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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My VAT is high even thought my margins are low ?Do I have to

Resolved Question:

My VAT is high even thought my margins are low ?Do I have to pay 20% VAT on turnover ?
85% of my sales is internet based and There is some shop/ retail ( walk in client) ..Please advise
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

Hello and welcome to the site. Thank you for your question.

What is the nature of your business .. principal activities/sector?

What is your turnover?

Do all your suppliers charge you VAT on your purchases?

Many thanks

Customer: replied 2 years ago.

What is the nature of your business .. principal activities/sector? it's a retail shoes company - selling through shop, our company website and also through Amazon/ Ebay etc. Internet sales to EU and USA as well.


What is your turnover? Around £980,0000


Do all your suppliers charge you VAT on your purchases? 99 % standard rated and 1 % zero of the total sales. All EU & US sales is regarded as Standard rated.

The reason for this query on Amazon/ Ebay the profit margin are less hence is possible to pay VAT on margin which is lower. Amazon/ Ebay has high turnover... less margins hence thinking is it worth . can VAT be reduced ?

Expert:  taxadvisor.uk replied 2 years ago.
Bhavesh, thank you for your reply and for additional information...

As you are aware, VAT is payable on outputs and you offset your VAT on inputs against it. I am a bit lost when you say your VAT is high whereas your margin is low. Also 99% of your suppliers charge you VAT.

Low margin should result in a lower VAT paybale to HMRC nothwithstanding the fact the turnover is high

Most goods exported to the States can be zero-rated for UK VAT purposes (that is, VAT does not need to be added), as long as documentary evidence of export is kept. Any extra charges made for freight, shipping, postage or delivery are also zero-rated. Why are you charging VAT on exports to USA?

Please advise
Customer: replied 2 years ago.

These are Internet retail sales to USA individual and not business. Hence vat is charged. Is this correct to charge Vat?

Expert:  taxadvisor.uk replied 2 years ago.

Bhavash, thank you for your reply.

VAT is charged on goods exported to individuals in the EU . If goods are exported outside the EU (individuals or businesses), VAT isn’t charged. You can zero-rate the sale, provided you get and keep evidence of the export, and comply with all other laws. You must also make sure the goods are exported, and you must get the evidence, within three months from the time of sale.

Confirmation of this can be found here
https://www.gov.uk/vat-exports-dispatches-and-supplying-goods-abroad

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.