VAT for Sole Traders?

[TakeIX]

To All,

I am a newly self-employed individual and I have got an eBay Business account set up an I am in the process of making my first purchase from a wholesaler and apparently they are charging me VAT, as I am not charging any VAT on my present listings which I purchased as "joblots "on eBay.

At least 3 or 4 weeks ago, I had sent my CWF1 form to HMRC in Newcastle by normal post and I had never got any confirmation from them as yet and I am rather concerned that the correspondence has gone astray.

I would be very grateful for any assistance.

 

[MyAccountantOnline]

To All,

I am a newly self-employed individual and I have got an eBay Business account set up an I am in the process of making my first purchase from a wholesaler and apparently they are charging me VAT, as I am not charging any VAT on my present listings which I purchased as "joblots "on eBay.

At least 3 or 4 weeks ago, I had sent my CWF1 form to HMRC in Newcastle by normal post and I had never got any confirmation from them as yet and I am rather concerned that the correspondence has gone astray.

I would be very grateful for any assistance.

Have you or are you intending to register for VAT?

Regarding you other query not hearing anything for 3-4 weeks from HMRC regarding your CWF1 is not at all unusual.

 

[TakeIX]

Have you or are you intending to register for VAT?

Regarding you other query not hearing anything for 3-4 weeks from HMRC regarding your CWF1 is not at all unusual.

Many Thanks for you response,

I am not 100% sure to whether I should register for VAT or not? As I am a sole-trader and this is where I am kind of stuck on.

Regards,

 

[MyAccountantOnline]

Many Thanks for you response,

I am not 100% sure to whether I should register for VAT or not? As I am a sole-trader and this is where I am kind of stuck on.

Regards,

You may have to register based on your turnover, you can also make a voluntary registration which can sometimes be beneficial.

What do you estimate will be your turnover (sales) for the first 12 months and what is the exact nature of your business and who do you sell to?

 

[TakeIX]

You may have to register based on your turnover, you can also make a voluntary registration which can sometimes be beneficial.

What do you estimate will be your turnover (sales) for the first 12 months and what is the exact nature of your business and who do you sell to?

I know this is a vague answer on the turnover side which I know will be around £5,000 or less in the first 12 months??

I will be selling items to potential customers from my eBay store as a retailer, which I am listing brand new goods on a fixed price format.

Regards,

 

[MyAccountantOnline]

I know this is a vague answer on the turnover side which I know will be around £5,000 or less in the first 12 months??

I will be selling items to potential customers from my eBay store as a retailer, which I am listing brand new goods on a fixed price format.

Regards,

With that level of turnover and assuming you are selling to private individuals/people who aren't VAT registered I cant see any advantage to making a voluntary VAT registration.

 

[TakeIX]

With that level of turnover and assuming you are selling to private individuals/people who aren't VAT registered I cant see any advantage to making a voluntary VAT registration.

Do I still have to pay the VAT to the wholesaler when I am ordering stock and I can claim the VAT back when I finalise my tax return??

Regards,

 

[Philip Hoyle]

Do I still have to pay the VAT to the wholesaler when I am ordering stock and I can claim the VAT back when I finalise my tax return??

Regards,

Yes, the wholesale will charge you VAT. No, you can't reclaim it on your tax return. It's just an added cost of your purchases. VAT is a sales tax, not a profit tax. Two completely different things. All VAT will do is reduce your profit, so you'll pay less income tax on those lower profits. You certainly can't set VAT paid against income tax due.

 

[MyAccountantOnline]

Do I still have to pay the VAT to the wholesaler when I am ordering stock

Yes you do.

can claim the VAT back when I finalise my tax return??

No - you can only recover VAT when you are VAT registered.

When you complete your tax return the expenses you claim tax relief on will include any VAT you have had to pay so you get tax relief on it.

 

[Ideaswise]

It's actually not a bad idea to be VAT registered - it shows you're a serious business. And if you're on flat rate, depending on your line of business and your overhead levels, you can actually make money on charging VAT.

 

[MyAccountantOnline]

It's actually not a bad idea to be VAT registered - it shows you're a serious business. And if you're on flat rate, depending on your line of business and your overhead levels, you can actually make money on charging VAT.

I'm not entirely convinced that it shows people you have a 'serious business' - I would have thought the average buyer on Ebay will be interested in price and wont give a second look as to whether the seller is VAT registered.

I certainly wouldn't register solely for any perceived benefit of being a serious business for someone such as the OP.

The Flat rate scheme can be beneficial to some businesses but not all and certainly anyone considering using the scheme needs to do some calculations.

 

[TakeIX]

@Ideawise, Phillip Holye & MyAccountantOnline,

This is quite confusing as I am not charging any VAT on my present items before I make my first purchase from the wholesaler but however I am not entitled to include the VAT on these items because I am not VAT registered?

What I don't want to do is drive away potential customers from my eBay online because they are an asset.

Regards,

 

[MyAccountantOnline]

@Ideawise, Phillip Holye & MyAccountantOnline,

This is quite confusing as I am not charging any VAT on my present items before I make my first purchase from the wholesaler but however I am not entitled to include the VAT on these items because I am not VAT registered?

What I don't want to do is drive away potential customers from my eBay online because they are an asset.

Regards,

You can not charge anyone VAT as you are not VAT registered.

 

[TakeIX]

@Ideawise, Phillip Holye & MyAccountantOnline,

Many Thanks to you all!

 

[Ideaswise]

That's a fair point about eBay - I hadn't picked up that you were just selling on eBay, where price will be paramount. It's still valid in a wider sense though, I believe, (certainly in my line of work).

And yes, obviously it all depends on your overhead levels as to whether flat rate can be profitable.