VAT on Sales

[fishman1908]

Hi, I have just joined the forum after finding it from searching for this query so be gentle please.

I am importing goods from China/Hong Kong but the importer has a UK warehouse and is paying all import duty, VAT etc so I just call off what I want although I pay in dollars direct to HK.

Do I still have to involve VAT on all the sales through my retail shop?

Thank you

Robin

 

[MOIC]

Yes.

You must charge VAT in a retail shop.

You can claim it back, ONLY if you are registered for VAT.

Have you not spoken to an accountant prior to opening your shop / business?

 

[fishman1908]

Yes.

You must charge VAT in a retail shop.

You can claim it back, ONLY if you are registered for VAT.

Have you not spoken to an accountant prior to opening your shop / business?

Yes, I am more than aware of my "normal" VAT responsibilities as I have been in retail for over 11 years but I have only just started to import goods directly and I was confused by my suppliers comments that stated he had paid all duties including VAT and that I didn't need to include VAT on my sales, which I thought was incorrect so was the reason I wanted it confirmed on here.

Thank you.

Robin

 

[HertsCCTV]

God If Only I Had A Delete Button!!!!

 

[MOIC]

Yes, I am more than aware of my "normal" VAT responsibilities as I have been in retail for over 11 years but I have only just started to import goods directly and I was confused by my suppliers comments that stated he had paid all duties including VAT and that I didn't need to include VAT on my sales, which I thought was incorrect so was the reason I wanted it confirmed on here.

Thank you.

Robin

You always have to include the VAT on sales if sold in the UK.

This is nothing to do with the VAT you pay when importing your goods.

If your supplier has paid the VAT on your behalf, then he should issue you with a VAT invoice so you can claim the VAT back when doing your VAT returns.

 

[Vardan 89]

I agree with My office in China.
Do the importer give you a VAT invoice at all?
When making sales you do need to charge VAT to your customers and importer should give you a VAT invoice for you to claim it back.

Assuming importer gives you a VAT invoice, then I am wondering why you would still pay in US dollars?

 

[kulture]

I have to disagree sorry.

If you are VAT registered then VAT has to be charged on sales at the correct rate for the product. It is possible that what you are selling is zero rated (for instance childrens clothes or books).

If you are not VAT registered then you cannot claim back any VAT charged to you, nor can you charge VAT on sales.

Your supplier MAY not be VAT registered, and thus will not be charging you VAT when you purchase goods from him. Thus there is no VAT to reclaim. Further if your supplier is not VAT registered then he cannot claim back the VAT he paid when he imported the goods.

If either you or your supplier has a turnover of over £72,000 in the UK then you (or your supplier) have to be VAT registered.

 

[Vardan 89]

Thanks Kulture, I agree with you too.
There are lots of if's around unless the original poster provides the exact VAT situation at his end and at his suppliers end.
It is apparent from OP's statement that he is in retail and is aware about VAT.
It will be a shame if his importer is not a VAT registered and the cost of the product to OP and the end user will increase unnecessarily, apparently resulting into being uncompetitive - I hope I am making sense here.

 

[sla3]

Thanks Kulture, I agree with you too.

In this case you cannot agree with both.

You do not need to charge VAT if you are not registered for VAT, or if the product or service is exempt or zero rated, or on exports outwith the EU.

If your supplier charges VAT on his invoice and he is registered for VAT, then you pay it. Simple. If he is not registered for VAT he cannot charge VAT on his invoice.

The sole exception to that last statement MIGHT BE where he has disbursed VAT on 'your' behalf as part of the customs clearance process, but I cannot construct a real-life example where this could actually happen.

 

[sla3]

I was confused by my suppliers comments that stated he had paid all duties including VAT and that I didn't need to include VAT on my sales, which I thought was incorrect so was the reason I wanted it confirmed on here.

Probably lost in translation. If he has paid all VAT & Duty due on import, which he may well have done, and supplies you in the UK, the importing entity will bill you inclusive of VAT at whatever price you agreed.

Actually YOU are not importing anything: he is, or his UK counterpart, or branch office or whatever. You might be placing an order with his HK office (or whatever) but from what you say, he is the importer.

Very simple really: you are buying goods in free circulation in the UK from a UK vendor against an invoice bearing VAT (which may or may not be in HK$, in which case you translate them to £ in your accounts) and you buy HK$ and send them to Hong Kong.

