Should I vat register?

[Quinntessentials]

I am a startup E-commerce site and I am primarily doing drop shipping
My suppliers are whole sellers and they charge me whole sale price + Vat + delivery + vat

Thier delivery charges varies from mine - Sometimes I make a profit sometimes I make a loss
My only real costs for the business is hosting which is US based and payment charges again US based or Paypal . I guess there are a few work from home expenses like internet, phone etc but these cant be more than 40 pounds per month

But i am wondering is it worth me going VAT registered but i am confused over this big time
Please can someone help me

Subtotal
£5.67
Shipping & Handling £2.39
VAT£1.61
Sub total £9.67

I would then charge 12 pounds for this + 3.50 delivery charge which would equal
£15.50 - so take out fees would be about five pounds profit

[FONT=Arial, Helvetica, sans-serif]So is it worth me registering for VAT - I am just confused on input tax and out put tax
and the less paperwork I have to do the better as i am generally rubbish at it
Thank you
[/FONT]

 

[Mr D]

You could VAT register if you wanted to when below the threshold (you have to when you hit the threshold).

What that would mean would be that you add 20% to your prices and collect the VAT for HMRC. For the most part it will mean paying the same money out you are already but you can offset the VAT paid out against the VAT you collect.

Not a good idea to have a business making a profit or loss sometimes, better to focus on making a profit every time. The costs should be worked out in advance and pricing done such that you make money. Or don't sell the item.

Dropshipping you should be making money all the time, you don't buy the stock until the customer buys from you.

 

[Quinntessentials]

You could VAT register if you wanted to when below the threshold (you have to when you hit the threshold).

What that would mean would be that you add 20% to your prices and collect the VAT for HMRC. For the most part it will mean paying the same money out you are already but you can offset the VAT paid out against the VAT you collect.

Not a good idea to have a business making a profit or loss sometimes, better to focus on making a profit every time. The costs should be worked out in advance and pricing done such that you make money. Or don't sell the item.

Dropshipping you should be making money all the time, you don't buy the stock until the customer buys from you.

Sorry what i meant to say i do make a profit out of every sale just at timrs the delivery charge my suppliers charge is higjer than 3.50 but that balances as othet times its a lot less.But i do add on to products price when i know it exceeds this

So please explain simple

I buy product for one pound plus vat is then 1.20 i sell ir at two pounds equals 80 pemce profit. If i was to go vat registered what would this profit fugure look like then

And bear in mind ny delivery charge is higjer or lowet then my supplier and i know VAT is charged on delivering. So that would be 3.50 delivery and i get it for 2.29 plus vat or 4.49 plus vat depending on weight.

 

[Ken Moorhouse]

IMHO it is not worth a startup registering for VAT unless you are targetting VAT-registered customers who would not be able to reclaim the VAT that you have incurred as a result of buying something from you.

Take the example of you buying something for £100Nett+£20VAT. Let's say for simplicity that you want to sell it at break-even.

If you were VAT-registered you would sell it for £100Nett+£20VAT. The real cost to a VAT registered customer is £100 because they would claim the £20 VAT as input tax. The real cost to a non VAT registered customer is £120.

If you were not VAT registered and you sold it to a non-VAT registered customer then break-even sale price would be £120. To a VAT registered company the real cost to them is £120 too as they cannot claim any Input tax from you.

(I hope I've not muddled that explanation up!)

 

[Mr D]

Sorry what i meant to say i do make a profit out of every sale just at timrs the delivery charge my suppliers charge is higjer than 3.50 but that balances as othet times its a lot less.But i do add on to products price when i know it exceeds this

So please explain simple

I buy product for one pound plus vat is then 1.20 i sell ir at two pounds equals 80 pemce profit. If i was to go vat registered what would this profit fugure look like then

And bear in mind ny delivery charge is higjer or lowet then my supplier and i know VAT is charged on delivering. So that would be 3.50 delivery and i get it for 2.29 plus vat or 4.49 plus vat depending on weight.

You could start charging higher price / higher delivery charge for the items its costing you more to send.

If you buy at £1 plus VAT then sell at £2 plus VAT you are paying £1.20 (as you were before registering) to buy and charging £2.40 to sell in order to keep that £2 you want.

If the selling price remained at £2 then 1/6th of that would be the VAT paid by the buyer, 34p. So you'd have 66p not 80p profit - because you deduct the VAT you have already paid out.

The total of all you have collected in VAT in the quarter has the VAT you have paid out knocked off and the remainder paid to HMRC.

To be honest when dealing with VAT its easier to think totally in terms of excluding VAT. So you pay £1 and charge say £1.67. VAT on that £1.67 is 33p that the buyer pays on top so the buyer pays £2 total.

 

[Quinntessentials]

You could start charging higher price / higher delivery charge for the items its costing you more to send.

If you buy at £1 plus VAT then sell at £2 plus VAT you are paying £1.20 (as you were before registering) to buy and charging £2.40 to sell in order to keep that £2 you want.

If the selling price remained at £2 then 1/6th of that would be the VAT paid by the buyer, 34p. So you'd have 66p not 80p profit - because you deduct the VAT you have already paid out.

The total of all you have collected in VAT in the quarter has the VAT you have paid out knocked off and the remainder paid to HMRC.

To be honest when dealing with VAT its easier to think totally in terms of excluding VAT. So you pay £1 and charge say £1.67. VAT on that £1.67 is 33p that the buyer pays on top so the buyer pays £2 total.

Thankyou so by vat registering and only small outgoings i am worse off in this example by 13 pence so instead of 80 pence profit i only make sixty seven pence

 

[paulears]

If you deal with end consumers and don't have substantial purchases of items used to make the business run - equipment and other large ticket items it's just going to tie your hand behind your back. We're stock building and very few customers are domestic folk - for us being registered is great. We used to sell a few surplus items when we had to buy in bulk, on ebay - we cannot be competitive against non-VAT registered people. They sell items for small margins, and if 20% of our sale price is VAT we collect for the Government often it leave no margin - so we don't use this outlet any more - we were giving away stock, and I'd rather keep it!