilities

I'm perfectly happy with my tax liabilities. Thanks for your concern though.

 

[KAC]

I'm perfectly happy with my tax liabilities. Thanks for your concern though.

I'm sure you are ☺ My comments though were addressed to the OP

 

[STDFR33]

I'm sure you are ☺ My comments though were addressed to the OP

You quoted @AllUpHere though, and not the OP.

Simmer down everyone, it’s New Year’s Day!