Receiving VAT invoice with 0 VAT

[the5ame]

Hello,
we will be registering for VAT very soon and at the moment we are receiving invoices from our supplier were they indicate VAT as £0.00. So my questions are:
1) Can they do that now as we are not VAT registered?
2) Can they charge same when we become VAT registered?
3) If they keep sending invoices like that will that mean that the product we buy is £10 + vat (total £12) or that £10 already includes VAT and indicates zero as they are selling to another VAT registered business?

Below I have put a sample of the invoice. Hope someone can help us with this as could not find any information online. Thank you!

example:
Company
Company address
Company Postcode
Company Country

VAT Reg No: CompanyVATNumber

Postage price : £0.00
Item price: £10.00
VAT: £0.00
Total: £10.00

 

[kevin.doran]

A supplier charging you VAT has got diddly squat to do with your VAT status, it's down to whether they're VAT registered or not and what it is they're supplying.

 

[the5ame]

We are buying car accessories from them and they are very big company and VAT registered. They supply invoices with VAT registration number. And no way car accessories are VAT exempt???

 

[TheCyclingProgrammer]

We are buying car accessories from them and they are very big company and VAT registered. They supply invoices with VAT registration number. And no way car accessories are VAT exempt???

The way you've described the invoice makes it sound like they are charging 0% VAT. What is the item?

 

[the5ame]

Universal car mats, which they manufacturer them self in UK

 

[TheCyclingProgrammer]

Universal car mats, which they manufacturer them self in UK

Well they should have VAT on them at the standard rate if the supplier is UK VAT registered. The supplier is definitely in the UK?

Have you asked them why they haven't charged you any VAT?

 

[the5ame]

I did a few times and they explain as mistake in system however never got correct we get them in email all the time we buy stock. It does not bother us now but the problem will be that when we register for VAT it will mean that we are buying at £10 net which I believe will be £12 incl VAT?

 

[TheCyclingProgrammer]

I did a few times and they explain as mistake in system however never got correct we get them in email all the time we buy stock. It does not bother us now but the problem will be that when we register for VAT it will mean that we are buying at £10 net which I believe will be £12 incl VAT?

If you haven't been charged VAT correctly then you will have no VAT to reclaim. It is up to them to invoice you correctly and it will be their problem when the VAT man wants to know why they haven't been charging VAT correctly.

As it will make no difference to you once you're VAT registered (because if they had been correctly charging you £10 + VAT you would just reclaim the £2 VAT anyway) you should contact them again and tell them to start sending you valid VAT invoices with the correct amount of VAT on.

 

[the5ame]

So as an example:
at the moment we buy them at £10total, selling at £12 so our profit is £2.
If we register we buy at £10+VAT (£12), selling at £10+VAT leaves us with nothing as we want to keep prices same. But if they modify the way they send invoices it will be £8.33+VAT(£10)?

 

[TheCyclingProgrammer]

So as an example:
at the moment we buy them at £10total, selling at £12 so our profit is £2.
If we register we buy at £10+VAT (£12), selling at £10+VAT leaves us with nothing as we want to keep prices same. But if they modify the way they send invoices it will be £8.33+VAT(£10)?

If they've not been invoicing correctly then either:

a) £10 is the net price and they've not been adding VAT on to this
b) £10 is the gross price and they have not been showing the VAT element correctly on your invoices (but are accounting for the VAT properly at their end).

In either case once you're VAT registered you reclaim the VAT on your return (but only if they are sending you valid VAT invoices!) so the net cost to you is either a) £10 or b) £8.33. Clearly B is cheaper so it would be better for you if that was the case.

This has nothing to do with what price you sell to your customers at however. You need to accept that by registering for VAT you either need to a) add VAT on to your existing price, which makes you more expensive or b) treat your current price as VAT-inclusive which may reduce your margin (depending on your supplier's VAT status).

If you want to keep the price at £12 once you're VAT registered then yes, that means your net sale price will be £10 and if your supplier should have been charging you £10 + VAT it will wipe out your margin. If its £10 inc VAT your margin will remain unaffected after accounting for VAT.

 

[the5ame]

So obviously I have to ask my supplier and make sure that price shown on invoice as total is inclusive of VAT and when before we become registered make sure that we receive correct Invoices as otherwise it will screw accountancy for both me and supplier

 

[TheCyclingProgrammer]

So obviously I have to ask my supplier and make sure that price shown on invoice as total is inclusive of VAT and when before we become registered make sure that we receive correct Invoices as otherwise it will screw accountancy for both me and supplier

I wouldn't worry about your supplier but yes, if you don't want to increase your prices you need to get them to confirm the price is £10 inc. VAT AND get them to send you correct invoices or you won't be able to reclaim the VAT making the net cost to you £10 instead of £8.33 and your net sale £10, so your margin will still be wiped out.

 

[the5ame]

I know it is a bit of topic but following same example if we register VAT (flat rate) I have checked that flat rate for car accessories are only 6.5% but you can not claim input taxes. So does input taxes mean that we will be buying stock at £8.33 + VAT and selling at £10 + 20% and only paying HMRC 6.5%. As this way it is profitable to register for VAT prior even hitting the treshhold. Or we can not claim the VAT on the stock we bought? which makes paid £10 sold for £12 profit £12 minus 6.5%? I know we will have to get accountant soon when we hit treshhold or just before but as we are not making much profit we are really calculating whether it is really worth continuing with business and expand

 

[paulears]

What your supplier puts on his invoices has no link to your registration. If an invoice shows a total, that's what you pay them (VAT or not VAT invoices). If there is VAT content, this you in essence get back - it's your input tax, so you are only paying the price before VAT. If you get a properly completed VAT invoice, you claim. If the invoice doesn;t show any VAT you can't. They cannot put their price up if you register. In fact, how would they even know, unless you mention it?

They are doing it wrong. Or they could I suppose have reregistered and are using up their invoices. My local van repairer has deregistered. His invoices mention a VAT number, but he crosses it out and puts 0 in the old VAT box. I can't claim it back.