Purchasing from non-VAT registered company

[Naduk]

Hi,

Trying to get my head around something that seems simple but can't work it out.

A non-VAT registered business purchases a product from a VAT registered wholesaler. They sell on to myself at a VAT inclusive price. Obviously I cannot claim the VAT back but surely the VAT isn't added on again when I sell it on to my client?

Many thanks

Nad

 

[lesvatadvice]

Non-VAT registered company cannot charge VAT. You should treat the purchase price as VAT-inclusive, and then add your margin. (You don't add the VAT on, though.)

 

[StevensOnln1]

Of course you add VAT if you are VAT registered. Having no input VAT to reclaim has nothing to do with whether you charge VAT on your sales.

BTW they are not selling to you at a VAT inclusive price if they are not VAT registered, as they cannot charge you VAT.

 

[Bob]

Or in figures:
Non Vat registered business purchases for £10 + £2 VAT Total cost to them £12
They want to make a 10% uplift margin so sell for £12 +£1.20. Total selling price £13.20

Cost to you is £13.20 as you have to ignore the initial £2 VAT

If you want to make a 10% margin, then assuming you are registered for VAT you will have to sell it for £13.20 +£1.32 = £14.52 + 20% VAT £2.90 Total selling price £17.42

Hope this helps and yes it does make the product more expensive for you

 

[Naduk]

Of course you add VAT if you are VAT registered. Having no input VAT to reclaim has nothing to do with whether you charge VAT on your sales.

BTW they are not selling to you at a VAT inclusive price if they are not VAT registered, as they cannot charge you VAT.

Of course they would be charging me a price inclusive of VAT otherwise they would be loosing 20%? Surely the VAT has been added twice then? When they purchase it they are being charged VAT which they pay. They then sell it on to myself. If I put vat onto their price, that is over 40% VAT being paid on the one product?

 

[SuffolkDesigns]

They cannot charge VAT if they are not VAT registered.
If they were VAT registered they would charge +VAT which you would claim back, so really makes no difference to you if you pay £10 with no VAT or £12 and claim back £2, the cost price is the same.

 

[Naduk]

They cannot charge VAT if they are not VAT registered.
If they were VAT registered they would charge +VAT which you would claim back, so really makes no difference to you if you pay £10 with no VAT or £12 and claim back £2, the cost price is the same.

I did not say they were charging VAT per se, but if they are buying stock in at £8+£2VAT, they are the first person paying the VAT but cannot claim it back. They then sell it on to myself at say £12, making themselves £2. If I put VAT on this is it not then having VAT paid twice on the same item?

 

[StevensOnln1]

Yes VAT would be paid twice in the supply chain, but there is nothing you can do about that. Your choice is to either accept that you will pay a higher price by purchasing the goods from a non VAT registered supplier or to find a different supplier who is VAT registered and would enable you to reclaim the VAT.

 

[Naduk]

Yes VAT would be paid twice in the supply chain, but there is nothing you can do about that. Your choice is to either accept that you will pay a higher price by purchasing the goods from a non VAT registered supplier or to find a different supplier who is VAT registered and would enable you to reclaim the VAT.

Hi,

thats fine, was just making sure I wasn't going mad! Just seemed like the HMRC are getting a lot of tax out of this!

Thanks again