VAT is killing me

[VATHelp]

I've had to register for VAT, but with the recent postage rises, my business will probably go under as I cannot make a profit after I have to pay VAT.

So I was wondering if this was legal -
Set up business in the UAE, where I have citizenship, and that will be the point of sale between the customer and the business. - There is 0% taxation of almost everything there, no VAT etc.

Then UAE business then buys the product from the UK business at a lower price and asks them to dropship to the UK customer (I think VAT will have to be paid on this because of place of supply) but because they buy at a lower price it will be much lower.

Is it possible?

 

[Mpg]

I've had to register for VAT, but with the recent postage rises, my business will probably go under as I cannot make a profit after I have to pay VAT.

So I was wondering if this was legal -
Set up business in the UAE, where I have citizenship, and that will be the point of sale between the customer and the business. - There is 0% taxation of almost everything there, no VAT etc.

Then UAE business then buys the product from the UK business at a lower price and asks them to dropship to the UK customer (I think VAT will have to be paid on this because of place of supply) but because they buy at a lower price it will be much lower.

Is it possible?

Is there a reason your not charging VAT on your product.

You charge it then give most of it over to HMRC.
:|

 

[number42]

From what i understand your using a dropshipping business model for b2c?

If VAT is hurting you so much as a result of you going over the threshold and having to register and incorporate 20% vat into your sales price to end consumers maybe you should look to cut out the middleman so to speak, source the items yourself and supply them?

 

[VATHelp]

Hi,

Sorry sounds like I was a bit unclear.

I am not using a dropshipping model at the moment.

I meant that if customers pay to the UAE business (which I can set up) - so money goes to the UAE bank account

Then UAE uses the UK business (which is the only business at the moment), to dropship for them and pays them a smaller rate, therefore less VAT to be paid here

 

[Scalloway]

I would think that as the goods were supplied in the UK VAT would still be payable.

 

[faradaykeynes]

Soon you will be subject to distance selling vat threshold

 

[VATHelp]

Soon you will be subject to distance selling vat threshold

That only applies to EU companies.

This would be outside the EU. It's a tricky subject this, I think. I personally think there's a chance of making this work - but it sounds too good to be true..

 

[greengecko]

That only applies to EU companies.

This would be outside the EU. It's a tricky subject this, I think. I personally think there's a chance of making this work - but it sounds too good to be true..

In reality this happens on a large scale, everyday. With a lot of Chinese companies shipping to fulfillment warehouses in the UK, where the goods are dispatched. They should, under legislation, register for VAT immediately:

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm

In reality, well as long as it wasn't a multi-million pound company...

Pains me to say that, as the majority of competition in our market sector is from these companies.

 

[kelly69]

Yes, sure. It would be pretty much easier if there would be no VAT

 

[De Paralle Union]

What about the place of goods? Are they remain in UK.
If yes it might look like triangulation, and so the VAT liability is unavoidable
Could you detail the movement of the goods, please.

 

[Karimbo]

you can't depend on your business model to be profitable by not paying VAT. It's a price inflater which every other remotely successful business pays.

I don't think you have much luck operating as a offshore company, being a UAE citizen is a moot point practically anyone from any company can form a LTD (or equivalent) company in most capitalist countries.

The movement of goods is what is significant here.

Think about it, even the multinationals paying a tiny amount of tax that have been in the news recently still have to pay VAT.

This is unavoidable, the only exception is if you sell goods from China and the items are below £15 in value where they are not vatted because it's too costly in administration to levy the customs and VAT on them (I presume).

 

[Garage Runners]

I'm either not reading it right or am quite lost.
If you are dealing with customers, are they not paying the vat at the moment?
or is your profit margin based on the vat you supposedly charged them to your costs less vat?
I'm not vat registered for the car parts so I'm paying vat on my costs and having it reimbursed when I charge the customer with profits including vat.
Yes if I registered for vat I could claim it back from my costs but would still have to charge my customers as the vat man wants it from someone and not just look competitive being 20% cheaper.
If you aren't charging the vat and now risk losing money if you have to, then do you really have a business?

Please excuse me as I may of Interpreted wrong

 

[lesvatadvice]

Non registered example:
purchase price £120 (VAT-incl); selling price £180 - profit £60

VAT registered:
purchase price £100 + VAT (claim back); selling price £150 + VAT (pay over) - profit £50; £10 net payment to HMRC.

You cannot build a substantial business without registering for VAT (in my opinion).
Further, if you are located outside the UK, there is no VAT registration threshold if you are trading in the UK. So you have to register.

 

[VATHelp]

Thanks for the help guys! Looks like I will have to raise my prices and see how it works out for me