VAT - to register or not

Before registering, there was no VAT inclusive figure.

Price before: £100 + No VAT = £100 Price after: £100 + VAT - VAT = £100 The price paid by his customers (who don't pay VAT) was £100 before and £100 after, so they didn't go up.

If, on the other hand, he were to put his prices up by 17.5% as you suggest, from £100 + No VAT to £117.50 + VAT, then his customers would most certainly give a toss.

Reply to
Ronald Raygun
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Nil VAT was included.

He he he! QED.

Huh?

What didn't go up? *The* price? How can "the price" be a "they"? Maybe that is where you are getting confused, VAT and the price are all part of the total price.

Reply to
Troy Steadman

No. That would be saying it included an amount of VAT which was zero. In fact it didn't contain any VAT, not even zero.

Glad you agree.

The customer pays £100 + VAT. The nice VATman gives him back the VAT. Therefore the customer pays £100 + VAT - VAT = £100. Got it? Good.

The price paid by the customer was and remains £100, because VAT registered customers are effectively blind to VAT. When dealing with VAT registered suppliers, they see only the ex-VAT price and ignore the inc-VAT prince. When dealing with non-registered suppliers, they just see *the* price. Hence, to them, the only before/after prices it makes sense to compare are *the* price, and the ex-VAT price. These prices are the same.

No, you're making something out of nothing. A minor grammatical slip, "they" was meant to be "the prices", should have been "the price", and "it". I'm ever so sorry, and will write 100 times "Make each pronoun agree with their antecedent". With thanks to William Safire.

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Reply to
Ronald Raygun

Nice link.

Reply to
Troy Steadman

"Ronald Raygun" wrote

What about those VAT-registered customers who may be able to claim the full input VAT, but also may not - and won't actually find out how much they can reclaim until sometime after they have bought the item?

Do you think they really do "see only the ex-VAT price and ignore the inc-VAT price" ?

Reply to
Tim

I guess not, but they don't count. I don't know what bizarre non-standard group you have in mind, but I'm happy to exclude them from that definition of "VAT-registered" which applies in this context, as being non-typical.

Presumably you are referring to customers who make mixed supplies, taxable/exempt, or who operate the cash accounting scheme.

Reply to
Ronald Raygun

You are digging yourself into a hole here Ronald, what's "the cash accounting scheme" got to do with anything?

Do you mean "There are always cash flow implications which mean that no trader can be 'blind to VAT'"?

Reply to
Troy Steadman

"Ronald Raygun" wrote

Why-ever not?

"Ronald Raygun" wrote

Hmmmm. "I can prove any scientific theory I like, simply by excluding those cases which don't follow the theory - for they are surely non-typical" !!! ;-)

"Ronald Raygun" wrote

Indeed.

Sometimes input VAT can only be partially reclaimed in the quarter of purchase, and sometimes will later (at the year end) be allowed fully - ie the part not initially reclaimed can be reclaimed at end of year.

Other times, input VAT may be fully reclaimed in the quarter of purchase, and sometimes will later (at the year end) have to be (partly) re-paid to HMC&E - ie initially fully allowed, but later decided that it isn't!

So, at the actual time of purchase, the VAT-registered customer might

*think* they will be able to reclaim (say) x% of the input tax. Later, when they do the quarter's VAT returns, they may discover that in fact they can reclaim y%. Still later, at the end of the year, it may be discovered that a different percentage entirely should be reclaimed - z%.

Assuming that x%, y% and z% are all above zero and below 100%, then we have

**FIVE** different "prices" :-

(1) Excluding all VAT; (2) Including (100-x)% of full VAT (based on data to date of purchase); (3) Including (100-y)% of full VAT (based on data to end of quarter); (4) Including (100-z)% of full VAT (based on data to end of year); (5) Including all VAT.

Reply to
Tim

... but all these 'not 100% of VAT can be reclaimed' cases are fairly unusual surely in the general run of transactions between VAT registered businesses. I've been VAT registered since 1987 and have done quite varied things and have never had one of these 'partly VATable' transactions.

In most businesses if you are VAT registered and sell to other VAT registered businesses you can pretty well be certain that all your customers won't care about the VAT. There may be certain types of business where this isn't generally true but I'm pretty sure it is for most.

Reply to
usenet

Because for the purposes of this thread I took "VAT registered customers" to mean "customers who can reclaim all of their input VAT" (and so did Troy). Too obvious to bother mentioning explicitly.

Reply to
Ronald Raygun

I meant the flat rate accounting scheme. Sorry for the mix-up.

Reply to
Ronald Raygun

Ronald would factor in the cash discount, you're 4 prices short.

I notice he side-stepped my comment about the cash flow implications, maybe his "blind" trader gets round it by only ever purchasing anything the day his cheque clears at Southend.

Reply to
Troy Steadman

Cashflow is a red herring. Sure, there is the minor issue of having to fork out the input VAT up front and not getting it back until after the next VAT return, but this is more than made up for by the fact that you get to sit on the output VAT collected before you have to hand it over.

Generally traders make a profit and hence their output VAT exceeds their input VAT, so what are you on about?

Reply to
Ronald Raygun

On the Input side it could be the other way round.

1) Deliveries £10,000 Net come to Goods Inward last day of every month. 2) Suppliers allow 31 days.

Trader's cashflow is *permanently* improved by the £1,750 VAT he recovers on day 1 and pays on day 31.

Reply to
Troy Steadman

wrote

Have you ever made any exempt supplies?

Reply to
Tim

"Ronald Raygun" wrote

I took it to mean "people who are registered for VAT". Apologies if the group of "VAT registered customers" wasn't meant to include

*all* those customers who are "registered for VAT" !! :-(

"Ronald Raygun" wrote

Hmmm. Do you class "taxpayers" as only those that can "gain tax relief on

*all* of their purchases" ??!
Reply to
Tim

"Ronald Raygun" wrote

Perhaps he's considering someone using the output VAT as "working capital" ?

Not necessarily to be recommended, but is it illegal?

Reply to
Tim

Of course it wasn't. Use your head. The context was that Troy said the OP could put his prices up by 17.5% and his VAT-registered customers wouldn't give a toss.

Clearly he meant that the new price would be the same as before but with VAT added (and my quibble with that was that this did not represent an increase). But in order for Troy's claim to apply in the way he meant it, there was an unstated but obvious premise that the customers in question could recover all the VAT, since otherwise they certainly *would* give a toss.

Apology accepted. :-)

Reply to
Ronald Raygun

Careful, don't encourage our Graeme!

Why should it be illegal? So long as you are able to remit the difference between output and input when due, all is well.

Reply to
Ronald Raygun

No, and, as I said, I don't think many people do.

Reply to
usenet

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