Sole-trader billing customer VAT unregistered

[chromatin-hero]

Good day,

This is more of a sanity check so please bear with me. I am a sole trader and VAT unregistered with no chance of exceeding the threshold any time soon.

I am importing goods on DDP incoterms from china into the UK to my storage. At this point, my supplier will have paid all customs, duty and VAT due on my behalf per DDP.

The goods will be resold to customers within England. When in comes to invoicing said customers do I add up the cost of goods, customs, VAT I paid, duty and my margin to give me a figure that I charge the customer?

I do not need to make a separate line on the invoice to my customer for VAT. In fact, I am unable to charge VAT separately as a VAT unregistered entity. However, I will effectively be increasing the price of my goods to account for the VAT I paid thus 'reclaiming' it from the customer.

Thus, my invoice would have one line for cost of goods to customer and a separate line for shipping/handling.

Is this logic correct?

Thanks

 

[Newchodge]

Good day,

This is more of a sanity check so please bear with me. I am a sole trader and VAT unregistered with no chance of exceeding the threshold any time soon.

I am importing goods on DDP incoterms from china into the UK to my storage. At this point, my supplier will have paid all customs, duty and VAT due on my behalf per DDP.

The goods will be resold to customers within England. When in comes to invoicing said customers do I add up the cost of goods, customs, VAT I paid, duty and my margin to give me a figure that I charge the customer?

I do not need to make a separate line on the invoice to my customer for VAT. In fact, I am unable to charge VAT separately as a VAT unregistered entity. However, I will effectively be increasing the price of my goods to account for the VAT I paid thus 'reclaiming' it from the customer.

Thus, my invoice would have one line for cost of goods to customer and a separate line for shipping/handling.

Is this logic correct?

Thanks

You invoice your customer for whatever you are charging them. I would expect to see 1 figure. Your costs are none of my business.

In calculating what you charge your customers you need to know what it has cost you in total.

Those are 2 different figures.

 

[MBE2017]

OP, as you suggested, just add all your import, transportation and duty costs to the cost of the goods, work out your selling price. I doubt most customers would be interested in shipping etc, they just want a unit price.

 

[chromatin-hero]

OP, as you suggested, just add all your import, transportation and duty costs to the cost of the goods, work out your selling price. I doubt most customers would be interested in shipping etc, they just want a unit price.

Yes, I'm not implying I'm going to give them a breakdown of costs. The invoice will have single figure that I expect them to pay.

This question is more about the VAT. As I'm a non-VAT registered company, I cannot charge VAT and should not display a VAT amount on my invoice. Correct?

 

[MBE2017]

Yes, I'm not implying I'm going to give them a breakdown of costs. The invoice will have single figure that I expect them to pay.

This question is more about the VAT. As I'm a non-VAT registered company, I cannot charge VAT and should not display a VAT amount on my invoice. Correct?

Correct.

 

[Customs Geek]

I am importing goods on DDP incoterms from china into the UK to my storage. At this point, my supplier will have paid all customs, duty and VAT due on my behalf per DDP.

Thanks

I would also double check that your Chinese supplier is really covering all the taxes including the import VAT. It is extremely difficult for a non UK business to import into the UK and it is most common that the recipient is declared as the importer . The Chinese seller may be expecting you to be VAT registered and able to account for the UK import VAT.

If the price you are paying is truly DDP and you have nothing else to pay that is your cost . The invoice from the supplier should be an all in price.
They can include the VAT they incur as a cost but this isn’t the same as charging you VAT.

 

[chromatin-hero]

I would also double check that your Chinese supplier is really covering all the taxes including the import VAT. It is extremely difficult for a non UK business to import into the UK and it is most common that the recipient is declared as the importer . The Chinese seller may be expecting you to be VAT registered and able to account for the UK import VAT.

If the price you are paying is truly DDP and you have nothing else to pay that is your cost . The invoice from the supplier should be an all in price.
They can include the VAT they incur as a cost but this isn’t the same as charging you VAT.

If the supplier issues me an invoice with DDP terms and a complete breakdown including cost of goods, sea freight charge, VAT and duty that I can reconcile against a bank statement showing an equal amount paid to them, then surely I am covered ?

The supplier in this case is using a chinese freight forwarder with experience of shipping to the UK.

I guess the main questions is how can I guarantee that the shipment will pass through customs without issue?

 

[Customs Geek]

If the supplier issues me an invoice with DDP terms and a complete breakdown including cost of goods, sea freight charge, VAT and duty that I can reconcile against a bank statement showing an equal amount paid to them, then surely I am covered ?

