Zero rate VAT

[nico X]

I'm trying to encourage my client to zero rate VAT for ecommerce sale we ship out of UK. But he is reluctant and tells me he can't claim back VAT. He can, I think he is just using it as an excuse.

But I don't want to advise him to do something that he will lose on.

For example, when he imports clothing from Italy, he pays the VAT.

So for something that cost £50 he pays £60 with 20% VAT.

If he sell that within the UK, for £100. His gain in £40.

If he sell it outside the UK, that would be £100 - 20% VAT, sold for £80.

Now claiming back VAT would be £10. As imported it for £50. So profit in this case would be £30, £10 less than if sold in the UK.

 

[WaveJumper]

I might have been the long day ive had but I am reading this and not sure I understand. Your trying to supply zero rate, your client is reluctant as he can't claim vat back ?

 

[japancool]

I'm trying to encourage my client to zero rate VAT for ecommerce sale we ship out of UK. But he is reluctant and tells me he can't claim back VAT. He can, I think he is just using it as an excuse.

But I don't want to advise him to do something that he will lose on.

If he's VAT registered, he claims back the import VAT regardless of where he sells.

If he's NOT registered for VAT, he can't claim back the VAT when exporting, as the goods have entered free circulation in the UK.

£100-20% VAT is not £80 btw. It's £83.33.

 

[nico X]

If he's VAT registered, he claims back the import VAT regardless of where he sells.

If he's NOT registered for VAT, he can't claim back the VAT when exporting, as the goods have entered free circulation in the UK.

£100-20% VAT is not £80 btw. It's £83.33.

Yes you are right, sorry I'm new to VAT, my client has been VAT registered for over 20 years.

If he's VAT registered, he claims back the import VAT regardless of where he sells.
As I can understand, he can claim back the VAT he paid when importing the merchandise, when sold?

£83.33 is the pre-VAT price. He sells it in UK with VAT included for £100. He needs to pay VAT £16.67 to the tax office. Then he gets the VAT back what he paid for importing. So the difference would be something like £6.67.

Now question is if item sold and shipped out of the UK. It will be sold for £83.33, and no need for tax office to claim any VAT? But he can get the VAT for what he paid when importing the item.

 

[NickGrogan]

I don't think you should be advising your client on VAT.

Get them to speak to their accountant.

 

[japancool]

As I can understand, he can claim back the VAT he paid when importing the merchandise, when sold?

Only if he is VAT registered.

Now question is if item sold and shipped out of the UK. It will be sold for £83.33, and no need for tax office to claim any VAT? But he can get the VAT for what he paid when importing the item.

Correct. But he can choose to sell it for £100 if he wants. That sale price has no VAT element.

I agree with Nick. This is a commercial choice for your client, not sure why you would be advising him on it unless you are their accountant or a VAT adviser.

 

[nico X]

I got it, thank you.

In these times, we are selling most of 50% off. Marketplace fees and my fees on top of that, will get him to more or less sell something not only for free, but from his own pocket.

Now, if he sells with the VAT on non UK shipments, he will be on top a bit, as that will be regarded as sale price. But for me, it would be less sale, as we are not competitive. Even though it's 50% off. I'm taking into account, that the customer will need to pay VAT when they import it, and the customers take this into account as well, and don't buy if it's not really something that they really want.

 

[japancool]

OK, but you're advising your client to do something that isn't beneficial for them, but is beneficial for you.

Is that really what you should be doing?

 

[nico X]

It's a complex situation as there is a UK shop involved and ecommerce trade to non UK customers. As well, he earns more if sold in the shop rather than online, as I have my commission, and so does the marketplaces we list them on.

I own the website, so I advise him according to my requirements. If that doesn't suit, then everyone can do how they prefer with what they have created on their own. Hope that answers your question.

 

[Newchodge]

NEVER, EVER ADVISE FAMILY MEMBERS.

 

[SERC1204]

As I can understand, he can claim back the VAT he paid when importing the merchandise, when sold?

You don't wait to sell the item before you can reclaim the VAT, the VAT is reclaimed based on the purchase.

As has been stated above, they should really raise this with their accountant. Import and epxort VAT (and duties for that matter) can sometime be like tryin to plait sawdust and I'm not ocvinced your take on VAT is correct.