VAT query and auction site

[Deleted member 72231]

Hello,

I'm trying to find out about VAT and how it's paid/collected.

My firm is based in the UK and the good are purchased in the UK. However, I sell exclusively on a European website who request a VAT nr, and therefore I have to register even though I do not met the 100k threshhold.

As I understand it, when I buy from a supplier I pay the VAT (which is added automatically anyway by the supplier). So, using the obvious number. If I buy 1 item worth £100 from a supplier, he charges me £117.50 for it.

When it sells on auction for, say, £120, do I have to pay VAT on the £120 or the £20 profit? Because an auction's final fee has to have the VAT included.

I hope it's on the profit, because the other option means the deal would have me £3.50 worse off.

And also, what are the VAT rules for online auctions?

And what about when you submit your figures? Do you have to supply the paperwork?

Any advice greatly appreciated.

Best Wishes
Nick

 

[KidsBeeHappy]

Is the website you are selling on exclusively for VAT registered sellers?
What are you selling?

Assuming that he's vat registered, your vat registered, standard rated goods, supplied cross EC border, then you give him your vat number, he doesn't charge you VAT, you don't reclaim the VAT, and just pay for the goods net.

You sell for £120, and pay output vat in the UK on the £120. You have no input vat to reclaim against this. (£17.87)

 

[Deleted member 72231]

Hello,

Thanks for the reply.

I sell watches on a Danish website. I buy the watches in the UK from a supplier and I am not VAT registered at the moment.

The Danish authorities require, by their laws, to have any business operating on Danish websites a VAT number when they reach gross sales of £4000.

I pay tax in the UK but obviously not VAT. The Danish laws have made it necessary to register for a VAT nr volutarily.

The people I sell to are individual private customers and are not VAT registered.

But as I said in my earlier post, auctions have to have the VAT built into the final selling price (or final bid).

So I am very confused about the entire process and when VAt is paid or claimed.

I didn't quite understand your example.
If a watch is listed as £30 then I will pay £35.25 inc VAT
If I sell the watch on at online auction for £45, what is my profit after paying VAT?

Also, using the same example, to list this watch would incur fees of roughly £9.00. Do I take this figure off the final sell price before calculating VAT?

Thanks for helping - does anyone fnd this simple?

Regards
Nick

 

[KidsBeeHappy]

Sorry, thought you were buying from a European supplier.

OK.

You buy a watch for £30 + vat, you pay £35.25.
You sell the watch for £47 including VAT.



On your vat return you declare £7 of output tax, and recover input tax on any relevant business expenses (assume here £1), plus input vat on your purchases (ie the £5.25). You pay over to the vat man £7-£6.25=75p

(If you buy from a european supplier you don't pay or recover the input tax, but you pay the output tax as normal. So you pay out £30, you take in £47, and pay the vatman £6 (ie £7 output less the £1 input vat on expenses) instead of 75p).

Which, if you work the numbers, makes very little difference to the overall cash.

Don't think of profit on each vatable sales transaction, vat doesn't work like that and it muddies the thinking. Vat is a sales tax not a profit tax.

If you are selling at gross prices, then always think in terms of the gross price that you are paying for your supplies, this should help you protect your margins.

 

[KidsBeeHappy]

Re fees. You need to go and read the invoice from the auction. In all liklihood they will be invoicing you fees net of VAT given that you're vat registered. So, if there is no vat on the fees, you have nothing to reclaim.

Stop thinking about individual transactions, and start thinking in terms of output vat for sales, input vat on purchases and expenses, and capital. And the payover is the difference.

But, your margins are too tight, your net sales price is £40, your net purchase price is £30, and you've paid £9 fees. You've made £1 profit.

 

[Deleted member 72231]

Sorry for troubling you further but where does the £7 come from that you say I have to declare?

Also do not understand the £1 expenses.

"On your vat return you declare £7 of output tax, and recover input tax on any relevant business expenses (assume here £1), plus input vat on your purchases (ie the £5.25). You pay over to the vat man £7-£6.25=75p"

Regards
Nick

 

[KidsBeeHappy]

If you are selling at £47, then the vat is £7 and the net is £40.
£1 input vat on expenses, this is just put in for demonstration purposes, but I am assuming that you have other expenses, for example non royal mail postage costs, telephone, website maintenence & hosting, office expenses, computer expenses etc. You recover vat on all these expenses.

As said, you need not to think on a transaction basis for the "vat on the profit". VAT is the payover at the end of the quarter. You could sell loads of stuff for a huge profit but if you've gone and bought some new equipment, or a container load od stock that quarter you're not going to have any vat to payover.

 

[Deleted member 72231]

I really am very grateful for the time you're giving me. Thanks.

Could I finally just drop an example on you which the VAT office won't answer.

In a 3 month period:

I buy items for £500 (£587.50 with VAT)
I sell items for £800.

When I fill in the online form (or whatever) I obviously fill in that I have paid £87.50 VAT for that quarter.

My expenses come to (?) £30.
My listing fees cost £80

How much do I have to pay VAT and how is it what do I fill in on the form?

Thanks again
Nick

 

[KidsBeeHappy]

If £800 is the gross selling price, then you've got £119.15 of output included in that
(800 x 17.5/117.5). This is the output tax on your sales that you taken.

You cand deduct input vat for purchases and expenses as long as you have proper VAT invoices.

So, on purchases, you've got £87.50 of input VAT to recover.

Regarding your expenses, you need to go back through the receipts to see what you've paid out, and also to find out if it's a vatable supply, and whether you've got a vatable invoice. List these expenses, and add up the VAT on them. This input vat can then also be deducted.

Regarding listing fees. You need to get the invoices for these as see what they say. I am assuming that your auction is similar to ebay, so they'll be a vat registered european company, and so will be invoicing you as another vat registered european cross border company simply the net fees without vat. If this is the case, then there is no input vat to recover on the fees.

Therefore, the VAT due to be paid over would be £117.50-£87.50-whatever vat you've got on your list of expenses.

Hope this helps.

 

[Deleted member 72231]

Great - I'm getting there now.

If I regsiter for VAT in May, do I have to back-date all of my transactions?

Regards
Nick

 

[KidsBeeHappy]

No, you give a date from which you want to be registered from, and your registration will start from that date, even if your registration certificate comes in after then. You can state you want to be registered from may 1st, or any other date you wish.

 

[KidsBeeHappy]

No, set your required registration date in the future, to a date that suits, and then from that date you'll be liable for VAT on your sales (even if you don't get the confirmation through). I would set it for say 1 June, give you a chance to get the registration and paperwork all through. Applications online usually go through quickest.