I was simply suggesting you checked as so many seem to get stung when importing for the first time.
if you’re happy you won’t have anything else to pay that’s fine. Why do you need to reconcile the amount to a bank statement though.

It is customs that actually charge the duties and taxes based on the invoice value provided to them .

The supplier in this case is using a chinese freight forwarder with experience of shipping to the UK.

Again fine provided they are also competent with getting the goods customs cleared

I guess the main questions is how can I guarantee that the shipment will pass through customs without issue?

It should be the suppliers problem not yours . You shouldn’t be involved in the import process at all with DDP.

 

[japancool]

If the supplier issues me an invoice with DDP terms and a complete breakdown including cost of goods, sea freight charge, VAT and duty that I can reconcile against a bank statement showing an equal amount paid to them, then surely I am covered ?

If your supplier provides you with a false DDP invoice, or the goods haven't been sent DDP or cleared properly through customs, it won't matter what you agreed or paid your supplier. HMRC won't care - you'll have to pay whatever customs charges they demand if you want your goods.

If it's all been booked and cleared correctly, then there won't be a problem, of course.

 

[WaveJumper]

Out of interest who are your customers, business or the general public

 

[chromatin-hero]

Out of interest who are your customers, business or the general public

Businesses, why?

 

[Calvin Crane]

As I understand it you need to register for VAT and charge that to the customer which is 20% of the cost you decide to charge. This is Rishy tax 2018 I think. So everyone trading online prior was able to avoid charging VAT on goods sold if they were under a 120 roughly speaking price point. But now even a plastic dog toy has to have VAT added to it. The reason given was to allow the high street to have a chance! So they not allowed to sell online too? We should never listen.

 

[Customs Geek]

As I understand it you need to register for VAT and charge that to the customer which is 20% of the cost you decide to charge. This is Rishy tax 2018 I think. So everyone trading online prior was able to avoid charging VAT on goods sold if they were under a 120 roughly speaking price point. But now even a plastic dog toy has to have VAT added to it. The reason given was to allow the high street to have a chance! So they not allowed to sell online too? We should never listen.

This is not relevant to the OP‘s question . They have said they are a UK business so they do not need to register for VAT until they reach the VAT threshold.

The requirement to register for VAT on low value shipments is not for UK businesses but primarily for overseas e-commerce operators or e-commerce platforms who are shipping goods below £135 in value to UK consumers.

guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk

The EU also have a similar system.
The reason was to reduce VAT fraud on imports and similar requirements are happening all over the world.

 

[japancool]

The reason given was to allow the high street to have a chance! So they not allowed to sell online too?

So you think it's fair that a tat seller in China could get away with charging less that someone in the UK selling the same tat?

 

[MBE2017]

As I understand it you need to register for VAT and charge that to the customer which is 20% of the cost you decide to charge. This is Rishy tax 2018 I think. So everyone trading online prior was able to avoid charging VAT on goods sold if they were under a 120 roughly speaking price point. But now even a plastic dog toy has to have VAT added to it. The reason given was to allow the high street to have a chance! So they not allowed to sell online too? We should never listen.

The most incorrect answer I have ever seen on the forum. Please only contribute if you have the correct information.

VAT registration can be done on a voluntary basis at any level of turnover, but becomes mandatory once turnover reaches £85,000 pa, or is likely to breech that figure within 30 days.

 

[Calvin Crane]

The most incorrect answer I have ever seen on the forum. Please only contribute if you have the correct information.

VAT registration can be done on a voluntary basis at any level of turnover, but becomes mandatory once turnover reaches £85,000 pa, or is likely to breech that figure within 30 days.

Yet I am probably right. VAT needs to be charged to UK customers on items regardless of cost now.

Prone to exaggerate =

The most incorrect answer I have ever seen on the forum

UK Distance Selling Rules in Summary - TRA Vat Consulting

Changes to distance selling rules for the UK were implemented as part of The Taxation Act. This is a summary of the changes as at 1st January 2021

tra.org

 

[MRQ]

As I understand it you need to register for VAT and charge that to the customer which is 20% of the cost you decide to charge. This is Rishy tax 2018 I think. So everyone trading online prior was able to avoid charging VAT on goods sold if they were under a 120 roughly speaking price point. But now even a plastic dog toy has to have VAT added to it. The reason given was to allow the high street to have a chance! So they not allowed to sell online too? We should never listen.

