Sole trader registering for VAT?

[pendipidy]

Hi newbie here hence probably a simple mistake i am making?

I have an online store selling gifts. I am not currently VAT registered as am under threshold. I do pay VAT to my suppliers though.

For example: If i buy something for £14.99, so am charged £14.99 plus £2.62 VAT (free delivery) so costs me £17.61 to buy.

I sell it for £24.99 plus £4 delivery so in total charge £28.99.

Currently is would make £11.38 profit.

If i registered for VAT could i then claim that £2.62 back but still charge the same amount to the customer (stating £24.99 including VAT plus 4.00 delivery) so my profit would then be £14.00.

Is this how it works or have i missed something? otherwise wouldn't everyone do this?

I must be missing something, but what is it?

Thanks in advance!

Penny

 

[S-Marketing]

You will need to add VAT on to your sale price also.

 

[elaine@cheapaccounting]

£28.99 sales = £24.67 net ( vat would be on delivery as well)

cost £14.99

profit £9.68

 

[elaine@cheapaccounting]

Note I have assume it is £24.99 selling plus £4 delivery = £28.99 which includes vat

Also remember vat rate increases to 20% from 04/01/11

 

[pendipidy]

£28.99 sales = £24.67 net ( vat would be on delivery as well)

cost £14.99

profit £9.68

can you break it down for me? what i charge and what i claim? why is the cost 14.99..because i can claim the rest back?

how is the profit £9.68?

Thanks

 

[pendipidy]

You will need to add VAT on to your sale price also.

I will say that my prices include VAT, is that enough? or do i reduce my prices to the amount it would be with the VAT taken off and then it would be the same when VAT is charged to customer?

 

[S-Marketing]

I will say that my prices include VAT, is that enough? or do i reduce my prices to the amount it would be with the VAT taken off and then it would be the same when VAT is charged to customer?

Yes, sorry I didn't read the bit where you said the 24.99 would be inc. I would imagine it would be fine to do it either way. You get the same figure in the end after all.

Dont be under the impression you can make more money being vat registered, this only normally works if you spend more than you sell, which isnt great for business.

 

[elaine@cheapaccounting]

OK this is how I read you info:

Cost
£14.99 plus £2.62 VAT so costs me £17.61 to buy
You claim the £2.62 back from HMRC on your vat return - so cost proce if £14.99

Sales
£24.99 plus £4 delivery so in total charge £28.99
of this 28.99 / 1.175 x 17.5 = vat
You have to pay this over to HMRC
so net sale is £24.68

So profit is £24.68 - 14.99 = £9.68

 

[Maslins]

Assuming your gifts are bought by individuals (ie rather than corporate gifts) you will virtually always be worse off by registering for VAT.

If your turnover (ie total sales value, ignoring costs) is over £70k, then you have to register. If it isn't, then I recommend you don't register for VAT.

 

[pendipidy]

ok, thanks everyone...didn't realise i woul dget so much help so quickly!!
WHat i have missed (duh) is that i have to pay the VAT i have charged the customer back as well as claiming back what i originally payed the supplier! Right?!
SO i will be worse off as the VAT i charge my custmer will be more as i charge more to make a profit! SO the difference leaves me worse off.

Thanks!


pen

 

[S-Marketing]

ok, thanks everyone...didn't realise i woul dget so much help so quickly!!
WHat i have missed (duh) is that i have to pay the VAT i have charged the customer back as well as claiming back what i originally payed the supplier! Right?!
SO i will be worse off as the VAT i charge my custmer will be more as i charge more to make a profit! SO the difference leaves me worse off.

Thanks!


pen

You've got it.

 

[pendipidy]

i knew i was missing something. i am a cretin!

 

[elaine@cheapaccounting]

ok, thanks everyone...didn't realise i woul dget so much help so quickly!!
WHat i have missed (duh) is that i have to pay the VAT i have charged the customer back as well as claiming back what i originally payed the supplier! Right?!
SO i will be worse off as the VAT i charge my custmer will be more as i charge more to make a profit! SO the difference leaves me worse off.

Thanks!


pen

tax doesn't have to be taxing - LOL

 

[pendipidy]

Thanks for all your help