What if my VAT claim is more then tax due?

[Janemorley74]

Just reading the previous comment about VAT, (i didn't want to steal the post).

It's already looking like this year I will be reclaiming more VAT then what would be due.
My sales are looking like they will be around 90k, so 18k vat owed in vat.
However I will be reclaiming around 22k. What happens with the 4K difference.

Can this be reduced from next years tax bill?
Yes i'm VAT registered and yes limited company.

thanks
Jane

 

[StevensOnln1]

If you are recovering more input VAT than output VAT on your sales then HMRC will repay the difference to your bank account after you file your VAT return.

 

[DWS]

Just reading the previous comment about VAT, (i didn't want to steal the post).

It's already looking like this year I will be reclaiming more VAT then what would be due.
My sales are looking like they will be around 90k, so 18k vat owed in vat.
However I will be reclaiming around 22k. What happens with the 4K difference.

Can this be reduced from next years tax bill?
Yes i'm VAT registered and yes limited company.

thanks
Jane

So to clarify you have sales of £108k inclusive of VAT and purchases of £132k inclusive of VAT if all is reclaimed at 20%
If so then the £4k will be refunded to you after you submit your VAT return,
You say this ‘year’ are you not submitting your VAT returns quarterly?

 

[KM-Tiger]

It's not uncommon to receive a VAT refund in the start up phase of a business. You have invested more than the profit you have made.

You might get a call from HMRC with some questions. They will want to check that your refund isn't fraudulent.

 

[DontAsk]

How does someone get to be running a VAT registered company without understanding the very basics of VAT reporting?

 

[MyAccountantOnline]

Just reading the previous comment about VAT, (i didn't want to steal the post).

It's already looking like this year I will be reclaiming more VAT then what would be due.
My sales are looking like they will be around 90k, so 18k vat owed in vat.
However I will be reclaiming around 22k. What happens with the 4K difference.

Can this be reduced from next years tax bill?
Yes i'm VAT registered and yes limited company.

thanks
Jane

When you say can it reduce next years tax bill what tax bill do you mean?

 

[RandyMarsh]

Relax. You will get the difference repaid to you after the return is submitted. If you pay VAT by direct debit then it will just appear in your account.
This is a fairly common scenario: if you are stocking up a retail business or investing in equipment it's often the case that you generate a VAT surplus. Some businesses do this on a regular basis: if you are only selling zero rated products like fruit and veg then you will always have a negative amount due. Obviously if your return looks suspicious then HMRC may investigate (though this isn't particular common) but if your accounts are up to scratch then it's nothing to worry about.

 

[Blood Lust]

Just reading the previous comment about VAT, (i didn't want to steal the post).

It's already looking like this year I will be reclaiming more VAT then what would be due.
My sales are looking like they will be around 90k, so 18k vat owed in vat.
However I will be reclaiming around 22k. What happens with the 4K difference.

Can this be reduced from next years tax bill?
Yes i'm VAT registered and yes limited company.

thanks
Jane

VAT is a tax on the value added. Lets imagine a supply chain:

Factory > Distributor > You > End Customer

For simplicity sake lets say the factory magics a TV out of thin air costing £100. Then the factory has added £100 of value and needs to collect the VAT for it for HMRC. So with a VAT rate of 20% they charge the distributor £120.

Now the distributor adds value too it, lets say they put it in fancy packaging taking it to £200. So at 20% VAT they sell it to you for £240. Now thats a profit of £100 for them.

Now you add some value to it, lets say you sell it in your shop adding customer care taking it to £400. You have already paid VAT to the distributor when you purchased it. They have sent that VAT to HMRC. Until it is sold you have not received any money, you technically have added no value yet, so you have to wait. Its not until the customer buys it that you have collected VAT to send to HMRC.

So with yourself you are down £40 on VAT and HMRC will refund it to you. Why? Well ultimately the end customer is the one who pays all the VAT. It just gets passed backwards along the chain to you and the others functioning as `tax collectors`. Until you have collected it for HMRC there is nothing to pay.

And if you have VAT to pay on other things instead of a refund it gets deducted off the VAT you have collected for HMRC.

 

[Ivel]

Just double check everything is correct and submit it to HMRC. They will repay the difference in your account. If this is unusual for your business, they might call you, ask some questions and ask to see a copy of calculations and some of the VAT invoices, but nothing stressful.