As MBE says... you have this very, very wrong! The overarching principles of VAT registration haven't changed in generations. 'Rishy tax 2018'? Huh? What makes you think that?

 

[Calvin Crane]

As MBE says... you have this very, very wrong! The overarching principles of VAT registration haven't changed in generations. 'Rishy tax 2018'? Huh? What makes you think that?

May have the year wrong but for example eBay started charging VAT on all the products we buy- looks like it was 2021 Jan 18th. Everything after this law was passed now was 20% more expensive. So it happened through Rishy hence Rishy Tax. It was a bit of humour. Guys you need to lighten up. eBay sellers will know this. Amazon the same these are called OMP Online Market Places. If you have your own e-commerce store you can no longer not charge VAT regardless of your turnover. That remains my understanding as I had to at the time get my head around it. If I am wrong but proven not just links or opinion then I will own it.

 

[DontAsk]

If you have your own e-commerce store you can no longer not charge VAT regardless of your turnover.

Completely and utterly wrong. Stop digging.

 

[MBE2017]

If I am wrong but proven not just links or opinion then I will own it.

Register for VAT

How to register for VAT, change your details, cancel your registration, register for VAT in EU countries.

www.gov.uk

Own it.

 

[japancool]

If you have your own e-commerce store you can no longer not charge VAT regardless of your turnover.

Err, no. If you're not over the VAT registration threshold and you're selling via your own website, you do not have to register for VAT.

It's different if you're selling via a marketplace. Marketplaces are now responsible for charging VAT.

 

[DontAsk]

If I am wrong but proven not just links or opinion then I will own it.

You are wrong, but if you will not accept a link how do you expect someone to provide the proof?

 

[Newchodge]

As I understand it you need to register for VAT and charge that to the customer which is 20% of the cost you decide to charge. This is Rishy tax 2018 I think. So everyone trading online prior was able to avoid charging VAT on goods sold if they were under a 120 roughly speaking price point. But now even a plastic dog toy has to have VAT added to it. The reason given was to allow the high street to have a chance! So they not allowed to sell online too? We should never listen.

You understand completely wrongly. The law never changed. Many online sellers ignored the law on VAT and were warned that they must comply or face the consequences.

 

[Socio South West]

Interesting topic. My understanding of DDP is that it relates only to the Customs Duty, and VAT on the import is not part of the Incoterm. The reason being that Incoterms are International whereas VAT is only European.

Can any more experienced importer advise on this?

DDP is a rare enough beast in itself, but if OP has found someone to pick up the import VAT bill as well I believe they are indeed fortunate.

<Edit - A bit more digging has revealed that the Incoterm is usually qualified to include or exclude the import VAT - and more often than not it is excluded>

 

[JEREMY HAWKE]

As I understand it you need to register for VAT and charge that to the customer which is 20% of the cost you decide to charge. This is Rishy tax 2018 I think. So everyone trading online prior was able to avoid charging VAT on goods sold if they were under a 120 roughly speaking price point. But now even a plastic dog toy has to have VAT added to it. The reason given was to allow the high street to have a chance! So they not allowed to sell online too? We should never listen.

You are wrong part 6

You don't charge vat as an online seller if you are not vat registered and if you are below the threshold and don't wish to be registered.

As for the members lightning up .There is a lot of pissing around and having a laugh that goes on here but members are ferociously protective of incorrected advice going into the public domain from posts that they are part of

 

[WaveJumper]

Businesses, why?

The reason I asked this was fairly simple, if and a big if as I don’t know either your pricing or product but if your adding all your costs onto your product as you mentioned (in your original post) hopefully your prices are still well below that of your competition who may well include VAT in their pricing, as those business purchasing would be looking to re-coupe the VAT off their costs suddenly making yours look less attractive … just a thought

 

[chromatin-hero]

The reason I asked this was fairly simple, if and a big if as I don’t know either your pricing or product but if your adding all your costs onto your product as you mentioned (in your original post) hopefully your prices are still well below that of your competition who may well include VAT in their pricing, as those business purchasing would be looking to re-coupe the VAT off their costs suddenly making yours look less attractive … just a thought

This is specialist equipment for a highly technical application. The businesses purchasing from me are the end consumer so-to-speak, thus, there is no VAT for them to recover, correct?

 

[Newchodge]

This is specialist equipment for a highly technical application. The businesses purchasing from me are the end consumer so-to-speak, thus, there is no VAT for them to recover, correct?

No. If the end consumer is VAT registered they can recover VAT they have paid