It is possible that your supplier has some kind of bonded warehouse, which means duty and VAT is paid only when the goods are withdrawn from the warehouse, not when they land in the UK, but you probably needn't concern yourself with that, especially as from what I remember, the duties, and quotas and other tariff measures on clothing are rather complex.

 

[MOIC]

In this case you cannot agree with both.

You do not need to charge VAT if you are not registered for VAT

You CANNOT charge VAT if you are NOT REGISTERED.

 

[kulture]

I think the whole thread is lost in translation and we are all arguing from the same side.

When you import goods you pay the VAT due. If the importer is not registered for VAT then he cannot claim this VAT back, nor can he charge VAT on the onward sale. HOWEVER the VAT paid will naturally have increased the cost and thus presumably the sale price.

When the retailer buys the goods from the importer, if the importer was not VAT registered then the VAT paid on the import cannot be reclaimed. The retailer, if they are VAT registered, should have imported the goods themselves so that they could reclaim this VAT. Either way, if the retailer is VAT registered then they have to charge VAT on the sale.

I suspect that we are all saying this.

 

[TechKing]

I think ,you should include VAT in your sales ..

 

[sla3]

You CANNOT charge VAT if you are NOT REGISTERED.

Thank you for correcting my words: replacing "needn't" with "cannot" does indeed make the same point more strongly

 

[GraemeL]

What a mess this thread is!

I don't understand how you can pay an amount that includes VAT, in $, to an HK account. Surely the VAT must go to a UK registered business and then declared to HMRC?

The HK business cannot have a VAT number, so the VAT cannot be reclaimed

G

 

[sla3]

What a mess this thread is!

I don't understand how you can pay an amount that includes VAT, in $, to an HK account. Surely the VAT must go to a UK registered business and then declared to HMRC?

The HK business cannot have a VAT number, so the VAT cannot be reclaimed

G

The VAT doesn't have to "follow the money", and the money actually doesn’t even have to move (e.g. if the buyer is already in credit with the seller) It's really a paper/accounting transaction rather than one based on a flow of 'physical' money, except for the final payment to the VATman.

The UK-branch (for want of a better word) issues a VAT invoice (and is registered for VAT). It is for them to account for that VAT. Their customer settles the invoice by remitting a sum of money to HK according to the contact between them. This is why the issuing of an invoice is actually not a trivial matter.

I was perhaps incorrect in saying that the invoice could be ISSUED* in HK$ but it can certainly be settled in HK$ according to whatever contract exists between buyer and seller.

*I can't satisfy myself one way or another on this. For example if I buy Tulips from Amsterdam the two sensible currencies I could be invoiced in would be Euros or £. I'd be billed VAT whatever the currency, at the Dutch rate. Why, the could the Dutch company not invoice me in US$ or HK$, I ask myself. I cannot come up with an answer that says "they cannot", al they would do is translate the foreign currency to their accounting currency in their accounts. OTOH, perhaps the regulations mean you have to issue your bill in your accounting currency and then translate it to a foreign currency on the invoice. I cannot work out which.

 

[paulears]

Surely we are just complicating this. Hong Kong does not have any VAT system, so if they quote $1000, then that is what they expect to be transferred to their account. When the goods arrive in the UK there will be a customer declaration - a very small form that states how much the item cost, and what the shipping charge was. When it arrives here, the designated carrier will put it through customs, and pay VAT and possibly import duty (based on the description on the package). They do this on your behalf. A week or two later you will receive a bill from them, which you must pay. If it is for the VAT there will probably be a charge for processing too. The invoice has a VAT number on it, so if you are registered this is input tax, which you 'claim back' by offsetting it against your output tax next quarter. If you are NOT VAT registered, then this invoice just has to be paid and you are a little worse off!

That's it. It is no more complicated than that.

 

[sla3]

No no. The OP says that the UK "branch" of the HK seller is the importer. Probably into a bonded warehouse. The buyer calls-off what he wants from the stock he has ordered. He is probably billed in £ in the UK by the VAT-registered importer (who operates the warehouse) and in settlement of the invoice raised in the UK he remits HK$ to HK.

There's nothing wrong with what you're saying, it just doesn't apply in this case.