VAT on soft drinks

[Stephen Danks]

Hi,

I've got a question RE VAT on carbonated drinks.

I've just started a small business. I am going around offices at lunchtime with a basket of freshly made sandwiches & home bakes etc (all cold food, vat exempt items)

I am not VAT registered, as I am not above the threshold, and as I am selling cold foods outwith premises, and am not a "caterer", I do not need to charge this (according to VFOOD4600 - on HMRC website). This is good as my prices are low and competitive, and startup costs were low enough that I'm relatively happy not to claim back the VAT (which would require voluntary VAT registration?)

However; I would like to sell soft drinks (ie cans of coke etc). These are considered standard rate VAT items according to HMRC.

My question is this. As I am not above the VAT threshold, and apparently exempt from charging it, and will be paying VAT on drinks when purchasing from suppliers, will I need to charge VAT when I sell them on?

Any advice would be greatly appreciated.

Stephen

 

[Scalloway]

If you are not VAT registered you ignore VAT entirely. It is part of your costs for buying and it is illegal to charge it if you are not registered.

 

[Bob]

No you won't need to register for VAT until you exceed the threshold. You can sell VAT liable products but will just have to price them without mentioning VAT. The VAT you incur will just be part of your cost of sales e.g. you buy a product for 20p + VAT, it has cost you 24p and you must take that cost into account when setting your selling price. If you sell it for 30p you have made 6p profit. Hope this helps

 

[Stephen Danks]

thanks guys!

That was what I thought, but the terminology used in the VAT rules on food seemed to imply I had to charge it, contradicting the guidance given on VAT threshold. It's been a long day! Can sleep easy now.


kind regards,

Stephen

 

[Alan]

Yes you can't charge VAT as you are not VAT registered.

Also you are better off.

See calculations here

-----------------------------

Not VAT registered.

Trade Price: ex VAT 50p
VAT 10p
cost to you 60p

Selling price £1.00

Profit 40p

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VAT registered

Trade Price : ex VAT 50p
VAT 10p


Selling price: ex VAT 83p
VAT 17p
-----------
£1.00

VAT reclaimed 10p
VAT paid the HRMC 17p

Profit (£1.10 - 77p) = 33p => 7p worse off

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