VAT question, purchasing from EU

[JasonG]

One of our suppliers has ceased trading directly in the UK. We now purchase stock from them in Germany. Because of this we no longer pay VAT on these purchases.
However, this means that because we are not 'claiming' the VAT from the purchase, when we sell that item the VAT man is taking all of the VAT.

An example:

Purchased in the UK:

Item costs £10+VAT. We sell for £20 (£17.39 net) VAT man gets £2.61 less VAT claimed back of £1.50 = £1.11

Purchasing from Germany:

Item costs £10. We sell for £20 (£17.39 net) VAT man now gets £2.61 (no VAT to claim back).

Our supplier doesn't see this as a problem and reckons that some of their larger customers have purchased directly from Germany for years without any issues over VAT. I'm thinking that there must be some way of claiming this VAT back but apparently not?! Does anyone here know differently?

 

[Zeno]

UK (ex-VAT)
Sales Price - £17.39
Purchase Price - £10.00
Net Profit - £7.39

Germany (Ex-VAT)
Sales Price - £17.39
Purchase Price - £10.00
Net Profit - £7.39


Your profit is exactly the same. It is only a cashflow issue on your VAT return.

 

[JasonG]

Thanks Zeno,

That is what I thought, but my boss thinks we would be paying more VAT than we need to by purchasing via Germany?

 

[Zeno]

Thanks Zeno,

That is what I thought, but my boss thinks we would be paying more VAT than we need to by purchasing via Germany?

As it was before, you were paying £11.50 (£10 + VAT) per unit on your purchases then claiming the £1.50 back up to three months later on your VAT return.

Now, you just pay the £10.00 per unit.

The net result is that your payments to your supplier will be lower but your payments to HMRC will be higher.

None of this has any bearing on the profit.

 

[JasonG]

Indeed, that is the part we were overlooking! Thanks.

 

[Zeno]

Are you comfortable with the reverse charge mechanism on your VAT return?

 

[JasonG]

Never heard of it, and I have a feeling my boss who looks after the accounts may not understand it. Do you have a link to somewhere I could read up about it?

 

[Williams lester]

Never heard of it, and I have a feeling my boss who looks after the accounts may not understand it. Do you have a link to somewhere I could read up about it?

http://www.hmrc.gov.uk/vat/managing/international/imports/importing.htm

 

[Zeno]

Never heard of it, and I have a feeling my boss who looks after the accounts may not understand it. Do you have a link to somewhere I could read up about it?

Before your boss gets his knickers in a twist, try to make him understand that this is purely an adjustment on the VAT return for adminstration purposes only. It results in no more or less VAT payable.

 

[winelight]

If these are goods rather than services (and don't fall under the reverse charge rules for mobile phones, computer chips etc), then there is no reverse charge.

 

[Zeno]

If these are goods rather than services (and don't fall under the reverse charge rules for mobile phones, computer chips etc), then there is no reverse charge.

I meant the EU aquisitions part on the VAT return. Not sure what is proper name is.

 

[JasonG]

They are goods - car audio equipment

 

[winelight]

I don't either, I usually just go by box number!

 

[myfirstimportbusiness]

Can someone please tell me if I can reclaim VAT on acquisitions from the EU which come from retailers and not wholesalers?
Of course, these goods are for re-sale by my company in the UK and VAT receipts can be provided for me.