Can VAT registration mean less profit?

If your business is doing so well, then why have'nt you asked your accountant this basic question?

It is something that is quite serious, and will make a huge difference in terms of profit...

You need to understand the basics of your business..

So it is worth paying an accountant..to get sound advice....

In article , Graeme Nicholson writes

It is a "Value Added Tax", so you actually end up paying 17.5% on the value you add. So, in priciple, the answer is yes.

However, it becomes complicated when buying from non vat registered sellers, and selling as a vat registered seller.

You need your accountants help

Stephen, meet Graeme. Graeme, meet Stephen. You have so much in common, I'm sure you'll get on well ...

Because Mr Nicholson like to have his crazy VAT scams given the once over by the members of this group first.

For a change he has asked a sensible question.

(The answer is yes BTW, as real world traded has to put his prices up, unfortunately an ebay trader doesn't have this option)

Tim

Although you can state that VAT will be added to the winning bid.

In message , Stephen GoldenGun writes

Why would he need an accountant?

No, 14.89% but rounded to 15% in your example.

Your arithmetic was correct up to this point.

when you sell at £100, £14.89 is VAT not £17.50.

Your reduced profit of £5.10 is 85% of £6, so your profit is reduced by

Paying an accountant to tell you this would be a waste of money.

to the OP basically you pay customs and excise the VAT in your profit

OK Fair enough! When it comes to VAT I am very much believing in getting it thoroughly checked out, especially as so much money is at stake.

But as you say, if your confident enough then thats just fine.

I believe out of the government agencies to stay on the right side of......the VAT is the number one agency that has the overall most "ruthless and unconcerned" nature as opposed to the TAX Office.

So if you inadvertently make a mistake for some reason, you are less likely to get a freindly or undestanding response than from the TAX Office.

But thats only my humble opinion.

Who and where are your customers? If they include private individuals in other Member States, it gets complicated... You might have to register in those other States, as well as in the UK...

Saints preserve us.

If you are selling £94 items for £100 currently (profit £6, margin 6%)

At £55,999 you will make £3,360 profit At £56,000 you will pay £8,340 Output VAT and on your purchases of £56,000 x 94/100 = £52,640 you will recover £7,840 of Input VAT leaving you £8,340 - £7,840 = £500 worse off.

Are you really operating such a high turnover on such low margins? You need an accountant. VAT registration can be (could be) avoided or mitigated, you have tax returns to complete and hefty fines if you miss your deadlines, lots of new legislation, profits (or in your case losses) to compute.

In article , Troy Steadman writes

My concern was that, if the sellers you buy from are not VAT registered, you cannot reclaim the input VAT, because there is none.

In article , Stephen GoldenGun writes

Um, because this is Graeme who turns up every so often with an idea for a VAT scam!

Indeed Richard and then things get *really* hairy! If I may quote myself:

With takings of £54,999 you will have an income of £54,999. With takings of £55,000 you will have an income of £46,808 and pay the VAT man £8,191 With takings of £64,624 you will have an income of £54,999 and pay the VAT man £9,625. So you earn less when your takings are £64,623 than you do when they are £54,999!

But there may be "margin" scheme available?

Soddit that's the wrong one again!

With takings of £55,999 you will have an income of £55,999. With takings of £56,000 you will have an income of £47,660 and pay the VAT man £8,340 With takings of £65,799 you will have an income of £55,999 and pay the VAT man £9,800. So you earn less when your takings are £65,798 than you do when they are £55,999!

:0(

You are slightly wrong. Add 1 to each of your examples. You only have to register when you go *over* 56,000.

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